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GOVERNMENT INCENTIVES

R&D Incentives

 1-      R&D Law

 The R&D Law provides special incentives for R&D and design investment projects in Turkey provided that a minimum of 30 personnel are employed in an R&D center. This personnel requirement may be reduced to 15 employees in sectors determined by the Council of Ministers to be a priority, such as software, medicine and medical devices, agriculture, food, biotechnology, ICT, and other high-tech sectors. The incentives within the new law will remain in effect until 2024 and include:

 100 percent deduction of R&D expenditure from the tax base

  • Half of the R&D and design expenditure increase incurred in the operational year compared to the previous year will be deductible (criteria will be determined by Council of Ministers)
  • Income withholding tax exemption for employees (until December 31, 2023.)
  • 50 percent social security premium exemption for employers (until December 31, 2023)
  • Stamp duty exemption for applicable documents
  • Customs duty exemption for imported products within the scope of R&D projects
  • Techno-initiative capital for new scientists up to TRY 500,000
  • Deduction from the tax base of certain funds granted by public bodies and international organizations

 2-      Support for Technology Development Zones

 The advantages in Technology Development Zones are:

 Profits derived from software development, R&D, and design activities are exempt from income and corporate taxes until December 31, 2023.

  • Sales of application software produced exclusively in TDZs are exempt from VAT until December 31, 2023. Examples include software for systems management, data management, business applications, different business sectors, the internet, mobile phones, and military command control.
  • Wages of R&D, design, and support personnel employed in the zone are exempt from all taxes until December 31, 2023. The number of the support personnel covered by the exemption shall not exceed 10 percent of the number of the R&D personnel.
  • Investments for the production of the technological products obtained as a result of the R&D projects conducted in the zone may be made in the TDZ if deemed suitable by the operator company and allowed by the Ministry.
  • 50 percent of the employer’s share of the social security premium will be paid by the government until December 31, 2023.
  • Customs duty exemption for imported products and stamp duty exemption for applicable documents within the scope of R&D, design, and software development projects.

 3-      Industrial Thesis (SANTEZ) Program

 Direct financial support for new technology adaptation, process development, quality improvement, and environmental modification projects to be achieved via university partnerships:

  • Up to 85 percent of the project budget could be supported by direct grants
  • Project term is 2 years, with a possible extension of 6 months
  • Expenditure on staff, travel, consumable materials, machinery equipment, consultancy, and relevant service procurements, transportation, insurance, and customs are supported
  • The application file could be approved within 4 months, and the project supervision committee is independent 

4-      TUBITAK Support

 TUBITAK (Scientific and Technological Research Council of Turkey) compensates or grants R&D related expenses and capital loans for R&D projects.

 Projects eligible for TUBITAK incentives:

 Concept development

  • Technological research and technical feasibility research
  • Laboratory studies in the translation of a concept into a design
  • Design and sketching studies
  • Prototype production
  • Construction of pilot facilities
  • Test production
  • Patent and license studies
  • Activities concerning the removal of post-sale problems arising from product design

 TUBITAK 1515 – Frontier R&D Laboratory Support Program 

The 1515 Program applies an integrated perspective that extends beyond a consideration of the initial establishment phase of the R&D laboratory. The 1515 Program offers an entirely grant-based financial model to cover up to 75 percent of the operating expenses of the R&D laboratory in Turkey up to TRY 10 million for each calendar year for a duration of 10 years at most.

The coverage of the grant support consists of the following items:

 Personnel costs

  • General operating costs
  • Consultancy fees

For eligibility to have personnel costs covered in the total grant amount, at least 50 percent of the personnel must hold Turkish citizenship and at least 1/3 should have a doctoral degree.

5-      TTGV Loans 

The Technology Development Foundation of Turkey (TTGV) offers long-term interest-free loans for R&D projects on agriculture technologies, health technologies, education technologies, and energy efficiency improvement.

The loans are intended to provide financial support to those activities whose purpose is the development of new products with commercial value in the aforementioned technological areas, or for the promotion of competitiveness of current products in these areas. The scope of the program includes:

 The duration of project support is at least 1 year and is at most 3 years.

  • The upper and lower limits for the amount of support to be provided are USD 3 million and USD 250,000, respectively.
  • Support shall be provided 50 percent by TTGV and 50 percent by the project coordinating company’s contribution.
  • The pay-back term is 4 years in total after project execution, including a one-year grace period. 

Export Support

 Inward Processing Regime 

The aim of the Inward Processing Regime is to enable exporters to procure inputs at world market prices for the production of their exports without being subject to customs duties, including VAT, as well as trade policy measures.

The Inward Processing Regime includes two types of processing measures: Conditional Exemption System and Reimbursement System.

 1)      The Conditional Exemption System waives commercial policy measures and taxes that arise during the importation of non-freely circulating raw materials, auxiliary materials, packages, and operating equipment used in production of the export product subject to Inward Processing Regime. It is called conditional as the exporter has to guarantee through collateralization of the imported materials and equipment that they will only be used for the production and exportation of the product subject to Inward Processing Regime. The guarantee given for the collateralized materials and equipment will be released upon exporting of the final product.

 2)      The Reimbursement System is the reimbursement of taxes that were paid during the importation of freely circulating raw materials, auxiliary materials, packages, and operating equipment used for the production of the exported product subject to Inward Processing Regime. These taxes are reimbursed upon the exporting of the final product subject to Inward Processing Regime. Commercial policy measures are applied to the imported materials and equipment and the all the import procedures such as technical regulations in foreign trade and standardization legislation must have been completed.

 Evaluation of Applications

 It should be possible to determine whether the imported raw materials are used to produce exported products.

  • The activity should not have a negative impact on the economic interests of the producers in the customs territory.
  • Activities should create added-value and the final product should not have a negative impact of the competitiveness in the sector.
  • The company should be built in the customs territory in Turkey

Benefits of Inward Processing Regime 

  • 100 percent Customs Duty Refund
  • 100 percent  VAT Refund
  • 100 percent Special Consumption Tax Refund
  • 100 percent Resource Utilization Support Fund Refund
  • 100 percent Stamp Tax Refund
  • Exemption from quotas and surveillance measures: There are import quotas determined by the government for a number of goods, and inward processing regime certificate holders will not be affected by these quotas. The government also determines market prices for some products and imposes excise taxes to these products based on the determined market price, irrespective of the price paid by the importer. Participants in the Inward Processing Regime would also be exempt from such surveillance measures.
  • It is permitted for domestic sales and delivery

 Sectoral Incentives

 Incentives for Renewable Energy

 In addition to the General, Regional, Priority, and Strategic Investment Incentive schemes that apply to investments in the energy sector, the government provides specific incentives for electricity production investments that are based on renewable energy sources.

 100 percent exemption from Customs Duty and VAT

  • Feed-in-Tariff (FiT) scheme for 10 years 

§  Differentiated FiT scheme based on resource type

§  Extra premiums for domestic components

  • Grid connection priorities
  • Lower license fees

§  Only 1 percent of licensing fee

§  Exemption from the annual license fee for the first eight years of operation

  • License exemptions in exceptional circumstances
  • Various practical conveniences in project preparation and land acquisition

 

 

Renewable Energy FiT Rates

Type of production facility based on renewable energy resources

Feed-in-tariff Prices Applicable

(US Dollar cent/kWh)

Hydroelectric production facility

7.3

Wind power-based production facility

7.3

Geothermal power-based production facility

10.5

Biomass-based production facility (including landfill gas)

13.3

Solar power based production facility

13.3

 

Additional FiT rates for Local Content Support

Type of facility

Domestic production

Domestic Contribution

(US Dollar cent/kWh)

A-Hydroelectric production facility

1- Turbine

1.3

2- Generator and power electronics

1.0

Wind power based production facility

1- Blade

0.8

2- Generator and power electronics

1,0

3- Turbine tower

0.6

4- All of the mechanical equipment in rotor and nacelle groups (excluding payments made for the blade group and the generator and power electronics.)

1.3

Photovoltaic solar power based production facility

1- PV panel integration and solar structural mechanics production

0.8

2- PV modules

1.3

3- Cells forming the PV module

3.5

4- Invertor

0,6

5- Material focusing the solar rays onto the PV module

0.5

Intensified solar power-based production facility

1- Radiation collection tube

2.4

2- Reflective surface plate

0.6

3- Sun tracking system

0.6

4- Mechanical accessories of the heat energy storage system

1.3

5- Mechanical accessories of steam production system that collects the sun rays on the tower

2.4

6- Stirling engine

1.3

7- Panel integration and solar panel structural mechanics

0.6

Biomass power-based production facility

1- Fluid bed steam tank

0.8

2- Liquid or gas fuel steam tank

0.4

3- Gasification and gas cleaning group

0.6

4- Steam or gas turbine

2.0

5- Internal combustion engine or stirling engine

0.9

6- Generator and power electronics

0.5

7- Cogeneration system

0.4

Geothermal power-based production facility

1- Steam or gas turbine

1.3

2- Generator and power electronics

0.7

3- Steam injector or vacuum compressor

0.7