INVESTMENT ENCOURAGEMENT
PROGRAM (IEP) - NEW FRAMEWORK
Saadet DENİZ
Head of International Relations Department
General Directorate of Incentives and Implementation
. .2010, ISTANBUL
OUTLINE
I.
The Legal Basis and Scope
II.
New Approach in Implementation- Three Pillar
Mechanism
III. General Investment Encouragement Mechanism
IV. New Regional Classification
V.
Regional and Sectoral Implementation
VI. Implementation for Large Investments
VII. Explanations of The Measures
VIII. Agricultural Investment Projects
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I. LEGAL BASIS and SCOPE
• A
new
“Decree
Concerning
State
Encouragements to Investments” has been
adopted on July 14th, 2009, Decree No:
2009/15199,
published on the Official
Gazette dated 16.07.2009 and No: 27290.
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I. LEGAL BASIS and SCOPE
In the Decree, investments for;
• the production of goods and services,
• research and development (R&D) and
• environmental protection
can benefit from the encouragement measures.
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II. NEW APPROACH IN IMPLEMENTATION
The Mechanism comprises of three main
categories :
I. General investment encouragement
mechanism
II. Regional and sectoral implementation
III. Implementation for large investments
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III. GENERAL INVESTMENT
ENCOURAGEMENT MECHANISM
• It applies for all types of investments
• Encouragement measures are;
o
Exemption from Customs Duties:
•
o
Imports of the machinery and equipment to be used in the production
process shall be subject to Customs Duty exemption,
VAT Exemption:
•
Imports and domestic purchases of machinery and equipment within the
scope of investment project are exempted from the Value Added Tax,
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IV. REGIONAL CLASSIFICATION
• One of the main objectives of the system is to
eliminate inter-regional imbalances.
• Regarding the implementation of encouragement
measures, provinces have been classified into
four regions according to their socio-economic
development status on the basis of NUTS 2
classification of EU.
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IV. REGIONAL CLASSIFICATION ON NUTS 2 BASIS
REGION ı
REGION II
REGION III
REGION IV
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V. REGIONAL AND SECTORAL IMPLEMENTATION
The Measures:
•
•
•
•
•
•
VAT Exemption
Customs Duty Exemption
Interest Support
Tax Reduction
Social Security Premium Support
Land Allocation
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V. REGIONAL AND SECTORAL IMPLEMENTATION
ENCOURAGEMENT MEASURES WITHIN THE SCOPE OF
REGIONAL IMPLEMENTATION
REGION I
VAT
exemption
Customs
duty
exemption
YES
YES
REGION II
YES
YES
REGION III
YES
YES
REGION IV
YES
YES
Tax
reduction
Social
security
premium
support
YES-
YES-
LOW RATE
LOW RATE
YES-
YES-
MEDIUM
RATE
Interest
support
Land
allocation
NO
YES
MEDIUM
RATE
NO
YES
YES-
YES-
YES-
HIGH RATE
HIGH RATE
LOW RATE
YES-
YES-
HIGHEST
RATE
HIGHEST
RATE
YESHIGH RATE
YES
YES
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VI. IMPLEMENTATION FOR LARGE INVESTMENTS
Definition:
Large investments are with an investment cost over
50 Million TL as defined in the Article 32/A of
Corporate Tax Law No:5520. Agricultural industry is
not considered in this category.
The Measures:
•
•
•
•
•
VAT Exemption
Customs Duty Exemption
Social Security Premium Support
Tax Reduction
Land Allocation
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VII. EXPLANATIONS OF THE MEASURES
- INTEREST SUPPORT
Application categories of
investment
TL Credit
Basis
Points
FX Credit
Basis
Points
Max. Amount
Compensated
(TL)
Region III
3
1
500.000
Region IV
5
2
500.000
Environmental
Protection
5
2
300.000
Research &
Development
5
2
300.000
Max. Duration for
Compensation
(Years)
5
1- The credit amount exceeding 70% of the fixed investment cost shall not be subject to compensation.
2- Financial leasing companies and all banks ratifying the Protocol to be made by Undersecretariat of
Treasury shall be included.
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VII. EXPLANATIONS OF THE MEASURES
-TAX REDUCTION
• It applies for large investments and regional investments.
• According to the Article 32/A of Corporate Tax Law No:5520,
earnings through regional and large investments having an
investment encouragement certificate are subject to corporate or
income tax reduction.
• In operational undertakings, only earnings obtained from the
additional investments are subject to tax reduction.
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VII. EXPLANATIONS OF THE MEASURES
-TAX REDUCTION (cont.)
Rates of Tax Reduction for Investments started before December 31st 2010
Regional Implementation
Large Investments
Regions
Contribution
Rate to
Investment (%)
Annual Tax
Contribution
Reduction Rate
Rate to
(%)
Investment (%)
Annual Tax
Reduction Rate
(%)
I
20
50
30
50
II
30
60
40
60
III
40
80
50
80
IV
60
90
70
90
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VII. EXPLANATIONS OF THE MEASURES
-TAX REDUCTION (cont.)
Rates of Tax Reduction for Investments started after December 31st 2010
Regional Implementation
Large Investments
Regions
Contribution
Rate to
Investment (%)
Annual Tax
Contribution
Reduction Rate
Rate to
(%)
Investment (%)
Annual Tax
Reduction Rate
(%)
I
10
25
25
25
II
15
40
30
40
III
20
60
40
60
IV
25
80
45
80
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VII. EXPLANATIONS OF THE MEASURES
-SOCIAL SECURITY PREMIUM SUPPORT
It is implemented ;
• For large investments
• For regional investments
• Definition : The social security premium to
be paid by the employer, corresponding to
the amount to be paid on minimum wage
cost, is funded from the budget for the
specified periods.
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VII. EXPLANATIONS OF THE MEASURES
-SOCIAL SECURITY PREMIUM SUPPORT (cont.)
Regions
Investments started
before
Dec. 31st 2010
Investments started
after
Dec. 31st 2010
I
2 years
-
II
3 years
-
III
5 years
3 years
IV
7 years
5 years
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VII. EXPLANATIONS OF THE MEASURES
LAND ALLOCATION
–
It applies for;
•large investments
•regional investments
•Definition: Pursuant to additional article 3 of
the Law dated 29/6/2001 and No 4706 and in
accordance with the procedures and
principles set forth by the Ministry of Finance.
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VII. EXPLANATIONS OF THE MEASURES
-MOVING SUPPORT
- Enterprises Operating in the Textile, Apparel, Leather
and Leather Products Sector ,
located in Regions I and II that move completely to the provinces in Region
IV until 31/12/2010 and create employment for at least fifty persons, can
benefit from:
– social security premium support for five years,
– land allocation,
– corporate or income tax reduction by 75% for the first five years
following the moving and
– compensation of moving costs if the moving completed until the
end of year 2009.
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Region I
Region II
Investments such as;
Investments such as;
 food and beverages
 food and beverages
production
 integrated animal
husbandry including
integrated animal
husbandry investments for
breeding production,
farming industry
 aquaculture
 tanning and processing of
leather
 green house
Agricultural machinery
production
production,
 integrated animal husbandry
including integrated animal
husbandry investments for
breeding production,
 farming industry
 aquaculture
 tanning and processing of
leather
 green house
Region III and IV
Mainly labor intensive
investments such as;
 food and beverages
production
 integrated animal husbandry
including integrated animal
husbandry investments for
breeding production
 farming industry
 leather and leather products
 green house
 aquaculture
Agricultural machinery
production
tanning and processing of
leather
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CONDITIONS FOR AGRICULTURAL
INVESTMENTS TO BENEFIT FROM
REGIONAL IMPLEMENTATION
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Conditions to be considered in regional investments
for dairy farming:
– In regions I. and II. min. 500 cattles, 2000 milk
sheeps,
– In regions III. and IV. min. 300 cattles,1000 milk
sheeps,
– In an integrated investment with dairy products
together with feed production unit and /or cooling
warehouse.
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Conditions to be considered in regional
investments for animal husbandry:
– In regions I.and II. 700 cattles/period, 2000
sheeps/period,
– In regions III. And IV. 500 cattles/period, 1000
sheeps/period,
– In an integrated investment with slaugther house
together with meat production and/or feed
production unit and /or cooling warehouse.
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Conditions to be considered in regional investments for poultry
In all regions:
– for meat and egg poultry 200.000/period chicken or turkey,
– for meat poultry integrated investment of slaugtherhouse
together with advance meat processing or cooling warehouse or
feed production facility,
– for egg poultry integrated investment of feed production facility or
cooling warehouse or egg sorting and packing facility,
is required.
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Conditions to be considered in regional
investments for aquaculture
In selected provinces;
• in regions I.and II. min. 1.000.000 TL total fixed
investment amount,
• in regions III.and IV. min 500.000 TL total fixed
investment amount
is required.
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VIII. AGRICULTURE INVESTMENT PROJECTS
SUPPORTED UNDER REGIONAL IMPLEMENTATION
Conditions to be considered in regional
investments for greenhouse investments
For selected provinces,
• in regions I. and II. min. 25 da.
• in regions III. and IV. min. 10 da. of
greenhouse area
is required.
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VIII. AGRICULTURAL INVESTMENT PROJECTS
EXCLUDED FROM REGIONAL IMPLEMENTATION:
-completely new and expansion investments on “rice, bulgur, ready made food for
pets, fish flour, cod oil, fish feed, bread, cake, waffle, rakı and beer” production,
-completely new and expansion investments on “dried nuts, pickle, cotton linter,
tea and nut” production,
-investments on “instant soup and consomme production, classification and
packaging of grains and legumes”
shall not benefit from the measures within the scope of regional implementation.
Leather tanning investments can only be supported in the organized industrial
zones.
These subjects can be supported under general system.
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VIII. AGRICULTURAL INVESTMENT PROJECTS
NOT SUPPORTED UNDER GENERAL SYSTEM
• Grist products, starch and starch products and production of ready-made
fodder (except rice, bulgur, ready made food for pets, fish feed and fodder
production in integrated animal husbandry investments)
• Biscuit,
• Phyllo dough and kadayif (shredded wheat used to prepare a kind of
dessert),
• Pasta, semolina, noodle, coscous and similar products,
• Catering companies,
• Cube sugar,
• Plant production (except greenhouse production, mushroom cultivation
and forage crops cultivation in integrated animal husbandry investments),
• Animal husbandry investments except integrated animal husbandry
investments encouraged within the context of regional investments and
conditionally encouraged animal husbandry investments.
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THANK YOU FOR YOUR
ATTENTION
Saadet DENİZ
Head of International Relations Department
General Directorate of Incentives and Implementation
e-mail: [email protected]
Website: http://www.treasury.gov.tr
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