FREE ZONES

This section is based on Undersecretariat of Foreign Trade publications

Free Zones are special areas in which regulations related to commerce, economy and financial system are not applicable or partly applicable. Free Zones are also areas where additional incentives apply and where a more favourable business climate is offered to promote industrial and commercial activities.

After the related legislation was enacted in 1985, 17 free zones have been established with the objective of promoting export-oriented investment and production in Turkey, accelerating the entry of foreign capital and technology, and increasing the utilization of external finance and trade possibilities.

Manufacturing, warehousing, packing, general trading, banking, leasing and insurance are some of the activities that can be carried out in the special zones. Investors are free to construct their own premises, while zone authorities offer office spaces, workshops, or warehouses on a rental basis with attractive terms. All activities that are open to the Turkish private sector are also open to joint-ventures of foreign companies.

Turkey's geographical location provides significant advantages to the Turkish Free Zones. Generally, these are adjacent to major ports on the Mediterranean, Aegean and Black Seas. In addition, they are within easy access from international airports and highways. There are no regulations regarding price, standards, quantity or quality of goods produced or the use of foreign exchange.

The trade volume of the zones reached USD 7,7 billion as end of 1998 and USD 7.8 billion as end of 1999.

 

INCENTIVES OFFERED

• Free Zones are tax free areas. Income and revenues generated in the Zones are exempt from taxes including income, corporate and value-added tax.

• The validity period of an operation licence is maximum 10 years for tenant users, and 20 years for users who build their own offices in the Zone. If the operating licence is for manufacturing, these terms are 15 and 30 years for tenant users and investors, respectively. The requested operation licence period can be prolonged to 99 years according to the type of investment.

• Earnings and revenues can be transferred to any country, including Turkey, freely without any prior permission and are not subject to any kind of taxes, duties and fees.

• There is no limitation on the proportion of foreign capital participation in investment.

• Unlike most Free Zones elsewhere, sales into the domestic market are allowed in Turkish Free Zones. (Sales to the domestic market are subject to a charge of 0.5 % of the transaction value.) Currencies used in the zone are convertible foreign currencies accepted by the Central Bank of Turkey.

• The Infrastructure of the Turkish Free Zones is comparable with international standards.

• Red tape and bureaucracy have been minimized during application and operation phases by authorizing only one agency to deal with these procedures.
• For a period of 10 years following the commencement of operations in the Zones, strikes and lockouts shall not be allowed. However, any disputes occurring within the context of collective bargaining during the period shall be resolved by the Supreme Arbitration Council.

• Municipality Law, Passport Law, Foreign Investment Law, Foreign Investment and Encouragement Law, and all other provisions of laws contrary to the Free Zones Law, shall not be applicable.

To engage in operations in Free Zones, an Operating Licence has to be obtained from the Directorate General of Free Zones of the Undersecretariat for Foreign Trade.

ANNUAL TRADE VOLUME OF FREE ZONES (1000 US $)