According to the Free Zones Law, Free Zone Company in Turkey are established to encourage export-oriented investment and production, to accelerate foreign direct investments and technology entry, to direct businesses to exports and to develop international trade. The establishment and operation of free zones by public institutions and organizations, domestic or foreign real or legal persons shall be decided by the President of the Republic. For this reason, since there is no domestic or foreign capital limitation for those who will operate in the free zone, there will be no distinction between domestic and foreign capital in terms of the advantages (incentives and tax exemption) provided by this zone.
Free zones in Turkey have been kept separate from other parts of the country and broader advantages have been granted to these zones for commercial activities and increase in production. The customs, finance or foreign trade provisions of the countries they are in are either partially applied or not applied to these regions.
In Turkey, free zones have been a popular practice for companies that meet the requirements for several reasons that it is a step that both accelerates and facilitates the export of goods, creating the ground that will contribute to the development of technology and the growth of capital, the availability of rapid and sufficient amount of raw materials and intermediate parts needed in the industry, the advantages and incentives recognized, paving the way for the production of low-cost goods. As Fidelis Law Firm, in this article, we will discuss the advantages of establishing a company in a free zone and the points to be considered for establishing a company.
ADVANTAGES OF STARTING A FREE ZONE COMPANY IN TURKEY
The first of the opportunities provided by the free zone is some exemptions for taxation. Users operating for manufacture in the free zone are not liable to pay corporate tax or income tax for their earnings in this zone.
At the same time, the user will be exempted from paying income and corporate taxes in terms of the wages paid to his/her employees who employed in the free zone, provided that he/she exports at least 85% of the FOB (free on board) value of the products produced in the free zone.
Users engaged in production activities will be exempted from stamp duty and fees for the transactions and contracts that must be made for the beginning and continuity of the activities in the free zone.
In terms of double taxation, organizations operating in free zones will be able to benefit from the provisions of the Double Taxation Agreement.
In addition to these, there are some exceptions for customs duty that vary depending on whether the goods come from Turkey or other countries, and whether they are in free circulation or not.
Secondly, free zones are considered as the Turkish customs territory in terms of the implementation of the basic provisions, however, they are considered to be outside the Turkish customs territory in terms of customs procedures. Therefore, shopping between Turkey and the free zone is subject to export (sales from Turkey to free zone) and import (sale from free zone to Turkey) provisions. Also, foreign trade provisions do not apply to the exchange between the free zone and other countries. As a result of the fact that free zones are not considered as Turkish customs zones, some Turkish laws specified in the Free Zone law will not be applied in these zones.
The laws specified in the article titled “Inapplicable Provisions” are listed as follows:
- Law No. 4817 on Work Permits of Foreigners
- 4875 Foreign Direct Investment Law
- Passport Law No. 5682
- Provisions of the Municipality Law No. 5393, excluding the articles related to death and fire, construction and repair of sewerage, providing drinking, using, industrial water and controlling gas, water and electricity consumption
- Legislation provisions on customs and foreign exchange taxpayers
- Provisions of other laws contrary to the Free Zones Law
- Law No. 5683 on Residence and Travel of Foreigners in Turkey
- State Tender Law No. 2886
Thirdly, some opportunities that the free zone provides to its users for money transfer and ease of trade can be mentioned. In the free zone, the user will be able to easily transfer his earnings without the permission of the competent authorities, there is no legal obstacle to this.
In addition, goods of Turkish origin, the price of which does not exceed 5000 USD or the equivalent of Turkish lira, can be brought to the free zone optionally, without being subjected to export process, in order to facilitate the supply of consumables.
Due to the implementation of import and export provisions between the free zone and Turkey, free zone users will also be able to purchase goods and services from Turkey without VAT.
LICENSE OF OPERATING IN THE FREE ZONE
In order to operate in the Free Zone Company in Turkey, it is necessary to obtain an operating license first. This license must be obtained from the General Directorate of Free Zones, Foreign Investment and Services, Ministry of Commerce. Activities such as production license, purchase-sale license, storage license, assembly-disassembly license, maintenance and repair license, leasing license and operating licenses for areas such as the service sector, banking and insurance can be counted as examples of work areas where a license is granted to be a user in a free zone.
In order to apply for an operating license, the application form must first be filled and the application fee of 5000 USD must be deposited into the Free Zones Special Account at the Central Bank of the Republic of Turkey. An application is made to the Free Zone Directorate together with the application form, its annexes and the account document of the application fee. It is possible to send the application both directly and by registered mail. The Free Zone Directorate, after receiving the opinion of the board operating the zone, directs the application to the Free Zone General Directorate by adding its own opinion. The application fee is refunded to the applicant who receives a negative feedback as a result of the evaluation of the application by the Free Zone General Directorate. If it is deemed appropriate to grant an operating permit, the applicant must submit a copy of the contract to be made for the supply of the workplace in which he will operate and the necessary documents to the General Directorate of Free Zones within 30 days. If it is not forwarded, the right to obtain a license is lost and the application fee is recorded as income at the competent authority.
The applicant, to whom a positive response was received, while choosing a workplace in the free zone to operate:
- Renting open space
- Purchasing land or a workplace if the land is in free zones owned by the private sector.
Will be able to choose one of the options. Applicants proceeding from the first option must make a rental agreement within 30 days with an organization that has a rental license in the free zone. For the second option, the applicant will have to make a sales contract with the operating company in the free zone within the same period. A copy of this contract for the supply of the workplace and approved by the relevant Free Zone Directorate is sent to the Free Zones Directorate and an annual report is drawn up on behalf of the companies that made the contract.
COMPANY ESTABLISHMENT IN THE FREE ZONE
There may be companies operating in the free zone, headquartered in that zone, as well as branches may be established. Real or legal persons, regardless of whether they are local or foreign, who want to carry out their commercial activities in the free zone, are obliged to pay attention to the following issues in the draft of the articles of association in accordance with the circular numbered 1998/4:
- The purpose and subject of the article should be determined in accordance with the relevant free zone activity and the title should be in this direction.
- The use of the phrases “buying” and “selling” instead of the words “export” and “import” in the title, purpose and subject headings and related parts
- Since the purchase, sale and production parts of the form must be compatible with the purpose and subject headings, the goods that are forbidden to be brought into the relevant free zone are not included in these parts.
- Arranging the company period at least as much as the operating license
- Adding a clause stating that for the amendment of the articles of association, the approval of both the authorized bodies of the company and the General Directorate of Free Zones must be obtained.
The main contract draft must be submitted to the Free Zone Directorate together with the Operating License Application Form mentioned above and the documents to be attached to the form. Finally; After the application is approved by the competent authority to which it is sent, it is necessary to apply to the trade registry with other documents required for the establishment of the company. Thus, the company that wants to operate in the free zone has been registered in the trade registry and can now start to operate in an official way.
