Turkey: Turkey Introduces Project-Based Government Incentives

Last Updated: 29 December 2016
Article by Şahin Ardiyok and Can Yıldız

A few months ago, we reported1 that Law no. 6745 on "Promoting Investments on Project Basis and Amending Some Laws and Decree Laws" was promulgated on 7 September and that article 80 of this law provided a wide range of powers to the Council of Ministers to take the necessary steps to grant the determined incentives to investment projects. We also mentioned that we expected decisions of the Council to arrive soon. The first of such decisions is already here.

The Council of Ministers Decree No. 2016/9495 on "Grant of Project-Based Government Assistance to Investments" was published in the Official Gazette dated 26 November 2016 and entered into force.

In the concerned decision, the principles regarding supply security, reducing external dependency, achieving technological transformation, supporting R&D intensive and high added value investments on a project basis were determined by the Ministry of Economy.

For projects with a minimum fixed investment of $100 million, project-based state aid, such as tax exemption and deduction, capital contribution, investment floor and public procurement guarantee, may be granted.

The incentives listed in the Decree are as follows;

Evaluation criteria for applications

The Ministry of Economy will be able to invite one or more companies to invest in the investment it has determined, or to make an announcement call for investment.

Companies wishing to benefit from the incentive will be able to submit to the Ministry their project information, investment feasibility, impact analysis and requested incentives and reasons, application petition, signature declaration and other documents required to be assessed in accordance with the example provided in Annex-1 of the Decree.

The applications will be assessed by taking into consideration the qualifications such as meeting the critical needs of the country that may arise in the present or future, providing supply security in products with insufficient production capacity, improving technology capacity in technology open areas, reducing import dependency in foreign trade areas and competitiveness in countries in different sectors.

As a result of the evaluation, the eligible project or projects will be submitted to the Council of Ministers by the Ministry of Economy. Incentive decisions will be issued for projects that are deemed to be supported by the Council of Ministers. Unsupported applications may be taken into consideration under the Decree on State Aids in Investments, if requested by the investor.

Investment incentive certificate to be issued

An investment incentive certificate2 will be issued for projects that are chosen to be supported by the Council of Ministers. The start and end date of the investment will be determined in the incentive decision.

The investor will be responsible for the realization of the investment within the specified period, except for reasons caused by the public. In case the investor fails to fulfil the obligations stipulated in the support decision, the tax that has not been accrued in due time due to the discounted corporate tax or exception application and the income tax withholding tax will be recovered within the framework of provisions of the Law on Collection Procedure of Public Receivables.

Investment expenditures that benefit from the support under the decision will not be able to benefit from the support of other public institutions and organizations.

This mechanism will provide the government the flexibility to attract large foreign investors that are experiencing the dilemma of "will we invest in Turkey or another country?" Beyond that, it remains unclear what investors—with investments exceeding $100 million that meet the stated conditions—will need to do to take advantage of the incentives; it is estimated that investors will have to negotiate with the government for six-seven sectors as determined by the Council of Ministers.

Footnotes

1. You may access the earlier article dated 26 September here http://www.mondaq.com/turkey/x/530358/Government+Contracts+Procurement+PPP/New+Wave+Of+Investment+Incentives+In+Turkey

2. It is a document prepared for the investments to be carried out in accordance with the purposes of the Decree, which includes the characteristic values of the investment and provides the possibility of benefiting from the registered incentive elements if the investment is realized in accordance with the determined minimum conditions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Şahin Ardiyok
Can Yıldız
 
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