Operating at Turkish Free Zones

Free zones are defined as special zones within the country that are deemed to be outside of the customs territory. Within free zones, goods not in free circulation are not subject to any customs regime. These goods are considered outside the Turkish customs territory in terms of customs duty, trade and foreign exchange practices.

Goods in free circulation are subject to the export regimes. Foreign trade regimes are applied to trade between free zones and other parts of Turkey. On the other hand, foreign trade regimes are not applied between other countries and other free zones.

There are 18 free trade zones in Turkey, most of which are located in port cities. The main purpose of free zones is to encourage export-oriented investment and production, and to develop international trade. Companies either with domestic capital or foreign capital can operate in free zones. Also the incentives and advantages provided in the free zones are available to all companies regardless of their origin. Foreign companies may conduct all fields of activities that Turkish companies are entitled to.

Some Advantages of Free Zones:

• Until the end of the taxation year when Turkey becomes a full member of the European Union, the earnings of manufacturers generated through the sales of the goods that are produced in the zones are exempted from income and corporate taxes.

• The transactions and the documents drawn up related to the activities carried out by manufacturer users in the zones are exempted from stamp duties and fees.

• The revenue and earnings from free zone activities can be freely transferred to Turkey or abroad without any permission.

• Free zone users can purchase goods and services from Turkey at export prices (without VAT).

• Since the free circulation status of Turkish or EU originated goods brought into the zones does not change, these goods are exempted from customs duty while entering into Turkey’s or European Union customs territories. Third country originated goods are exempted from customs duty while entering into the free zones or being exported to another country apart from Turkey or the EU.

• The goods can remain in the zones without any time limit.

• Every payment in the Turkish Free Zones is done with convertible currencies or its equivalent in Turkish Lira.

• Since free zones are part of the Turkey-EU Customs Territory, the goods in free circulation can be sent to the EU Countries by an A.TR certificate. Customs duties for the goods of third country origin are also not paid at the entry into the free zones. However, the goods of third country origin that are not in free circulation can be sent to the EU countries by an A.TR certificate, only after the customs duties are paid over the rates determined in the Common Customs Tariff.

At this point it should be noted that, in order to operate in free zones, an operating license must be obtained from the General Directorate of Free Zones. A list of the required documents for operating license is as follows:

• Descriptive information about the applicant and it's Free Zone operation.

• Authorization document and specimen of signature of the signatory and (if any) power of attorney and specimen of signature of the company’s agent.

• If the applicant; is an already established company, record of the Türkiye Ticaret Sicil Gazetesi (Turkish Trade Registry Gazette) which indicates the establishment announcement, the last capital and partnership structure of the applicant and document obtained from Chamber of Commerce and/or Industry (The copy of the establishment documents of the firm which has been established outside of Turkey, ratified by the Turkish Consulates); or is a new company that will be established in the free zone, articles of incorporation.

• Last three year’s balance sheets and income statements.

• The original and a copy of the receipt that shows the Operating Licence fee has been paid to the Central Bank of Turkey.

• Documents related to the foreign currency brought into Turkey within the last three years (if any).

• Establishment Permit from BDDK-Banking Regulation and Supervision Agency for bank and financial leasing institutions and from Undersecretariat of Treasury Directorate General of Insurance for insurance companies.

• A copy of the filled Operating Licence Application Form.

The licences are granted for:

15 years, for tenant-users.

20 years, for manufacturer-tenant-users.

30 years, for users who build their own working premises (investor users).

45 years, for manufacturer-investor-users.

The operating license fee is USD 5,000 for all Free Zones. If the application is rejected, the application fee is refunded.

Another point worth mentioning is employment rules that will apply within the Turkish Free Zones. Turkish social security legislation applies both to companies operating in the zone and to employees -including foreign nationals- who are in their service under a labor contract.

However, in cases when there is an agreement between Turkey and any other country regarding social security, provisions of such an agreement also apply. Social insurance payments are payable to the social security organizations in either foreign currency or in Turkish Liras. Social security payments are made to beneficiaries by these organizations in Turkish Liras.

In our next information note on the initiatives of foreign investors in Turkey, you may examine the legal proceedings of establishing a branch office in Turkey.

Att. Eda Idil Tokdemir

Att. Merih Okuyaz

This information note has been prepared for informational purposes only and does not constitute advertising, offer or legal advice in anyway. We recommend that you consult your legal advisor for your questions and problems on the subject. All rights of this article belong to its author, it cannot be used without permission, even partially.