Free trade zone (“FTZ”) is the area within which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities.
Only when the goods are moved to consumers within the country in which the FTZ is located, they become subject to the prevailing customs duties. FTZs are mostly organized around major seaports, international airports, and national frontiers where many geographic advantages stand for the trade.
Foreign companies are entitled to participate in all activities of business in the FTZs in Turkey. There is no difference at all on the regulation of the FTZs.
It is possible to operate within the FTZs by either establishing a company or setting up a branch as the subsidiary of the foreign company.
Turkey has 21 FTZs located around the country. Since the establishment of the EC-Turkey Customs Union in 1996, exports to the European Union from domestic businesses in Turkey have been free of tax.
Advantages of the Turkish Free Trade Zones
- Opportunity to Benefit from Tax Advantages for Manufacturer Users
Until the end of the taxation year including the date Turkey becomes a full member of the European Union, the earnings of the manufacturer users, generated through the sales of the goods they produced in the free zones, are exempted from the income or corporate taxes.
The wages of the workers employed by the users that export at least 85 percent of the FOB value of the goods they produce in the free zones are exempted from income tax. The Council of Ministers can reduce this rate to 50 percent.
The transactions and arranged documents related to the activities carried out in the zones by the manufacturer users are exempt from stamp duties and fees.
The free zone users that obtained “operating license” other than “production” before 06/02/2004, the income or corporate tax exemption continues during the validity period of the Operating License.
The free zone users that obtained operating license other than production after 06/02/2004 do not enjoy income or corporate tax exemption.
- Opportunity of Medium and Long Term Planning
The validity period of an operating license:
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.
Building plots and buildings on Treasury owned land can be leased or granted easement until 49 years for the investor users.
- Opportunity to Transfer Profits
The revenue and earnings from free zone activities can be freely transferred to Turkey or abroad without any permission.
- Facilitation of Foreign Trade
Since the goods sold from Turkey to free zones are subject to export regime, free zone users can buy goods and services from Turkey without paying value added tax. On the other hand, trade between free zones and third countries is not subject to foreign trade regime.
Moreover, upon request, goods of Turkish origin in value less than 5000 US $ or its equivalent in Turkish Lira can be exempted from export procedures.
- Trade Facility Free from Customs Duty Procedure
The goods in free circulation can be sent to Turkey or to the EU countries from the free zones without any customs duty payment. Moreover, no customs duty is applied on the goods of third country origin at the entrance into the free zones and exit to the third countries.
- Easy Access to EU Countries
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.
- Equal Treatment
The incentives and advantages provided in the free zones are available to all firms regardless of their origin.
- No Time Limitation
The goods can remain in the zones without any time limit.
- Managing Trade Activities According to Market Demands and Conditions
In the Turkish Free Zones, unless the manufacturers demand, any authority regarding prices, quality and standards granted to public institutions and agencies by laws or by other legislation is not valid. Also legislative provisions pertaining to customs and foreign exchange obligations are not applicable in the zones.
- Inflation Accounting Opportunity
Every payment in the Turkish Free Zones is done with Convertible Currencies.
- Access to Domestic and Foreign Markets
In contrast to most of the free zones in the world, sales to the domestic market with the exception of consumer and risky products are allowed.
- Reduced Bureaucratic Procedures and Dynamic Management
During application and operation process bureaucracy is minimized. Professional private sector companies manage free zones.
- Strategic Location
Turkish Free Zones are close to the EU and Middle East Markets, adjacent to the major Turkish Ports on the Mediterranean, Aegean and Black Sea and have easy access to international airports and highways.
- Competitive Infrastructure Standards
Infrastructure of the Turkish Free Zones is competitive with international standards.
- Supply Chain Management
Turkish Free Zones, particularly for the companies which manufacture for export, offer supply chain management opportunities in providing intermediate and raw materials.