A free zone is a special economic area located within a country’s customs borders, where foreign trade transactions can be carried out freely, bureaucratic burdens are minimized, and investors are offered various tax incentives. These zones are designed for companies focused on export-oriented production and present significant opportunities for both domestic and foreign investors. In Turkey, free zones have been established through government-backed policies to improve the investment environment and attract international capital. They provide numerous financial advantages to entrepreneurs, such as exemption from customs duties, VAT exceptions, and income and corporate tax benefits. With their structure encouraging foreign currency earning activities, free zones also directly contribute to closing the country’s foreign trade deficit. Attractive for investors in Turkey, these areas offer not only economic advantages but also important logistical, operational, and strategic benefits, helping companies achieve a stronger position in global competition.
Concept and Purpose of a Free Zone
The concept of a free zone refers to special economic areas established within the economic system to promote foreign trade and attract international investment, where legal and financial incentives are implemented. These zones are a significant component of countries’ foreign trade policies and stand out for the advantages they offer to companies engaged in export-oriented production. Due to simplified customs procedures, reduced tax burdens, and minimized bureaucratic processes, free zones have become highly attractive to both domestic and foreign entrepreneurs. In Turkey, free zones are designed not only for production but also to serve a wide range of business activities such as trading, assembly, maintenance and repair, software, research and development, warehousing, banking, and insurance. With this structure, free zones contribute to increasing global competitiveness in the industrial and service sectors and play a critical role in the country’s economic growth. They are also an important tool for accelerating foreign capital inflow and encouraging foreign currency earning activities.
Free Zones in Turkey and Their Features
There are 19 active free zones in Turkey, each established through strategic planning in terms of both geographic location and sectoral structure. Major centers among them include the Aegean Free Zone, Mersin Free Zone, Antalya Free Zone, Istanbul Leather Free Zone, and Istanbul Atatürk Airport Free Zone. Each of these zones serves different sectors and is located in areas with access to ports, airports, and highways, providing significant logistical advantages to investors. For example, the Aegean Free Zone specializes in textiles and electronics, while the Mersin Free Zone stands out in food, agriculture, and maritime sectors. The advantages of free zones include the duty-free import of investment goods, VAT exemption, free transfer of profits abroad, and various tax exemptions for production activities. The availability of ready infrastructure services, low rental costs, and ease of employment also encourage entrepreneurs to operate in these areas. Attractive for both domestic and foreign investors, these zones aim to position Turkey as a production hub in the global competitive environment.
Company Establishment Process in a Free Zone
The first step for entrepreneurs who wish to establish a company in a free zone in Turkey is to apply to the General Directorate of Free Zones at the Ministry of Trade with an investment project. This application should clearly outline the type of activity, anticipated employment, investment amount, and export targets. If the application is approved, the investor is granted a free zone license. After obtaining the license, a lease agreement is signed with the relevant free zone operating company and a physical space is allocated. Subsequently, trade registry procedures are completed, and tax number and social security (SGK) registrations are made. While the company establishment stage follows general company formation procedures, the application requirements for free zones have specific characteristics. The investment must primarily be export-oriented, generate foreign currency income, and include a certain employment commitment. Thanks to the conveniences offered by the government, this process is typically completed within 15 to 30 days. The zone administration guides entrepreneurs throughout the process, ensuring that all steps are carried out thoroughly and efficiently.
Tax and Customs Advantages
Free zones offer significant incentives to investors through tax exemptions and financial conveniences. Companies engaged in production-oriented activities that obtained their licenses before 2004 are exempt from income and corporate taxes, which substantially increases their net profit margins. Transactions carried out in free zones are not subject to VAT or customs duties; thus, businesses save on import costs and minimize their export expenses. Companies operating in free zones have the right to sell their products directly abroad and freely use their export earnings within the country. Another major advantage is that salaries paid to employees are not subject to income tax, significantly reducing personnel costs for employers. According to official sources, profits generated from foreign currency-earning activities in Turkey’s free zones can be transferred abroad without any tax liability. All these advantages enable investors to utilize their capital more efficiently.
Trade Restrictions in Free Zones
Although free zones offer many advantages, there are also certain restrictions when it comes to conducting business in these areas. Firstly, sales of products from free zones to the Turkish domestic market are subject to VAT and customs duties. This can lead to increased costs for companies aiming to compete in the domestic market. Companies selling products to the Turkish market are also subject to stricter inspections and reporting requirements compared to other businesses. Additionally, companies operating in free zones can only conduct business in the activity areas specified on their licenses. For example, a company licensed for software development is not automatically authorized to engage in import activities. Moreover, special permits are required to operate in certain sectors (such as financial services, logistics, or energy), which can prolong processes or limit some investors. Social obligations such as registering employees with the social security system (SGK), and complying with occupational safety and environmental protection regulations, are also valid in free zones. For this reason, it is very important for investors to consider all legal regulations and not focus solely on the advantages when determining their strategy.
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