Turkey: Changes in subsidy law

Previous legal framework
State aid is granted on the basis of various criteria. The region or the economic sector in which the investment is made is decisive, but also the strategic importance of the investment and the level of the investment volume.

Investments in structurally weak regions receive higher subsidies than investments in industrial areas. For the award of grants, a distinction is made between six different regions. General investments (i.e. those which are not of strategic importance, are not carried out in a specific sector and do not exceed a minimum amount) are only supported in industrial areas above an investment level of TL 1,000,000.00. In structurally weak regions, however, an investment volume of TL 500,000.00 is sufficient.

In principle, the following types of state aid are available:

  • exemption from VAT.
  • exemption from import duties.
  • reduction in income or corporate tax.
  • reduction of the employer’s contribution to social security.
  • reduction in wage tax.
  • reduction of the employee’s contribution to social security.
  • aid in the payment of interest and dividends.
  • allocation of properties.

The actual aid granted depends on the specific circumstances of the individual case.

In addition, investments relating to a particular project may be subsidised. In order to be recognised as eligible, this project must be innovative, have a high added value and satisfy critical market needs.

It is essential that the level of dependence on supply through imports from abroad is reduced.

Changes
To date, a particularly high level of support has also been given to investments in certain sectors that increase Turkey’s competitiveness, technology, research and development capacity. Such separate subsidies for major investments have recently been abolished by executive order.

In the future, aid for investments linked to a particular project will instead be extended to a specific product range (“list of priority products”). These “project-based subsidies” are granted in particular where the investment concerns the manufacture of high-quality technological products. Products that are essential for the development of certain industries are also considered eligible. These preferred areas include chemical, pharmaceutical and medical value creation, but also computer technology, electronics, optics, electrical equipment, machinery and transportation.

Authors: Melis Paula Aydin & Zeynep Kafa