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Free Trade Zones of Türkiye - Part I


Source: Export Promotion Center of Türkiye - Trade Point Ankara

General Description       Incentives Offered in The Turkish Free Zones                 Evaluation and Granting of Operating Licenses by Directorate General

General Description Free Zones are defined as special sites within the country but deemed to be outside of the customs border and they are the regions where the valid regulations related to foreign trade and other financial and economic areas are not applicable, are partly applicable or new regulations are tested in. Free Zones are also the regions where more convenient business climate is offered in order to increase trade volume and export for some industrial and commercial activities as compared to the other parts of country. With the objective of increasing export-oriented investment and production in Türkiye, accelerating the entry of foreign capital and technology, procuring the inputs of the economy in an economic and orderly fashion and increasing the utilization of external finance and trade possibilities, Free Zones Law numbered 3218 was issued in 1985. Since then Mersin (1987), Antalya (1987), Aegean (1990), Istanbul Atatürk Airport Free Zones (1990), Trabzon (1992), Istanbul Leather and Industry (1995), Mardin (1995), Eastern Anatolia (1995), Istanbul International Stock Exchange (1997), Izmir Menemen-Leather (1998), Rize (1998), Samsun (1998), Istanbul Thrace (Çatalca) (1998), Adana- Yumurtalik (1998), Kayseri (1998), Thrace (Çorlu) (1999), Gaziantep (1999) Free Zones became operational. Istanbul International Stock Exchange Free Zone’s main objective is to make Istanbul an international finance center where underwriting-trading, stock barter activities are carried out in a tax-free environment.

In general all kind of activities can be performed in Turkish Free Zones such as manufacturing, storing, packing, general trading, banking and insurance. Investors are free to construct their own premises, while zones have also available office spaces, workshops, or warehouses on rental basis with attractive terms. All fields of activities open to Turkish private sector are also open to joint-ventures and foreign companies.

Türkiye has realized Customs Union with EU countries on January 1, 1996 and Free Zones are one of the topics to be harmonized during the Customs Union Period. During the negotiations with EU officials it was observed that although the legislation unity was provided in order to minimize the implementation differences, the full harmonization has not yet been achieved in the Community Free Zone Implementations. There are still some differences in Community Implementations and uniformity of these differences could not be realized in a short term and the Community has to take into consideration the free zone legislation of member states which were put into force according to their National Laws before the full membership. Within this context as a result of Community Officials’ evaluations on the Turkish Free Zones Legislation, it was observed that both legislation are substantially similar, so Türkiye does not need a new legal arrangement on this subject and the current situation can be carried on during the Customs Union period.

Turkish Free Zones as far as their legislation, infrastructure and volume of trade are concerned, constitutes a good example in our region. In this context, technical and consultancy assistance have been given to the countries in the region especially to the CIS countries to help to establish their free zones. Moreover, the 17th International Conference of World Export Processing Zones’ Association (WEPZA) - a non-profit international organization set up under the auspices of UNIDO and which has 50 members in 40 countries was realized in Istanbul, on October 5-8, 1997 under the theme “The Global Network of Free Zones In the 21st Century”. This organization indicates that Turkish Free Zones are considered among the most successful free zones in the world. Top

Incentives Offered in The Turkish Free Zones Turkish Free Zones are tax free zones. Income generated through activities in the Zones are exempted from all kinds of taxes including income, corporate and value-added tax. The validity period of an operation license is maximum 10 years for tenant users, and 20 years for users who intend to make their own offices in the zone; If the operating license is for production, these terms are 15 and 30 years for tenant users and investors, respectively. The requested operation license period can be prolonged to 99 years according to the type of investment.

Free Zones earnings and revenues can be transferred to any country, including Türkiye, freely without any prior permission and are not subject to any kind of taxes, duties and fees. There is no limitation on the proportion of foreign capital participation in investment within the Free Zones. In contrary to most Free Zones of the world, sales into the domestic market are allowed in Turkish Free Zones within the context of the import regime. (Sales to the domestic market is also subject to a fee of 0.5 % of the transaction value.)

Currencies used in the zones are convertible foreign currencies dealth in by the Central Bank of Türkiye. Infrastructure of the Turkish Free Zones is compatible with international standards. Red tape and bureaucracy have been minimized during application and operation phases by authorizing only one agency in charge of these procedures.

The geographical location of Türkiye provides significant advantages to the Turkish Free Zones. Turkish Free Zones are adjacent to the major Turkish Ports on the Mediterranean, Aegean and Black Seas. In addition, they were established within easy access from international airports and highways. There are no procedural restrictions regarding price, standards or quality of goods in the Turkish Free Zones. For a period of 10 years following the commencement of commercial operations in the zones, strikes and lockouts shall not be applicable. However, any disputes occurring within the context to collective bargaining during this period shall be resolved by the Supreme Arbitration Council. In Turkish Free Zones, Municipality Law, Passport Law, Foreign Investment Law, Foreign Investment and Encouragement Law, and all other articles of laws contrary to the provisions of the Free Zones Law, shall not be applicable. Top

Evaluation and Granting of Operating Licenses by Directorate General If firms which are found appropriate to get an Operating License intend to rent an open area must sign a rental contract with the Zone Operator, Founder/Operator Company. Firms that intend to rent a closed area must sign a rental contract with one of the users holding Renting Operating License within 30 days of being so notified. A copy of the rental contract approved by the related Zone Directorate is sent to General Directorate of Free Zones and Operating License can be obtained thereafter. Those who are not found eligible for an Operating License their application fee shall be repaid. Term of the Operating License is 10 years for tenant users who intend to rent a completed office and 20 years for investors who intend to build their own office. However this term is 15 years for tenant users and 30 years for investor users who are engaged in production activities. Top


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