Ready to explore Free Zone company tax advantages in Turkey for your business? Akkas & Associates Law Firm provides full-service company formation and governance solutions for foreign investors establishing Free Zone operations in Turkey.
With over three decades of experience since 1992 and successful registration of more than 250 companies with foreign shareholders, we deliver the expertise you need to navigate Free Zone regulations, maximize tax benefits, and ensure compliance.
Table of Contents
- Understanding Turkey's Free Zone Framework
- The Seven Pillars of Free Zone Tax Exemption
- Key Areas That Thrive in Free Zones
- Navigating Compliance: The Crucial Role of Legal Expertise
- Most Prominent Free Zones in Turkey
- Why Partner with Akkas & Associates Law Firm for Free Zone Company Formation
- Frequently Asked Questions (FAQs)
- Q1: Is the Corporate Tax exemption in the Free Zone permanent?
- Q2: Can a Free Zone company sell goods to the Turkish domestic market?
- Q3: Do the tax exemptions apply to all types of activities in a Free Zone?
- Q4: Are there any other fees or funds a Free Zone company must pay?
- Q5: Can I have 100% foreign ownership of a company in a Turkish Free Zone?
- Contact us for Free Zone Company Tax Advantages in Turkey
Turkey’s Free Zones (FZs) are strategically designated areas that, while geographically within the national borders, are considered outside the customs territory. This unique status, established under Law No. 3218, is designed to boost export-oriented investment and production, facilitate the entry of foreign capital and technology, and reduce operational costs.
For international investors and foreign shareholders, establishing a company in a Turkish Free Zone—such as the ones near Istanbul or Izmir—offers a compelling array of tax and financial incentives that significantly enhance profitability and competitiveness on the global stage.
Understanding Turkey’s Free Zone Framework
Free Trade Zones in Turkey are specially designated areas considered outside the customs territory, despite being within the country’s borders. Established under Free Zones Law No. 3218 in 1985, these zones create a business-friendly environment designed to stimulate foreign direct investment, promote international trade, and accelerate technology transfer.
Unlike traditional business structures, companies operating in these zones benefit from being treated as if they’re outside Turkey’s customs borders for taxation purposes, while still enjoying the stability and infrastructure of conducting business within the country.
The Seven Pillars of Free Zone Tax Exemption
The cornerstone of the Turkish Free Zone appeal is a robust package of tax exemptions and financial freedoms. These incentives are primarily granted to manufacturing companies and are often tied to export performance, making them ideal for businesses with an international focus.
1. 100% Corporate Income Tax (CIT) Exemption
For manufacturing companies operating within a Free Zone, the profit derived from the sale of goods they produce in the zone is fully exempt from Corporate Income Tax. This exemption is a massive cost-saving measure that dramatically increases the net profitability of your Turkish operation. This exemption generally lasts until the year Turkey becomes a full member of the European Union, providing a long-term planning horizon.
2. Value Added Tax (VAT) Exemption
All transactions conducted within the Free Zone—including the delivery of goods and services between Free Zone companies—are exempt from VAT. Furthermore, goods and services supplied from mainland Turkey to a Free Zone company are treated as exports and are also VAT-exempt. This simplification significantly streamlines cash flow and reduces the administrative burden.
3. Customs Duties and Taxes Exemption
Goods brought into Free Zones, regardless of their origin (Turkish, EU, or third country), are exempt from customs duties and other taxes, provided they are not consumed or utilized within the zone itself. This exemption on raw materials, components, and machinery for production purposes is a critical advantage, substantially lowering the initial investment cost for manufacturers.
4. Income Tax Exemption for Employees
This is a powerful incentive for export-driven manufacturers. The wages of employees of a manufacturing company operating in a Free Zone are exempt from income tax withholding, provided that the company exports at least 85% of the FOB value of the goods produced in the zone. This exemption significantly reduces labor costs, giving your business a competitive edge.
5. Stamp Duty and Fee Exemptions
Documents and transactions related to the activities of manufacturer users in the Free Zones are generally exempt from stamp duties and various fees. This reduces the cost and complexity of legal and contractual paperwork associated with your operations.
6. Free Repatriation of Profits
A major draw for foreign investors is the complete freedom to transfer profits and earnings generated from Free Zone activities to Turkey or abroad without any restrictions or withholding taxes. This ensures total flexibility in financial planning and capital management.
7. Medium and Long-Term Operating License Security
Free Zones offer stability through long-term operating licenses, which can range from 5 years for tenant users to 45 years for manufacturer-investor users who construct their own premises. This long-term commitment allows for secure, medium-to-long-term business planning, which is crucial for major investments.
Key Areas That Thrive in Free Zones
Turkish Free Zones are particularly well-suited for businesses involved in manufacturing, logistics, R&D, and international trade. The tax advantages are most pronounced for export-focused manufacturers.
- Manufacturing and Export: Textiles, electronics, machinery, and automotive components benefit hugely from the CIT and customs duty exemptions.
- Logistics and Trade: Using a Free Zone as a regional distribution hub provides flexibility and duty-free inventory management.
- Technology and R&D: Companies focused on software and high-tech development can combine Free Zone benefits with other specific R&D incentives offered by the Turkish government.
Understanding which Free Zone best aligns with your business goals is crucial. For detailed guidance on selecting the optimal zone and structuring your company, our expert team can provide a tailored consultation. Check out our dedicated page on Company Formation in Turkey for more context.
Navigating Compliance: The Crucial Role of Legal Expertise
While the benefits are clear, maintaining these tax exemptions requires strict compliance with Free Zone legislation and Turkish tax law. For instance, the corporate tax exemption for non-manufacturing activities is far more limited, and the employee income tax exemption is contingent on meeting the 85% export threshold.
Incorrect company structuring, non-compliance with reporting requirements, or failure to properly document transactions can jeopardize your tax-exempt status. This is where the experienced legal guidance of a full-service firm becomes indispensable. We ensure your entity is not only correctly formed but also maintains full compliance to safeguard your advantages.
We specialize in Joint Stock Company (A.Ş.) and Limited Liability Company (Ltd. Şti.) formations within Free Zones. For an overview of the formation process, you may find our article on How to Start a Business in Turkey helpful.
Most Prominent Free Zones in Turkey
Several Free Zones stand out for their infrastructure and business ecosystems:
Aegean Free Zone (Izmir): One of Turkey’s most successful zones, focused on electronics, automotive, and manufacturing industries with excellent connectivity to European markets.
Mersin Free Zone: Turkey’s first Free Zone established in 1985, strategically located near the Port of Mersin, serving as a maritime trade hub.
Istanbul Atatürk Airport Free Zone: Specializes in air transport logistics, ideal for high-value and time-sensitive goods.
Antalya Free Zone: Located on the Mediterranean coast, supporting yacht manufacturing, medical devices, and tourism-related industries.
European Free Zone (Tekirdağ): One of the largest zones, strategically positioned for European market access.
Why Partner with Akkas & Associates Law Firm for Free Zone Company Formation
Establishing a Free Zone company involves navigating complex regulatory requirements, licensing procedures, and compliance obligations. Since 1992, Akkas & Associates Law Firm has successfully guided more than 250 companies with foreign shareholders through the Turkish business formation process.
Our comprehensive services for Free Zone company establishment include:
- Strategic Free Zone selection based on your industry and market objectives
- Complete licensing assistance including operating license applications and approvals
- Company registration services under Turkish Commercial Code
- Tax planning and compliance to maximize available incentives
- Lease negotiations for Free Zone facilities
- Ongoing legal support for operational compliance and reporting requirements
- Multilingual services ensuring clear communication throughout the process
Frequently Asked Questions (FAQs)
Q1: Is the Corporate Tax exemption in the Free Zone permanent?
The corporate tax exemption for manufacturing profits is currently granted until the end of the taxation year in which Turkey becomes a full member of the European Union. This provides a long-term benefit, but its duration is tied to this condition.
Q2: Can a Free Zone company sell goods to the Turkish domestic market?
Yes, a Free Zone company can sell goods to the domestic Turkish market. However, these sales are treated as imports into Turkey. Therefore, customs duties, VAT, and other import-related taxes will apply to the goods entering the mainland.
Q3: Do the tax exemptions apply to all types of activities in a Free Zone?
No. The primary and most extensive tax benefits—like the 100% Corporate Tax exemption—are reserved for manufacturing activities and are often contingent on high export performance (e.g., the 85% rule for employee income tax exemption). Trading, storage, or service activities have more limited exemptions.
Q4: Are there any other fees or funds a Free Zone company must pay?
Yes. Free Zone companies are required to pay a percentage of their gross revenue (or rent for non-manufacturers) into the Free Zones Establishment and Development Fund (generally 0.5% for manufacturers selling abroad and 1% for non-manufacturers). Social security premiums for employees must also be paid.
Q5: Can I have 100% foreign ownership of a company in a Turkish Free Zone?
Absolutely. One of the major non-tax advantages of Turkish Free Zones is the guarantee of 100% foreign ownership. Foreign investors enjoy the same rights and incentives as domestic investors, without any minimum capital requirements or mandatory local partnership.
Contact us for Free Zone Company Tax Advantages in Turkey
With a successful track record dating back to 1992 and multilingual expertise in full-service company formation and governance, Akkas & Associates Law Firm stands as your premier legal partner in Istanbul.
We deliver meticulous, results-driven solutions to ensure your business maximizes these exceptional Turkish Free Zone investment incentives. Our multilingual team in Istanbul provides personalized guidance through every stage—from initial Free Zone selection and operating license applications to company registration, tax structuring, and ongoing compliance support.
Let us help you unlock the powerful tax advantages of Turkey’s Free Zones while ensuring your operations meet all regulatory requirements. Contact Akkas & Associates Law Firm to schedule a consultation and discover how Free Zone company tax advantages can transform your investment strategy in Turkey.
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