Free Trade Zones in Turkey

THE FREE TRADE ZONES

What is a Free Trade Zone (FTZ)?

A Free Trade Zone (FTZ) is a specially designed production site which aims at increasing export-oriented investment and production in Turkey, accelerating the entry of foreign capital and technology into Turkey, enhancing the productivity and economies of scale and increasing the utilization of external financial sources and trade opportunities.

Although an FTZ is within the boundaries of the Republic of Turkey, it is treated as if it were a territory abroad.

National regulations relating to foreign trade, financial and economic areas are partially applicable to FTZs.

There are 20 FTZs in Turkey and their annual trade volume amounted to more than $ 23 billion in year 2005.

What are the advantages of an FTZ?

1	Geographical location

An FTZ generally is;

o Very close to the centre of the city where it is located,

o Very close to the main loading/unloading stations of the National Railway, a port or an airport,

o Well-integrated with the related/outsourcing industries.

2	Flexible layout

The plot and parcel sizes within an FTZ are determined in a flexible manner so that small, medium and big sized industrial companies can all operate together.

3	Tax incentives

o Production companies in an FTZ are exempt from both corporate and income taxes.

o Goods imported from abroad are exempt from customs duty. In addition, there are no restrictions on the age/model of machinery to be imported from abroad, and these items are exempt from both VAT and customs duty.

o Goods purchased in Turkey by companies located in an FTZ are exempt from VAT.

o Companies based in an FTZ can keep their products in a designated duty-free storage area for an indefinite period of time and they can export the products in lots at any time (at the time of export, a customs duty for the lots is paid).

o Energy, water and telephone utilities supplied within a zone are all exempt from special consumption tax (OTV) and VAT.

4	Property and money transfer rights

o Any company in an FTZ can freely transfer abroad its commercial revenues.

o Investors who own facilities in a zone can sell their properties to any real or legal person.

5	Minimised Bureaucracy

o Customs transactions are carried out during the entry of the imported goods (or delivery of the exported goods) in a designated location in an FTZ. In addition, such transactions are optimally designed. These factors enable companies to save substantial amount of time and financial resources.

o Energy, water and telephone utility services are supplied by the operator. Thus, companies in an FTZ do not have to deal with too many transactions and utility companies.

o Since Free Trade Zones are accepted to be ‘foreign land abroad’, companies in these zones are exempt from many of the national regulations.

6	Favourable Property Costs

o Unit selling price of lands on these sites is one of the cheapest among all alternatives in Turkey.

7	Qualified Labour

Since FTZs are based in industrialised provinces, every type of qualified labour force can easily be found at very reasonable costs in those locations.

The average monthly gross wages start from £230 for blue-collar employees.

8	Related & subcontracting industry

The related & subcontracting industries are composed of thousands of very competitive small and medium sized companies specialised in diversified production/manufacturing areas.

Thus; an FTZ and the related industry create an excellent synergy.

What is the legal framework? Who is the regulator

Free Zones are operated in line with Law No. 3218 dated 1985.

Regulator: The General Directorate of Free Trade Zones of the Undersecretariat of Foreign Trade regulates and supervises the FTZs.

Directorate: The regulated is represented by the directorates based in the FTZs.

What is a founder or operator?

Founder: The organization which provides the infrastructure. It can be either private or public.

Operator: The institution or agency which operates the zone. It can be either private or public.

Founder & Operator: A combination of Founder and Operator.

Any license needed?

In order to operate in an FTZ, companies need an Operating Licence which is granted by the Regulator mentioned above.

The firms which are found appropriate to get an Operating Licence and which intend to rent an open area must sign a rental contract with the Zone Operator, or Founder&Operator. Firms intending to rent a closed area must sign a rental contract with one of the users holding Renting Operating Licence.

Upon the submission of a copy of the rental contract approved by the related Zone Directorate to the regulator, operating licence is granted to the applicant.

All these transactions take very short time.

The term of a license

Service Companies (Office Users)

A company which is going to use a completed office can be granted a 10 year license whereas an investing company which is to build its own office can be granted a 20 year license.

Production Companies

Depending on whether an ownership or letting is in question, a 15-to-20 year licence can be granted.

How to start operating in an FTZ?

Tenants can start operating as soon as they receive their Operating Licences from the regulator.

Investing companies, on the other hand, are to obtain a “construction licence” to implement their construction projects. Once they complete the construction, whether the construction complies with the “construction licence” is checked. Upon the approval of the buildings, the investing companies can start operating.

The free trade zones (FTZ) in Turkey

The contact information of the FTZ operators

The free zone directorates