Turkish Economy

INCENTIVES PURSUANT TO THE EMPLOYMENT ENCOURAGEMENT LAW NO. 5350

Last updated on June 3, 2005

A	The provinces covered by Law No 5350

Law No. 5350 envisages State incentives for creation of new jobs in the provinces;

where income per capita was less than $1500 in year 2001 or

where the year-2003 Socio-economic Development Index value announced by the State Planning Organisation is negative.

Thus, 49 provinces are covered by the law:

Provinces with income per capita less than US$ 1500

Adiyaman	Bingöl	Hakkari	Siirt
Afyonkarahisar	Bitlis	Igdir	Sinop
Agri	Çankiri	Kars	Sivas
Aksaray	Diyarbakir	Kirsehir	Sanliurfa
Amasya	Düzce	Malatya	Sirnak
Ardahan	Erzincan	Mardin	Tokat
Bartin	Erzurum	Mus	Usak*
Batman	Giresun	Ordu	Van
Bayburt	Gümüshane	Osmaniye	Yozgat

(*)In this list, only USAK has a positive Socio-Economic Development Index (2003) value. All of the other provinces have negative index values.

Provinces with negative Socio-Economic Development Index values*

Artvin	Kahramanmaras	Kilis	Nigde	Tunceli
Çorum	Karaman	Kütahya	Rize
Elazig	Kastamonu	Nevsehir	Trabzon

(*)Provinces with a negative Socio-Economic Development Index value,
which were excluded by the previous table.

B	Incentives

The law envisages that eligible enterprises defined below shall be granted the following incentives:

‘Personal income tax’ exemption
‘Social insurance contribution (employer’s share)’ exemption
Free Land support
Energy subsidies

These incentive schemes will have been abandoned as of January 1, 2009.

1	Income Tax & Social Contribution exemptions

In the covered provinces, income and corporate tax payers who

a) started their business after April 1, 2005 and employ at least 30 employees or
b) started their business before April 1, 2005 and, afterwards, increased/increase the number of employees by at least 20% over those employed before 2005 in a way that the total number of employees exceeds 30

are granted ‘income tax’ and ‘social insurance contribution (employer’s share)’ exemptions as shown in the following table.

In case of 1(a), all new employees’ wages are subject to ‘personal income tax’ and ‘social insurance contribution (employer’s share)’ exemptions.

On the other hand, for those which fall into category 1(b), both;

the additional (new) employees and
a number of other employees who were employed before 2005, not more than twice the number of new (additional) employees

are subject to ‘personal income tax’ and ‘social insurance contribution (employer’s share)’ exemptions.

Amount of exemptions

	Operation location (in the covered provinces)	Amount of Exemption
Income Tax	Industrial Zones (IZ) or Organised Industrial Zones (OIZ)	100% of the income tax to be calculated out of the minimum wage
Income Tax	Places other than IZ and OIZ	80% of the income tax to be calculated out of the minimum wage
the employer's share of social Insurance contribution (payable to SSK -the private sector wage earners & public sector workers' scheme)	IZ or OIZ	100% of the social insurance contribution (the employer's share) to be calculated out of the minimum wage
	Places other than IZ and OIZ	80% of the social insurance contribution (the employer's share) to be calculated out of the minimum wage

2	Free-Land Support

Lands belonging to the Treasury or local governments can be allocated to the use of investors who will create 30 or more jobs (for at least 5 years) in the provinces described above or those in the Priority Development Regions provided that no space is left in the Organised Industrial Zones or Industrial Zones in the relevant province.

3	Energy Subsidies

Beneficiaries

The following categories of enterprises with certain production/closed-space capacities are granted energy subsidies:

a) Stock breeding firms, freezing-warehousing companies, glasshouses/sera operators or certified seed producers which

were set-up after April 1, 2005 and that employ at least 10 employees or

started operating before April 2005 and that increased the number of employees by at least 20% after April 1, 2005 over those who were employed before 2005 provided that the total number of employees is 10 or more

b) Manufacturing and mining companies, tourism accommodation facilities, educational enterprises, or health services providers which

were set-up after April 1, 2005 and that employ at least 30 employees or

started operating before April 2005 and that increased the number of employees by at least 20% over those who were employed before 2005 provided that the total number of employees is 30 or more

Amount of energy subsidies

If the covered enterprises employ the minimum number of employees mentioned above, the amount of energy subsidy is 20% of the total energy bill charged by the supplier. If they employ more employees than the minima, then the subsidisation rate is increased by 0.50 percentage point for each additional employee.

However, there is a ceiling for the subsidisation rate. The ceiling is as follows:

Enterprises	Ceiling
Those in ‘Organised Industrial Zones or Industrial Zones’	40%
Those in other places	50%