Incentives on Railway Industry in Turkey

Within the perspective of Turkish legal system, there exist five different types of incentives:

 

• Regional Incentives
• Prioritized Investment Areas

 

 

By considering these different types of incentives, several factors of support are envisaged such as:

 

• Exemption from VAT : Regarding the machinery and equipment (domestic and abroad supplies) within the scope of Investment Incentive Document (YatırımTeşvikBelgesi)
• Exemption from Customs Tax: Regarding the machinery and equipment (domestic and abroad supplies) within the scope of Investment Incentive Document (YatırımTeşvikBelgesi)
• Tax Reliefs: Deduction of Income Tax or Corporate Tax until it reaches the level of envisaged contribution amount
• Support for Interests: Financing of the interest or share of profits until they reach the level of 70% of the amount of investment marked in the Investment Incentive Document (YatırımTeşvikBelgesi).
• Allocation of Investment Area: It is possible to allocate an area for investment within the rules and procedures applied by Ministry of Economy for the ones having an Investment Incentive Document (YatırımTeşvik Belgesi).
• Support for Employer’s Contribution on National Insurance: Ministry covers the minimum amount of expenses of the Employer concerning the insurance premiums of additional employment for investments having an Investment Incentive Document (YatırımTeşvikBelgesi).
• Insurance Premium Support: Ministry covers the minimum amount of expenses concerning the insurance premiums of additional employment for the investments having an Investment Incentive Document (YatırımTeşvikBelgesi).
• Income Tax Withholdings Support: Cancellation of the income tax withholdings until the amount of minimum wage.
• VAT Return: Returns of the VATs collected for the expenses on construction regarding the strategic investments having a value exceeding 500 million Turkish Liras. 
• Large Scaled Investments
• Strategic Investments
• General Incentives 

 

1. Regional Incentives

 

The main purpose of this type of incentive is to diminish the difference between the citied concerning their level of development by increasing their export and production potential. Throughout Turkey, there exist six different regional classifications for cities on their level of development. THis regions might be shown on map situated above.

 

2. Prioritized Investment Areas

 

Support of previously determined investment topics with the supports concerning the 5th region

 

3. Large Scaled Investments

 

Support of investments having the capability to increase the capacity of technology and R&D.

 

4. Strategic Investments

 

Support of investments having additional values which may contribute to the diminishment of current deficit. 5. General Incentives Support of the investments not falling under the scope of the mentioned investment subjects.

 

INCENTIVES IN RAILWAY INDUSTRY

 

Regarding the railway industry, the authorities envisaged the following incentives:

 

• Incentives for Transportation
• Incentives for Production

 

1. INCENTIVES FOR TRANSPORTATION

 

This kind of incentive consists of investments by private sector concerning the intercity transportation of passengers/freight and inner-city transportation of freight. The above mentioned investments are considered as “Prioritised Investments” and benefit from VAT exemption, Customs Tax exemption, Tax Deduction, Support for Employer’s Contribution on National Insurance, Support for Interests. For further information, please see the table herein below:

Table 1

SUPPORT FACTORS		REGIONS
		I	II	III	IV	V
VAT EXEMPTION		YES
CUSTOMS TAX EXEMPTION		YES
TAX DEDUCTION	CONTRIBUTION TO INVESTMENT (%)	40
	DEDUCTION (%)	80
SUPPORT FOR EMPLOYER’S CONTRIBUTION ON NATIONAL INSURANCE		7 YEARS
ALLOCATION OF INVESTMENT AREA		YES
INTEREST SUPPORT	DOMESTIC LOANS	5 POINTS
	LOANS ON EXCHANGE/LOANS BASED ON EXCHANGE	POINTS

 

1.      Incentives for Production

These incentives are provided for the production of railways and tramway locomotives and wagons.

For the investments having a maximum amount of 2 million Turkish Liras, by the exemption of Istanbul, Regional Incentives (for further information, please see information on page 2) are envisaged.   Regarding regional incentives for production please see the Table 2.

For the investments having a maximum amount of 50 million Turkish Liras, Incentives for Large Scaled Investments (for further information, please see information on page 2) are envisaged.  Regarding incentives for large scaled investments please see the Table 3.

 

 

Table 2. Supports Regarding the Productions ≤2 million Turkish Liras, excluding Istanbul

SUPPORT FACTORS			REGIONS
			I	II	III	IV	V	VI
VAT EXEMPTION			YES	YES	YES	YES	YES	YES
CUSTOMS TAX EXEMPTION			YES	YES	YES	YES	YES	YES
TAX DEDUCTION	CONTRIBUTION TO INVESTMENT (%)	Out of the OIZ[1]	15	20	25	30	40	50
		In the OIZ	20	25	30	40	50	55
SUPPORT FOR EMPLOYER’S CONTRIBUTION ON NATIONAL INSURANCE		Out of the OIZ	2 YEARS	3 YEARS	5 YEARS	6 YEARS	7 YEARS	10 YEARS
		In the OIZ	3 YEARS	5 YEARS	6 YEARS	7 YEARS	10 YEARS	12 YEARS
ALLOCATION OF INVESTMENT AREA			YES	YES	YES	YES	YES	YES
INTEREST SUPPORT	DOMESTIC LOANS		NO	NO	3 POINTS	4 POINTS	5 POINTS	7 POINTS
	LOANS ON EXCHANGE/LOANS BASED ON EXCHANGE				1 POINT	1 POINT	2 POINTS	2 POINTS
INSURANCE PREMIUM SUPPORT			NO	NO	NO	NO	NO	10 YEARS
INCOME TAX WITHHOLDINGS SUPPORT			NO	NO	NO	NO	NO	10 YEARS