The Council of Ministers has implemented some changes to its decree dated June 06, 2012 regarding state incentives which will be provided to certain investments (“Decree”) through its decree published in the Official Gazette dated April 08, 2015 (“Amending Decree”).
Pursuant to the Decree, import of machinery and equipment can be permitted for investments for which an incentive application has been filed even if an incentive certificate has not yet been issued for that investment.
This is subject to the condition that a security has been deposited at an amount corresponding to the total of the taxes and deductions which can be granted with an exemption within the scope of an incentive certificate. Moreover, the period for such permission can be six months at most. If the incentive certificate has not yet been issued within the aforesaid period, then an application shall be filed to the Ministry of Customs and Commerce (“Ministry”) for an extension.
The Amending Decree introduces a period to file the abovementioned extension application to the Ministry, namely within three months starting from the end of the permission period.
Having said that, an application can also be filed within two months commencing from April 08, 2015 regarding investments where an extension application was not filed within three months and the security provided therefor has not yet been recorded as a revenue.
Previously, investments realized with the approval of the Ministry of Health for production of biotechnical, oncological medicines and blood components with a minimum investment amount of TRY 20,000,000 were included under privileged investments meaning that they would benefit from regional investment incentives. This privilege has been removed by the Amending Decree.
On the other hand, investments realized with the approval of the Ministry of Defense in the field of national defense will now be considered as a privileged investment without a minimum investment amount threshold. Prior to the Amending Decree, these projects were required to have a minimum investment amount of TRY 20,000,000 in order to be considered as privileged investments.
Similarly, investments for mining exploration activities of investors who have a valid exploration license or certificate realized within their licensed mining sites shall now be considered as privileged investments.
A new provision is introduced with regard to income or corporate tax deductions for persons and/or companies which are granted an incentive certificate. As a result, income or corporate tax deductions applied to investment expenses realized between January 01, 2015 and December 31, 2016 within the scope of an incentive certificate can now be applied to the income of the investor procured from other business activities in accordance with the limitations set forth under the Amending Decree.
Additionally, the Amending Decree has lowered the minimum investment amounts for certain investments. Accordingly, minimum investment amounts for the investments listed below have been amended as follows:
• TRY 1,000,000 for investments in production of office, accounting and information technology machinery realized in the 1st and 2nd investment zones and TRY 500,000 if these investments are realized in the 3rd, 4th and 5th investment zones;
• TRY 1,000,000 for investments in production of radio, television, communication inventory and machinery realized in the 1st and 2nd investment zones and TRY 500,000 if these investments are realized in the 3rd, 4th and 5th investment zones;
• TRY 1,000,000 for investments in maintenance and repair of aircrafts and its engines realized in the 1st and 2nd investment zones and TRY 500,000 if these investments are realized in the 3 rd, 4th and 5th investment zones;
• TRY 1,000,000 for investments in production of chemical herbal based products used in pharmaceuticals and medicine realized in the 1st and 2nd investments zones and TRY 500,000 if these investments are realized in the 3rd, 4th and 5 th investment zones.
Another important change introduced by the Amending Decree is that (i) new and expansion investments for which a license has been obtained from the Energy Markets Regulation Authority before June 19, 2012 and (ii) modernization type investments aimed to reduce the specific fuel consumption by at least 15% can now benefit from the state incentives.
Finally, it will also be possible to apply the favorable provisions of the Amending Decree to incentive certificates which were issued after January 01, 2012 upon request of the investor.