Financial Advantages of Free Zone
The information notes has been prepared for Bayramoglu Group. On the other hand, tax advantages for service provider companies have been stated below.
Manufacturer Company
Specific situations for manufacturer is briefed according to type of taxes
Corporate Income Tax (CIT)
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Revenues obtained from goods manufactured by the company based in Free Zone, which are sold at home and abroad, are exempted from CIT.
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Revenues obtained from commercial goods, which are purchased abroad or in Free Zone or in Turkey and are unprocessed, are out of exempt.
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Revenues obtained from products manufactured with raw materials, which are used for production being out of Free Zone Scope, manufactured inside or outside of Free Zone by subcontracted service provider are out of exempt.
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In terms of CIT, It does not matter that goods manufacturing in free zone are sold in Turkey, in free zone and abroad.
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Purchasing subcontracted service for manufacturing does not prevent from benefitting tax exemption. However, It is essential that most of parts of final product has to be manufactured in Free Zone and raw materials subcontracter uses has to be provided by the contracter in Free Zone.
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If Revenues obntained in free zone is deposited in banks located in free zone for the purpose of payment related the activities operating in free zone, the revenues such as interest are exempt from tax.
Value Added Tax (VAT)
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Company in Free Zone does not pay VAT for raw materials purchasing in Turkey, in Free Zone or abroad.
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VAT is not paid for subcontracted service purchasing in Turkey and free zone related manufacturing by scope of operation. However, primary materials have to be sent from free zone and the materials have to be sent back to free zone.
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If another service apart from subcontracting is purchased in Turkey, this service is subject to VAT.
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If raw materials in free zone are processed by a domestic company and then sent back to free zone, this service is liable to VAT.
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Any services purchased in free zone by manufacturer are excluded from VAT.
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The goods selling from free zone to Turkey are considered as import. That’s why purchaser in Turkey has to pay VAT for this transaction. However, the vendor in free zone does not pay VAT fort his sale.
Payroll Tax
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If at least 85% of FOB costs of goods manufactured in Free Zone are exported, the payroll tax paid by company are exempt from income tax.
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In terms of calculation of 85%, It matters the company makes sales into Turkey or Free Zone or abroad.
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If employees of company operating in scope of manufacturing work for another scope related to manufacturing, the company is allowed to benfit from the exemption for only employees working in manufacturing.
Withholding Tax on Dividends
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Dividends are withholded in case companies operating in Free Zone pay dividend depending on legal character of revenue.
Stamp Tax and Fee
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Stamp Tax and Fees derived from operations in Free Zone are exempt from tax.
Social Security
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There is no incentives related Social Security Law for Free Zone.
Keeping Accounting Books
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The company’d better have an accounting department because accounting books have to be kept according to Tax Regulation Law. Revenues and Cost with reference to the exemptions are supposed to be recorded separately. Cost of The Administration are to be spread into exempted operations and other operations depending on proportions of cost of sales.
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Tax inspections can be conducted by Tax Regulation Law.
Fund for Purchasing and Selling Raw Material
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The fees are paid up-front 0,001% of CIF worth of goods coming to Free Zone from abroad and 0,009% of FOB worth of goods sending to Turkey from Free Zone. No fund is paid for raw materials for subcontracting service
Necessary Documents
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Ruhsat - Licence
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Industry Registry Certificate
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Capacity Report