Investment Incentives: Turkish Defense Industry

Turkey provides various incentives for both newly established companies, and for the companies which are already in the business. Ministry of Science, Industry and Technology; Ministry of Economy; Scientific and Technological Research Council of Turkey, Undersecretariat for Defense Industries, and Development Agencies are some of the many institutions which provide incentives for the investments in the Defense Industry. 

Incentives provided by the Ministry of Science, Industry and Technology

–       The Law on the Technology Development Areas, Numbered 4691  

These incentives aim to produce new export-led technological know-how, and to improve the international competitiveness of the national industry. The entrepreneurs, companies which are already operating, or which are going to operate in Software, Design, or R&D activities can apply for these incentives until December 31, 2023. If qualified, applicants can enjoy various incentives such as Income Tax Exemptions, Value Added Tax exemptions for the software if developed as per the Law, and custom duty exemptions for the products imported as part of innovation and design projects.

–       The Law on the Supporting the R&D Activities, Numbered 5746

The incentives established by this law aim to improve the R&D and Design activities of companies and entrepreneurs, and to perform qualified studies which can compete internationally. The companies which are going to operate in Software, Design, or R&D activities can apply for these incentives until December 31, 2023. If qualified, applicants can enjoy various incentives such as a stamp tax exemption for the papers which are issued with regards to the R&D, development, or design activities.

Incentives provided by the Ministry of Economy 

The incentives provided by the Ministry aim to support the taxpayer defense industry companies which perform R&D activities for the new technology and know-how within the structure of their companies with the 100% expense incentive deductions. Therefore, if companies apply until December 31, 2023 to the Ministry of Science, Industry and Technology for this incentive; they may enjoy an incentive up to 100% R&D expense deduction.

Incentives provided by the Presidency of Defence Industries

The incentives provided by the Presidency lay on four major titles: Incentives for high-tech products, loan incentives, R&D incentives, and industrial participation Incentives. In order to apply for incentives, companies shall first fill the Incentive Evaluation, and feasibility study forms. Then companies shall register to the industrialization portal and submit the list of the expenses to be made, and pro forma invoices. The last step is the submission of the contracts which would show that the projects are about the defense industry. Therefore, If the local industrial enterprises take projects about the defense industry, the Presidency may supply TL-denominated credits. This incentive, the loan for qualified products, aims to support the enterprises for the machines and equipment needed for the investments. Furthermore, the Presidency has also started a new program called “Program to Evaluate and Support the Industrial Competency” (PESIC). This program aims to create growth plans for companies that are operating in the sector which aims to remove the external dependence for the products used or to be used by the military and support these companies according to the aforementioned growth plans.

Şafak Herdem