Decree No. 7028, published in Official Gazette No. 32154 of 5 April 2023, allows investments in districts accepted as disaster areas to benefit from the region 6 supports, the highest level of regional incentives.
Tax Circular No. 2023/17
Subject: Provinces affected by the earthquake brought within the Attraction Centres Programme
The “Decree Amending the Decree on the Support of Investments under the Attraction Centres Programme (Decree No: 7028)” was published in Official Gazette No. 32154 of 5 April 2023.
The Decree allows investments made in the districts accepted as disaster areas and listed in Annex 2 below to benefit from the region 6 supports, which provide the highest level of regional incentives.
1) Region 6 supports
Under Decree No. 2012/3305, the following supports may be provided for investments to be made in region 6:
a) customs duty exemption,
b) VAT exemption,
c) tax reduction,
ç) employer’s social security premium support,
d) allocation of an investment site,
e) interest or profit share support,
f) income tax withholding support,
g) social security premium support.
2) The incentive provision introduced by the Decree
Under temporary Article 1 added by this Decree to Decree No. 2018/11201 on the Support of Investments under the Attraction Centres Programme, investments of at least TRY 1,500,000 to be made in the districts accepted as disaster areas affecting general life because of the earthquakes that occurred in Kahramanmaraş on 6 February 2023, listed in Annex 2 below, may benefit from the support components provided under Council of Ministers Decree No. 2012/3305 on region 6 terms, at the rates and for the periods applied in region 6.
2.1) Limitation on interest and profit share support
Under Decree No. 2012/3305, on request, for investments benefiting from support under the regional incentive schemes and for strategic investments, 7 points of the interest or profit share payable on the portion of investment loans with a term of at least one year obtained from banks, up to 70% of the fixed investment amount recorded in the incentive certificate, may be met from budget resources for regional investments in region 6 in the case of Turkish lira loans, and 2 points in the case of foreign currency and foreign currency indexed loans, if approved by the Ministry, payable for a maximum of the first 5 years.
Under this Decree, the interest or profit share support for investments to be made in disaster areas may not exceed TRY 30 million, and may not exceed 10% of the fixed investment amount. For loans and financial leasing borrowings used before the entry into force of this Decree that benefit from interest or profit share support, the support will continue to be applied until the end of the support period without any change in the interest or profit share support points applied, provided the limits stated in this paragraph are not exceeded.
2.2) Scope of the investments
Under the Decree:
a) investments to be made to replace investments damaged by the earthquake,
b) new investments, including investments under investment incentive certificates whose investment period is continuing and for which no completion visa has been issued,
will be treated as within this scope.
In addition, for investments supported under Council of Ministers Decree No. 2012/3305 within this scope, the provisions of Annex 4 to that Decree entitled INVESTMENT AREAS THAT WILL NOT BE SUPPORTED OR WHOSE SUPPORT IS SUBJECT TO CERTAIN CONDITIONS will not be taken into account for investment areas with US-97 Code: 15-37. However, of that Annex 4:
– in respect of investments for the production of the iron and steel products specified in item (7) of section I/B, only investments to renew investment components damaged by the earthquake, and
– the ready-mixed concrete investments in item (2) of section II/B of the same annex
will be assessed under temporary Article 1 in accordance with the conditions stated in those items.
2.3) Application of the employer’s social security premium support and the social security premium support
For investments to be made to replace investments damaged by the earthquake, the employer’s social security premium support and the social security premium support will be applied, following completion of the investment, by treating the average number of employees reported in the monthly premium and service declarations submitted to the Social Security Institution between 1 August 2022 and 31 January 2023 (for seasonal investments, the seasonal employment averages of the previous year are taken into account) as follows:
a) for facilities destroyed by the earthquakes or subsequently ordered to be demolished because of damage, the whole as additional employment,
b) for severely damaged facilities, 25% as existing employment and 75% as additional employment,
c) for moderately damaged facilities, 50% as existing employment and 50% as additional employment,
ç) for slightly damaged facilities, 75% as existing employment and 25% as additional employment,
d) for undamaged facilities, 90% as existing employment and 10% as additional employment.
For moderately damaged, slightly damaged and undamaged facilities, the ratio of the total of the employer’s social security premium support and the social security premium support to the fixed investment amount may not exceed 200%.
The damage assessment report issued for the building by the Ministry of Environment, Urbanisation and Climate Change will be taken as the basis for the damage category.
Undamaged facilities will be assessed under this paragraph where the investor obtains a report on damage to machinery and equipment from the relevant insurance company or from the Ministry’s provincial directorates.
3) DISTRICTS WITHIN THE SCOPE OF TEMPORARY ARTICLE 1 (ANNEX 2)
Investments of at least TRY 1,500,000 to be made in the districts listed below may benefit from this provision.
4) Provisions of the Attraction Centres Programme Decree that will not apply under this provision
Under this provision, the second paragraph of Article 1, Articles 3, 4 and 5, and the fourth and sixth paragraphs of Article 8 of Decree No. 2018/11201 on the Attraction Centres Programme will not apply.
The second paragraph of Article 1:
“(2) This Decree covers the supports to be provided for manufacturing industry investments (US-97 Code: 15-37) and call centre and data centre investment projects to be carried out by the private sector in the provinces covered by the Attraction Centres Programme listed in Annex 1.”
Article 3:
“Supports
ARTICLE 3 – (1) Investments approved for support under this Decree shall, if approved by the Committee, benefit from energy support and from the support components provided under Council of Ministers Decree No. 2012/3305 on region 6 terms, at the rates and for the periods applied in region 6.”
Article 4:
“Fixed investment amount and minimum capacity
ARTICLE 4 – (1) Manufacturing industry investments (US-97 Code: 15-37) to be supported under this Decree must be carried out in an organised industrial zone or an industrial zone and must meet the condition of a minimum investment amount of TRY 2 million.
(2) To benefit from the support components under this Decree, call centre investments must provide employment for at least 200 persons, and data centre investments at ANSI/TIA-942 or Uptime Institute TIER-3 level or above must contain at least 5,000 m2 of white space.”
Article 5:
“Energy support
ARTICLE 5 – (1) For new investments approved for support by the Committee that include energy support, up to 30% of the monthly electricity costs, not exceeding 25% of the fixed investment amount realised following the commencement of operations, may be met from the Ministry’s budget for three years, up to TRY 10 million per business.
(2) The Committee is empowered to determine the rate, duration and amount of the support within the limits set out in the first paragraph, by province, sector or product.
(3) Energy support payments are made in three-month periods on the basis of the information and documents prepared following the assessment of a commission to be formed within the provincial governor’s office.
(4) In calculating a business’s energy costs for the purposes of the energy support, invoice amounts issued by the institutions or organisations supplying the energy and paid in cash in the invoice period are taken into account, excluding debts from earlier periods, late payment interest, penalty charges and VAT.
(5) Where existing facilities and investments covered by an incentive certificate use the same electricity meter, the energy support is applied on the amount of the electricity invoice for that meter determined in accordance with the fourth paragraph.
(6) Other matters relating to the application of this support shall be determined by communiqué.”
The fourth and sixth paragraphs of Article 8:
“(4) The ‘investments that will not be supported’ listed in Annex 4 to Council of Ministers Decree No. 2012/3305 shall likewise not be considered under this Decree.”
“(6) Where the investment is not realised or the undertakings underlying the Attraction Centres Programme cannot be fulfilled, the project may, on request, be assessed under the provisions of the Decree on State Aid for Investments in force. However, supports benefited from under this Decree that cannot be provided under the Decree on State Aid for Investments, together with any supports benefited from in excess, shall be recovered under the first paragraph of Article 9.”