A. Introduction 

By virtue of Presidential Decree No. 9903, which entered into force upon its publication in the Official Gazette dated 30 May 2025 and numbered 32915, a new regulatory framework governing the Investment Incentive System has been introduced. This new framework replaces and supersedes the previously applicable instruments, namely the Decree on State Aids in Investments (Decree No. 2012/3305) and the provisions related to the “Attraction Centers Program” (Decree No. 2018/11201), thereby marking the beginning of a structurally redefined period. The new system not only entails a comprehensive revision of the existing incentive mechanisms, but also introduces a transformation in the manner in which investment supports are planned, classified, and implemented. While the traditional regional incentive model remains in place, the new regime establishes a more selective and targeted support architecture, grounded in sectoral priorities, strategic objectives, and project-based implementation mechanisms. This new phase is designed to support not only increases in production capacity and employment, but also to accelerate the green and digital transformation processes of enterprises, ultimately aiming to strengthen Türkiye’s competitiveness in the global arena.

B. General Structure of the New Investment Incentive System

The New Investment Incentive System is structured around two main pillars:

1. *Türkiye** Century Development Initiative* 

Within this framework, three sub-programs have been established in line with Türkiye’s priority development objectives:

1.1. Technology Initiative Program 

This program supports high value-added investments in products within medium-high and high-technology sectors, as well as in products and areas listed in the Priority Products List. Examples of high-technology products include the manufacture of computers, electronic and optical products, and the manufacture of aircraft, spacecraft, and related machinery. Medium-high-technology products include the manufacture of motor vehicles, the manufacture of electrical equipment, and the manufacture of medical and dental instruments and supplies. The Priority Products List refers to a list prepared by the Ministry of Industry and Technology (“Ministry”), which includes products within medium-high and high-technology sectors as well as critical products essential to the development of these sectors. The list is compiled by the Ministry based on various criteria, including foreign trade data, demand trends, and the intensity of competition.

The Ministry issues specific calls for proposals related to the products on this list. Projects submitted in response to such calls are evaluated on a project basis by the Project Evaluation Committee (“Committee”), and those deemed eligible are granted an Investment Incentive Certificate. 

1.1.1. Support Instruments and Implementation Conditions

Investments approved for support under the Technology Initiative Program may benefit from the following incentive instruments:

• VAT Exemption: Applicable to machinery and equipment procured within the scope of the investment.
• Customs Duty Exemption: Applicable to imported machinery and equipment.
• Tax Reduction: A contribution rate to investment of 50% and a tax reduction rate of 60% are applicable.
• Employer’s Share of Social Security Premium Support: Granted for a maximum of 8 years, or up to 12 years for investments located in Region 6 (designated as the Earthquake-Affected Provinces).
• Employee’s Share of Social Security Premium Support: Exclusive to Region 6, and may be provided for a period of up to 10 years.
• Interest or Profit Share Support: For investment loans, support is provided up to 40%, depending on the Central Bank of the Republic of Türkiye’s policy interest rate. The support amount may not exceed 20% of the total investment amount and is capped at TRY 240 million.
• Machinery Support (alternative): In lieu of interest/profit share support, the investor may opt for machinery support. This is applicable only to machinery and equipment with a unit price of at least TRY 2 million. 25% of the machinery cost is paid to the investor in cash. The support amount may not exceed 15% of the total investment amount and is capped at TRY 240 million.
• Allocation of Investment Land: Public land may be allocated for projects evaluated under the program and deemed eligible. 

1.2. Local Development Initiative Program 

The primary objective of the Local Development Initiative Program is to reduce interregional disparities in development, to strengthen local economic structures, and to enhance competitiveness at the provincial level. Under the program, investments made in line with four priority investment areas — identified specifically for each province — are eligible for support. These investment priorities are determined under the coordination of the General Directorate of Development Agencies, taking into account the economic structure, sectoral priorities, labor force capacity, and resource profile of each province. The program operates on a call-based model. The provinces eligible for support, the application schedule, and the applicable rules are publicly announced through a call for proposals. Following the receipt of applications, the submitted projects are subjected to a preliminary evaluation either by the relevant Development Agency’s Board of Directors or by special evaluation commissions established by the Ministry. Subsequently, the projects are submitted to the Committee for a final decision.

1.2.1. Support Instruments and Implementation Conditions 

Investments approved under the Local Development Initiative Program may benefit from the following support instruments: 

• VAT Exemption: Applicable to machinery and equipment procured within the scope of the investment.
• Customs Duty Exemption: Applicable to imported machinery and equipment.
• Tax Reduction: A contribution rate to investment of 50% and a tax reduction rate of 60% are applicable.
• Employer’s Share of Social Security Premium Support: Granted for a maximum of 8 years, or up to 12 years for investments located in Region 6 (designated as the Earthquake-Affected Provinces).
• Employee’s Share of Social Security Premium Support: Applicable exclusively to Region 6, available for up to 10 years.
• Interest or Profit Share Support: Provided for investment loans, up to 40% depending on the Central Bank of the Republic of Türkiye's policy rate. The support amount may not exceed 20% of the investment value or a maximum of TRY 240 million.
• Machinery Support (alternative): Instead of interest/profit share support, the investor may request machinery support, which applies only to machinery and equipment with a unit price of TRY 2 million or more. 25% of the machinery cost is paid to the investor in cash. The support amount may not exceed 15% of the investment value or a maximum of TRY 240 million.
• Land Allocation for Investment: Public land may be allocated to eligible projects evaluated under the program. 

1.3. Strategic Initiative Program 

The Strategic Initiative Program is a project-based incentive model designed to enhance domestic production capacity in Türkiye’s critical sectors, reduce external dependency, and ensure supply security in strategic products. The Program also supports manufacturing industry investments with high R&D content and strong added value, aiming to boost international competitiveness. In this regard, the Program covers not only conventional production investments but also sustainability-oriented investments evaluated under the Digital Transformation Program and the Green Transformation Program. 

1.3.1. Implementation Requirements and Application Procedurem 

Projects eligible for support under the Strategic Initiative Program are identified based on the Strategic Initiative Investment Subjects List determined by the Ministry. The evaluation process of the Program is not solely based on application but is also structured around the project's potential contribution to economic development, technological advancement, and the foreign trade balance.

Projects submitted for application must meet at least three of the following five criteria:

1. The ratio of exports to imports for the investment-related product within the last year does not exceed 70%,

2. The total import value of the subject product exceeds USD 50 million,

3. At least 20% of the investment is financed by equity capital,

4. The value-added ratio is at least 30% (calculated in accordance with the method defined in the Communiqué),

5. The product is listed in the strategic investment list published by the Ministry.

Projects meeting these prerequisites are directed to a feasibility study following a preliminary evaluation. Feasibility studies are conducted by a development or investment bank of the investor’s choosing, provided that the bank has signed a protocol with the Ministry. These studies include an integrated assessment of technical, economic, and financial aspects.

Simultaneously, the investment file is submitted to the Directorate General for Industry for an assessment of supply security regarding the project. The feasibility report, the evaluation of the Directorate General, and all other required documents are reviewed by the Directorate General and subsequently presented to the Committee, which is the final decision-making authority. The Committee evaluates each project individually, and an investment incentive certificate is issued for projects deemed eligible. 

1.3.2. Minimum Investment Amount Requirements 

The minimum fixed investment amount is set at TRY 100 million for high-technology investments, TRY 200 million for other strategic investments, and TRY 50 million for investments under the Green Transformation and Digital Transformation Programs. Investments under the latter category are exempt from the preliminary evaluation process and may be directly supported within the scope of this Program. 

1.3.3. Support Instruments 

• VAT Exemption: Applicable to machinery and equipment purchased within the scope of the investment.
• Customs Duty Exemption: Applied to imported machinery and equipment.
• Tax Reduction: A 40% investment contribution rate and a 60% tax discount rate are applied.
• Employer’s Social Security Premium Support: Provided for up to 8 years; extended to 12 years in Region 6 (designated as Earthquake-Affected Provinces).
• Employee’s Social Security Premium Support: Applicable only in Region 6 and may be granted for up to 10 years.
• Interest or Profit Share Support: Up to 30% support based on the CBRT policy rate is provided for investment loans. The support amount cannot exceed 15% of the investment and is capped at 180 million TRY.
• Machinery Support (alternative): Investors may request machinery support instead of interest/profit share support, applicable only for machinery and equipment with a unit price of 2 million TRY or more. 25% of the machinery cost is paid in cash to the investor. The support amount cannot exceed 15% of the investment and is capped at 180 million TRY.
• Land Allocation: Public land may be allocated for eligible projects evaluated under the program.

2. Sectoral and Regional Incentive System

Within the scope of the New Investment Incentive System, the Sectoral and Regional Incentive System is designed to direct and support investments according to sectoral priorities. Under this system, incentives vary not only based on the geographical region where the investment is made but also according to the sector in which the investment operates. Thus, public resources are channeled more directly to meet the strategic needs of the national economy. The system is structured under two main subheadings:

2.1. Priority Investments Incentive System

Sectors supported under this system include green transformation technologies, digitalization, advanced manufacturing industry, production of renewable energy equipment, defense industry, pharmaceutical and medical device manufacturing, rail systems, motor vehicles, and battery technologies. These investments are included in the support scope without requiring project-based evaluation and can directly benefit from incentive elements.

2.1.1. Priority Investment Areas

Priority investments are projects distinguished by their technological content, strategic importance, or sustainability criteria. These include:

• Digital and green transformation investments,
• Production of high and medium-high technology products,
• Defense industry projects,
• Renewable energy and mining investments,
• Production facilities linked to R&D and design activities,
• IT infrastructure, data centers, and cloud services,
• Investments in socially prioritized fields such as education, health, agriculture, and disaster resilience.

2.1.2. Support Instruments 

• VAT Exemption: Applicable to machinery and equipment purchased within the scope of the investment.
• Customs Duty Exemption: Applied to imported machinery and equipment.
• Tax Reduction: A contribution rate of 30% to the investment and a 60% tax reduction rate are applied.
• Employer’s Social Security Premium Support: The duration of support varies according to the investment region; it is shorter in Region 1 and up to a maximum of 12 years in Region 6.
• Employee’s Social Security Premium Support: Valid only for Region 6 and can be provided for up to 10 years.
• Interest or Profit Share Support: For investment loans, support is provided up to 25% depending on the Central Bank of the Republic of Türkiye’s policy interest rate. The support rate can increase up to 10%, with a maximum support limit of 24 million TRY.
• Allocation of Investment Land: For projects evaluated and deemed suitable within the program, investment land can be allocated from public lands.

2.2. Targeted Investment Incentive System

The Targeted Investment Incentive System applies to projects carried out in the activity fields listed in Annex-3 of the Decree. This system covers areas that have certain priorities based on the nature of the investment but do not carry a strategic character, yet can still contribute to national development. To be eligible for support, the investment must meet the technical and sectoral conditions specified in the relevant list.

2.2.1. Minimum Investment Amount

To be eligible for incentives under this system, investments must meet minimum fixed investment amounts as follows:

• Minimum 12 million TRY in Regions 1 and 2,
• Minimum 6 million TRY in Regions 3, 4, 5, and 6.

2.2.2. Restrictions and Exceptions

Certain investment types are partially excluded from the system. In particular, projects related to electricity generation, distribution, and storage, as well as investments in the distribution of natural gas through the main network, are not eligible for the tax incentive.

Similarly, these investment types are also excluded from interest or profit share support. Such financial support is only available for eligible investments made in Regions 4, 5, and 6 that are not subject to these restrictions. Additionally, investments made in Istanbul province are excluded from the tax incentive scope.

2.2.3. Support Instruments 

• VAT Exemption: Applicable to machinery and equipment purchased within the scope of the investment.
• Customs Duty Exemption: Applied to imported machinery and equipment.
• Tax Reduction: A contribution rate of 20% to the investment and a tax deduction rate of 60% are applied.
• Employer’s Social Security Premium Support: The duration of support varies depending on the investment region; shorter in Region 1 and up to a maximum of 12 years in Region 6.
• Employee’s Social Security Premium Support: Valid only for Region 6 and can be provided for up to 10 years.
• Interest or Profit Share Support: Provided for investment loans, with support up to 25% based on the Central Bank of the Republic of Türkiye’s policy interest rate. The support rate can reach up to 10%, and the maximum support limit is capped at 24 million TRY.
• Allocation of Investment Land: For projects evaluated and approved under the program, public lands can be allocated for investment purposes.

 2.3. Application Process in the Sectoral and Regional Incentive System

Applications within the scope of the sectoral and regional incentive mechanisms are submitted electronically through the Ministry of Industry and Technology’s Electronic Incentive Implementation System (E-TUYS).

Following the application, investment projects undergo a preliminary evaluation by the Ministry. The evaluation process varies depending on the nature of the investment:

• Applications related to priority investment topics can be directly included in the support scope.
• For target investments, the Ministry reviews whether the investment aligns with sectoral priorities and strategic value, and then decides whether to issue the incentive certificate.

C. Conclusion

The New Investment Incentive System has come into effect and will remain valid for applications submitted until December 31, 2030. During this period, requests by investors seeking incentive certificates will be evaluated according to the principles set forth in the new system. Furthermore, to ensure alignment with the system’s dynamic nature, the monetary thresholds specified in the Decree and its annexes will be updated annually based on the revaluation rate and announced through relevant communiqués.

Within this framework, the "Decree on State Aids for Investments" dated June 15, 2012, numbered 2012/3305, and the "Decree on Supporting Investments within the Scope of the Attraction Centers Program" dated January 2, 2018, numbered 2018/11201, have been repealed, thus ending the application period of the previous incentive regime.

The new system offers a multi-layered framework that directs investment decisions not only through financial incentives but also by strategic, sectoral, and regional priorities.

@Çağla BARUT