Nedim Ruso

What is a free zone company?

A free zone company often referred to as a free trade zone company is a form of an entity located in an enclosed area within a unique customs territory with its own set of regulations and tax laws. These companies are generally known for paying very low or no corporate taxes and attractive import and export fees. Free zones help facilitate and promote seamless business activity and bolster international trade. 

They are divided into three zones: industrial/manufacturing, technology/R&D, and logistics.

Benefits of free zone companies:

Tax incentives

Companies operating in free zones are exempt from certain taxes. The most attractive exemption is for income and corporate taxes for the earnings of manufacturers’ sales produced in the zone. Similarly, the wages of the workers employed by manufacturers who export a certain amount are exempt from income tax. As for stamp duty payments, all activities related to manufacturer users are exempt. Furthermore, VAT is excluded from logistical services concerning third-world countries, while buildings or lands in the free zones are not subject to any property taxes.

Access to international markets & customs duty exemption

Logistics-free zones, among other types of free zones, are strategically situated in close proximity to major transportation hubs. These zones are typically included within the Türkiye-EU Customs Territory, which provides significant advantages for import/export firms such as exemption from customs duties and relaxed restrictions on trade between the two territories. Additionally, Türkiye has access to substantial domestic and regional markets, offering access to over 1.3 billion potential customers.

Reduced bureaucracy & streamlined processes

One can think of free zones as companies rather than government bodies based on the simplifications adopted, such as simplified customs declarations and faster clearance times. Although each free zone type has its own requirements, entry barriers are intentionally kept low to minimize bureaucracy and support business.

Skilled workforce & competitive infrastructure standards

Türkiye has a substantial and competent workforce, with more than 50% of its population under the age of 31, and a significant number of workers proficient in English and other languages. Businesses operating in free zones can take advantage of this talented labor pool.

Synergy among companies

When it comes to free zones, collaboration is the favored and actively promoted method for creating a more efficient system that encourages ease of doing business, job creation, and growth in trade and investment. This joint effort is at the forefront of sustainable business development and helps to cultivate innovation.

Types of free zones

Industrial free zones

Industrial free zones, known as Organized Industrial Zones (OIZ) in Türkiye, are designed for manufacturing and production companies. There are 353 OIZs in Türkiye, 258 operational, and 95 under construction. Over 67,000 companies with 2 million employees operate in these free zones.

Key benefits:

• No tax on land acquisitions,

• Exemption from real estate duty for a duration of 5 years from the completion of the construction,

• Reduced utility costs,

• No tax on plot merging and separation,

• Exemption from the municipality tax on solid waste if the OIZ does not avail of the municipality service.

Technology free zones

Technology-free zones, known as technology development zones (technology parks), usually partner with universities and are structured to support innovation and R&D companies. Technology parks encourage technology-based companies and help transfer skills and know-how across different companies. Companies operating in technology development zones generally benefit from tax incentives and have access to specialized facilities.

Key benefits:

• Exemptions on income and corporate taxes for profits derived from software development, R&D, and design activities,

• Government incentives for certain social security premiums,

• Certain customs and stamp duty exemptions,

• Certain VAT exemptions on application software produced in the zone,

• Certain remunerations for R&D, design, and support personnel employed in the zone,

• Certain investment access from the Ministry of Industry and Technology.

Logistics free zones

Logistics-free zones, referred to as free zones, are unique sites located outside the customs area, yet they remain inside the jurisdiction of the country. These free zones encourage export-focused activities. The logistics-focused companies can benefit from streamlined customs procedures and have access to advanced infrastructure. There are 19 logistics-free zones in Türkiye, 18 active and one under establishment.

Key benefits:

• 100% exemption from customs duties and other assorted duties,

• 100% exemption from corporate income tax for manufacturing companies,

• 100% exemption from value-added tax (VAT) and special consumption tax,

• 100% exemption from stamp duty for applicable documents,

• 100% exemption from the real estate tax,

• 100% income and corporate tax exemption for certain logistics services provided they focus on exports,

• 100% exemption from income tax on employees’ wages (for companies that export a certain value of the goods they produce in the free zones,

• Goods may remain in free zones for an unlimited period,

• Companies can transfer profits internationally from and to free zones without restrictions,

• Exemption from title deed fees when acquiring and selling a property,

• VAT exemption during construction, design, settlement, and approval processes,

• Ready infrastructure is exempt from VAT and other taxes,

• Permit to import second-hand and used machinery.​

Steps to establishing a free zone company in Türkiye

Step 1: 

• Choosing the most appropriate free zone,

• Differentiating between free zones and understanding the pros and cons of each free zone,

• Deciding on the zone that fits your company’s sector and profile,

• Identifying the shareholding structure,

• Picking the most suitable form of entity.

Step 2: 

• Document preparation & registration,

• Partners’ passport translation and notarization,

• Obtaining tax id numbers for the partners,

• Getting PoA from the partners for company formation before the notary public,

• Determining and reserving a company title,

• Signing a lease contract for the company address.

Step 3: 

• Establishing the entity & obtaining the relevant licenses,

• Preparing online company establishment procedures,

• Filing company details at the Istanbul Chamber of Commerce (ICO),

• Filing company Articles of Incorporation and getting approved,

• Filing all documents at the ICO and paying the fees,

• Obtaining the certificate at the ICO,

• Getting signature circular notarized at the public notary,

• Giving PoA to necessary 3rd parties,

• Opening company bank account,

• Applying for the free zone operating license at the governing authority.