Turkey, suddenly an "island" of stability? - Huge tax cuts and economic incentives to attract investment
As a result of the war in Iran, uncertainty prevails around the world. Many countries fear prolonged inflation and a lack of resources. While the Gulf countries are trying to maintain their image as "safe havens", Turkey is going on the offensive: With large tax cuts and economic incentives, Ankara aims to attract investors and wealth from abroad in particular.
The relevant legal package was announced by President Recep Tayyip Erdoğan at the end of April. The aim is to make Turkey more internationally competitive and position it as an attractive country for foreign capital and a skilled workforce.
The law targets individuals and companies that have not been registered as taxpayers in Turkey for the past three years, promising them significant benefits. Those who register their assets abroad – currency, gold or securities – in Turkey by July 31, 2027, will benefit from a 20-year income tax exemption on profits made abroad. In addition, for this group, the inheritance and gift tax rate is reduced to just one percent. Currently, these rates are – depending on the amount – between one and ten percent for inheritances and between ten and 30 percent for gifts.
Even domestic assets that have not been declared to the tax authorities so far can be declared without criminal consequences under certain conditions, for example if they are invested for a certain period in domestic government bonds or similar instruments.
Foreign trade is also set to revive. In March, a 6.4 percent decline was recorded. For this reason, the government aims to reduce the profit tax for domestic companies. For manufacturing exporters, the rate is reduced from 25 to nine percent, while for other exporters it is reduced to 14 percent. In addition, the government aims to develop the Istanbul Financial Center into a competitive international center based on the model of Singapore or Hong Kong. Companies headquartered in the Turkish metropolis will benefit from a complete tax exemption on profits from international transit trade. Global corporations that move their regional headquarters there will also remain tax-free for 20 years.
To make investment more attractive, the government aims to significantly reduce bureaucracy. Coordination is directly taken over by the presidency. It is envisaged to create a central digital platform that will handle all processes in a concise and accelerated manner – from company formation, to work and residence permits, to environmental assessments.
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