"TAX" CONCERNS IN FREE ZONES

Rumors regarding Corporate Tax liability for firms operating in Free Zones in Turkey have sparked unease among existing and prospective investors.

Eyüp Sevimli, Chairman of the Board İzmir Free Zone Establishment and Operation Inc. (İZBAŞ), stated:

"Practices that may imply changing the rules within the game cause discomfort for investors. Investment in free zones worldwide can be realized with certain tax exemptions granted to investors."

It was emphasized that this initiative, based on examples of practice worldwide, would cause irreparable damage to the development of free zones, which have been operating in Turkey for about 40 years.

Eyüp Sevimli, Chairman of the Board İZBAŞ - İzmir Free Zone Establishment and Operation Inc., who made evaluations regarding the Corporate Tax application intended for Free Zones, reminded that investment in free zones could be realized with certain tax exemptions granted to investors, parallel to examples of practice worldwide.

Sevimli stated, "The continuity of free zones and their ability to attract both domestic and foreign direct investments to the country depend on its success. In order to increase resource utilization within the country, it is necessary to preserve the functions of free zones and pay special attention to this. The most important function of free zones, besides providing production opportunities, excellent infrastructure, and logistics services, is the provision of free movement where fiscal laws are not applied."

"UNFAIR COMPETITION NARRATIVE IS INCORRECT"

Eyüp Sevimli, indicating that free zones, where customs duties and taxes on income are not applied, represent a geographically defined area within legally regulated and previously known limits, pointed out that opinions stating that firms in free zones have privileges compared to firms outside the zone and lead to unfair competition do not reflect the truth.

Eyüp Sevimli, Chairman of the Board İZBAŞ, continued his words as follows:

"Free zones are becoming increasingly important by creating macroeconomic effects through direct foreign investment, technology transfer, job creation, and contribution to foreign trade volume. These zones play an important role in the economic structures of countries. For instance, during the pandemic period, the contribution of free zones in our country to foreign trade has not decreased but increased; on the contrary, there has been a 12.22% increase in foreign trade volume compared to pre-pandemic levels. The absence of practices that could mean changing the rules within the game, maintaining the investment climate in free zones, making more sensitive statements, continuing policies that will not affect the sustainable climate of free zones, will contribute significantly to our country's economy."

"WE ARE STILL EXPERIENCING THE NEGATIVE EFFECTS OF THE 2004 AMENDMENT"

Eyüp Sevimli, Chairman of the Board İZBAŞ, stated that with the amendment made in the Free Zones Law on February 6, 2004, a positive transformation towards incentivizing production was experienced with the distinction made between "producer" and "non-producer" firms, while the negativity created by linking the exemption application on wages to an 85% export obligation still continues.

Highlighting that instant changes in customs procedures, customs duties, and compensatory customs duties in free zones impose unforeseen costs on firms, Sevimli pointed out that such situations and resulting hesitations, besides disrupting the current structure, will negatively affect direct investments.

TURKISH FREE ZONES IN FIGURES

✓ There are currently 19 active free zones in Turkey.

✓ These free zones host 2,108 companies, 550 of which are foreign-owned.

✓ Employing 100,000 people, free zones achieved a trade volume of $31 billion, generating $12.7 billion in exports in 2023.

✓ During the 2019-2023 period, exports from free zones reached $50 billion, with a total trade volume of $130 billion.

✓ From 2019 to 2023, free zones, with $50 billion in exports, conducted $40 billion in imports, resulting in a $10 billion trade surplus.