Free Zones are defined as special sites within the country but deemed to be outside of the customs territory and they are the regions where the valid regulations related to foreign trade and other financial and economic areas are not applicable, are partly applicable or new regulations are tested in. Free Zones are also the regions where more convenient business climate is offered in order to increase trade volume and export for some industrial and commercial activities as compared to the other parts of country.
The efforts to establish free zones in Turkey date back to the early years of the Turkish Republic and several free zones laws were put into force that could not be applied for reasons peculiar to their time. With the adoption of the Decisions of January 24, 1980, through which the import substitution policies were abandoned and arrangements toward liberalizing the economy became effective, free zones also came on the agenda among other liberalization policies. The first positive result achieved by the statement “Free Zones will be established” that was inserted in the 1984 Executive Plan which was put into force by the decision of Council of Ministers dated September 22, 1983 no:83/7077. The studies gained impetus and the Free Zones Law No:3218 came into effect in June 15, 1985.
In the Free Zones Law, the main objectives of the establishment and operation of free zones are stated as increasing export-oriented investment and production in Turkey, accelerating the entry of foreign capital and technology, procuring the inputs of the economy in an economic and orderly fashion and increasing the utilization of external finance and trade possibilities. Since the adoption of the Free Zones Law,
• Mersin (1987), Antalya (1987) and Adana - Yumurtalik (1999) Free Zones on the Mediterranean coast,
• Aegean (Izmir-1990), Denizli (2001) and Izmir Menemen Leather (1998) Free Zones on the Aegean region,
• Istanbul Ataturk Airport (1990), Istanbul Leather and Industry (1995), Istanbul Thrace (Catalca-1998) and Istanbul Stock Exchange International Securities (1997) Free Zones in Istanbul,
• Trabzon (1992), Rize (1998) and Samsun (1998) Free Zones on the Black Sea coast,
• Mardin (1995) and Gaziantep (1999) Free Zones in South-East Anatolia,
• Eastern Anatolia (Erzurum-1995) Free Zone in the eastern part of Turkey,
• Europe Free Zone (Tekirdag-Corlu-1999) on the European side of Turkey,
• Bursa (2001), Kocaeli (2001), Tubitak - Marmara Research Center Technology (2002) Free Zones in the Marmara Region,
• Kayseri Free Zone in the Central Anatolia became operational.
In general all kind of activities can be performed in Turkish Free Zones such as manufacturing, storing, packing, trading. Investors are free to construct their own premises, while zones have also available office spaces, ateliers, or warehouses on rental basis with attractive terms. All fields of activities are open to Turkish and foreign companies.
Turkish free zones offer foreign investors attractive incentives including 100 percent of repatriation of capital and 100 percent foreign ownership and there exists no distinction between foreign and domestic firms in terms of advantages offered by the Turkish free zones.
• Free zone users that operate under production licence are exempted from the income or corporate taxes until the end of the taxation period of the year Turkey becomes full member of the European Union. The free zone users that obtained operating licence other than production before 06/02/2004, the income or corporate tax exemption continues during the validity period of the operating licence. The free zone users that obtained operating licence other than production after 06/02/2004 do not enjoy income or corporate tax exemption.
• The validity period of an operating licence is maximum 10 years for tenant users, and 20 years for users who wish to build their own working spaces in the zone; If the operating licence is for production, these terms are 15 and 30 years for tenant users and investors, respectively.
• Currencies used in the zone are convertible foreign currencies dealt by the Central Bank of Turkey.
• There is no limitation on the proportion of foreign capital participation in investment within the Free Zones.
• There are no procedural restrictions regarding price, standards or quality of goods in the Turkish Free Zones.
• Since the trade conducted between Turkey and the free zones is subject to the foreign trade regime, free zone users can purchase goods and services from Turkey without paying value added tax.
• In contrast to most Free Zones in the world, sales to the domestic market are allowed.
• The goods can remain in the zones without any time limit.
• The incentives and advantages provided in the free zones are available to all firms regardless of their origin.
• Turkish Free Zones are close to the EU and Middle East markets, adjacent to the major Turkish ports on the Mediterranean, Aegean and Black Seas and have easy access to international airports and highways.
• Infrastructure of the Turkish Free Zones is competitive with international standards. The rents of closed and open areas are lower than other countries.
• Since free zones are part of the Turkey-EU Customs Territory, the goods in free circulation can be sent to the EU Countries by an A.TR certificate. Customs duties for the goods of third country origin are also not paid at the entry into the free zones. However, the goods of third country origin that are not in free circulation can be sent to the EU countries by an A.TR certificate, only after the customs duties are paid over the rates determined in the Common Customs Tariff.
• The goods in free circulation can be sent to Turkey or to the EU countries from the free zones without any customs duty payment. Moreover, no customs duty is applied on the goods of third country origin at the entrance into the free zones and exit to the third countries.
Operating in a free zone can be more advantageous for the firms, that;
• require minimum bureaucracy,
• sell abroad the goods they produce with imported inputs,
• engage in labor intensive sectors,
• engage in re-export,
• prefer to use foreign currency in all transactions (wholesalers, manufacturers),
• demand modern office and working spaces with good and ready infrastructure.
In order to engage in operations in free zones, an Operating Licence has to be obtained from Undersecretariat for Foreign Trade Directorate General of Free Zones.
An application form for Operating Licence can be obtained from Directorate General of Free Zones, Zone Directorates or Zone Operator, Founder/Operator Companies and has to be completed and the documents mentioned below have to be attached to the copy of the said form.
1- Descriptive information about the Applicant and its Free Zone operation,
2- Authorization document and specimen signature of the signatory and power of attorney and specimen signature of the representative of the firm (if any),
3- Turkish Trade Registration Gazette that announces the establishment of the Applicant Firm showing its current capital composition (for foreign firms Trade Registration Document ratified by the related Turkish Consulate),
4- Last three years’ balance sheets and income statements,
5- The original receipt of application fee deposited to the Central Bank of Turkey, and its copy,
6- Documents related to the foreign currency brought into Turkey in the last three years (if any),
The above mentioned documents have to be sent to Undersecretariat for Foreign Trade, Directorate General of Free Zones through Zone Operator or Founder/Operator Firms.
An Explanation: In order to obtain an Operating Licence, Turkish Trade Registration Gazette that announces the establishment of the domestic firm or a certificate indicating the registration of the foreign firm is required in addition to other related documents. This requires a trade registration either in the Chamber of Commerce or/and Industry in order to operate in free zones.
Within this framework;
a) Real persons or legal entities residing in Turkey holding a trade registration may engage in free zone activities in their offices they have constructed or rented by obtaining an Operating Licence from Undersecretariat for Foreign Trade Directorate General of Free Zones.
b) Turkish residents who intend to establish a firm to operate in a free zone; must apply to the Undersecretariat for Foreign Trade, Directorate General of Free Zones together with the draft of their contract to substitute the document mentioned above in item 3 along with other documents. If their application is approved, they may go along with the procedures to establish their firms. When the firm is established, the application is made by this firm to the Undersecretariat for Foreign Trade General Directorate of Free Zones along with the Trade Registration Gazette advertising the establishment of the firm together with the rental contract to obtain an Operating Licence.
1. For legal entities residing abroad;
a) Certificate of activity,
b) Activity report for previous year (including balance sheet and field of Activity for the previous year)
2. For real persons residing abroad;a) A copy of the passport,
b) A detailed commercial and industrial background and the verifying documents. (Certificate of activity and a copy of passport shall be certified by either the related Turkish Consulate or in accordance with the provisions of Convention Abolishing the Requirement of Legalization for Foreign Public Documents, prepared on the basis of the Hague Conference on International Private Law. If the copy of the passport is certified by a Public Notary in Turkey, no other certification is required).
3. Letter of Intend by real person or legal entity residing abroad stating that the required capital for the desired field of activity to be realized in Turkey shall be transferred into the country.
4. An application form.
5. A draft contract of the company to be established.
6. Proforma invoices, prospectuses and catalogues of the machinery, equipment and material to be imported together with three copies of global lists in FOB (Currency of the Country of Origin), FOB (US Dollars), CIF (Turkish Liras) values and Customs Duties and Charges thereof.
7. Documents required by the Incentive Legislation if investment is considered to benefit from the incentive measures.
8. Power of attorney given by shareholders to the person who will be the contact person in the course of application procedure (power of attorney should be certified by a public notary or in the manner mentioned above)
9. Other documents and information considered being of value.
The firms, which are found appropriate to obtain an Operating Licence, intend to rent an open area are obliged to sign a rental contract with the Zone Operator, Founder/Operator Company. Firms intending to rent a closed area are obliged to sign a rental contract with one of the users holding Renting Operating Licence within 30 days of being so notified.
A copy of the rental contract approved by the related Zone Directorate is sent to General Directorate of Free Zones and Operating Licence can be obtained thereafter. Those who are not found eligible for an Operating Licence, their application fee shall be repaid.
Term of the Operating Licence is 10 years for tenant users who intend to rent a completed office, and 20 years for investor users who intend to build their own offices.
However, this term is 15 years for tenant users and 30 years for investor users who are engaged in production activities. If the investor users engaged in production activities intend to operate in other fields of activities, then the term of the Operating Licence is 20 years on the condition that they operate in their same offices. If the investor users holding an Operating Licence in the field of activities other than production then the term of the Operating Licence is also 20 years.
Tenant users may start to operate when they receive their Operating Licences. After receiving their Operating Licence I investor users must also obtain a “construction licence” to implement their construction projects. When the construction is completed they must get a permission to settle in before they start to perform their activities. However they may perform their free zone activities by renting a closed area during the construction period.
The Zone was established on a 88.000 square meters of private estate by founder operator company DESBAS. Commercial activities in the Zone started in May 1995. There are 729 firms, of which 120 are foreign, holding free zone operating licences. 580 firms are operating in the field of purchasing and selling while 75 firms operate in production, 45 firms in renting and 9 firms in banking-insurance and the rest in storing, assembling-disassembling and repair-maintenance. In 2004, the volume of trade realized is $2.827.979.000. Though Istanbul Leather and Industry Free Zone was aimed to specialize in leather products, other field of activities can also be carried out by zone users. Employment in the zone reached 2.941 by the end of 2004.
Istanbul Ataturk Airport Free Zone is one kilometer to the international airport and is next to the Istanbul World Trade Center. It is on two main highways where E5 and TEM intersect. It has its own trade Center of 35.000 square meters indoor capacity, which has office, storage and showroom area with the entire necessary technological infrastructure. The zone is operated by ISBI–Istanbul Ataturk Airport Free Zone Founder and Operator Inc. Total 570 firms of which 86 are foreign hold free zone operating licences. 476 firms are operating in the field of purchasing and selling while 47 firms operate in production, 1 firm in renting and 17 firms in banking-insurance and the rest in storing, assembling-disassembling and repair-maintenance. By the end of 2004, the volume of trade realized by zone users is $3.723.087.000. Employment in the zone reached 1.910 by the end of 2004.
4 kilometers to the Adnan Menderes International Airport and 14 kilometers to Izmir Port, Aegean Free Zone covers an area of 2.2 square kilometers of public estate. Zone is basically designed for hi-tech industries and commercial activities have partly commenced in 1990. ESBAS, founder-operator company of the zone, has a foreign share of 96.4 percent. By the end of 2004, the volume of trade realized by zone users is $ 3.241.026.000. Employment in the zone reached 12.450 by the end of 2004. Total 437 firms of which 107 are foreign hold free zone operating licences. 278 firms are operating in the field of purchasing and selling while 126 firms operate in production, 3 firms in renting and 8 firms in banking-insurance and the rest in storing, assembling-disassembling and repair maintenance.
Adjacent to Mersin Port, Mersin Free Zone is established on a 776,000 square meters of public estate. Commercial activities are being performed since the beginning of 1988 and the zone is operated by MESBAS - Mersin Free Zone Operator Inc. By the end of 2004, the volume of trade realized by zone users is $ 2.720.016.000. Employment in the zone reached 7.024 by the end of 2004. There are 721 licensed firms in the zone of which 144 are foreign. 430 firms are operating in the field of purchasing and selling while 87 firms in the field of production, 71 firms storing, 106 firms renting and others in the fields of banking, insurance and repair-maintenance.
Taking into account it’s economic activities, Bursa exhibits a special remark for the future economic activities that will take place in the years ahead. In order to accelerate these activities, it is decided to establish a free zone in Gemlik District of Bursa, which has a leading position with regard to its industrial and commercial structure in Turkish economy, on an area of 825.452 square meters, 25 kilometers from Bursa, adjacent to the southern part of Gemlik Port. There are 177 firms holding operating licences of which 19 are foreign. The zone started its commercial activities in July 2001. The volume of trade is $ 2.223.382.000 by the end of 2004. Employment in the zone reached 3.711 by the end of 2004.
Istanbul Thrace Free Zone is founded and operated by ISBAS-Istanbul Thrace Free Zone Founder and Operator Inc. on an area of 387.500 square meters in Catalca district of Istanbul and came into operation in August 1998. There are 358 firms holding operating licences of which 54 are foreign. 260 firms are operating in the field of purchasing and selling while 45 firms operate in production, 29 firms in renting and the rest in storing, assembling-disassembling. By the end of 2004, volume of trade by zone users is $ 1. 689.556.000. Employment in the zone is 1.108 by the end of 2004.
Europe Free Zone is established on an area of 2.000.000 square meters in Corlu, in the middle of Corlu region, where an intensive industrialization was observed in recent years. The zone is located near TEM Highway that connects Turkey to Europe, where Istanbul is 110 kilometers and Tekirdag Port is 47 kilometers away. Turkish exports to Europe, especially in textiles are carried on by road transportation. Corlu has performed a great development with respect to industrial investments. Along with the direct investments in textiles industry, it has become a focus of start-up investments in various industries due to its closeness to Istanbul. There are 161 firms holding operating licences of which 22 are foreign. 113 firms are operating in the field of purchasing and selling while 38 firms operate in production, 3 firms in renting and the rest in storing. By the end of 2004, the volume of trade by zone users is $907.080.000. Employment in the zone is 1.984 by the end of 2004.
Adjacent to Antalya Port, Antalya Free Zone encompasses an area of 536,740 square meters of public property. A customs corridor is established between the zone and the port. Commercial activities in Antalya Free Zone have commenced in 1988 and ASBAS-Antalya Free Zone Operator Inc. performs as the zone operator company. As of end of 2004, the volume of trade realized by zone users is $457.498.000. Employment in the zone reached 3.534 by the end of 2004.Total 145 firms of which 38 are foreign hold free zone operating licences. 53 firms are operating in the field of purchasing and selling, while 48 firms in production, 28 firms in renting, 3 firms in banking and insurance, 4 firms in storing and the rest in the fields of assembling-disassembling and repair-maintenance.
Commercial activities started in the Zone in May 1995, which is established on an area of 1.600.000 square meters. There are 247 firms, of which 19 are foreign, holding free zone operating licences. 107 firms are operating in the field of purchasing and selling while 91 firms operate in production, 45 firms in renting and the rest in storing and other fields of activities. By the end of 2004, the volume of trade by zone users is $309.161.000. Employment in the zone is 3.222 by the end of 2004.
Taking into consideration the increasing foreign trade potential of Kayseri due to an intensive industrialization observed in recent years, Kayseri Free Zone was established on an area of 6.905.000 square meters. Kayseri Free Zone is located adjacent to the Organized Industrial Zone on the highway and railroad connections to Adana and Ankara. Kay-Ser the founder and operator firm operate the zone. Considering the magnitude of the area, the zone will be completed phase by phase and the total cost of the project is estimated to reach $50 million. There are 72 firms holding operating licences. By the end of 2004, the volume of trade by zone users is $297.556.000. Employment in the zone is 560 by the end of 2004.
Gaziantep Free Zone is established on an area of 1.137.000 square meters in 1998 in Gaziantep, within the GAP project, which has an important role in Turkey’s economy with its industrial and commercial structure. The zone is located near Gaziantep-Kahramanmaras highway and is close to the connection of another highway that gives access to Mersin and Iskenderun Ports. Productions as well as trade of textiles, food and machinery, assembling-disassembling, warehousing, renting, banking and insurance activities are targeted to be held in the zone. There are 48 firms holding operating licences of which 4 are foreign. By the end of 2004, the volume of trade by zone users is $156.898.000. Employment in the zone reached 212 by the end of 2004.
The zone is established in 2001 on an area of 538.285 square meters in Cardak, next to the Industrial Estate and close to the Airport. Textiles and clothing, machinery, glassware, electrical machinery production, leather goods processing, and banking are main industries of the zone. There are 44 firms holding operating licences. By the end of 2004, the volume of trade by zone users is $138.545.000. Employment in the zone is 46 by the end of 2004.
Kocaeli shares 13 percent of total industrial product of Turkey. The city has increased its capacity utilization rate from the level of 30 percent to the level of 70 percent. These facts and intensification of the industries such as chemicals, automotive, machinery, metals and paper in Kocaeli show that the city has most convenient logistics for the establishment of a free zone. There are 32 firms holding operating licences. By the end of 2004, the volume of trade by zone users is $ 122.705.000. Employment in the zone reached 96 by the end of 2004.
Samsun Free Zone is founded and operated by SASBAS on an area of 72.632 square meters adjacent to Samsun Port and the zone came into operation in May 1998. There are 14 firms holding operating licences. By the end of 2004, volume of trade by zone users is $85.621.000. Employment in the zone reached 95 by the end of 2004.
The zone is established on an area of 4,8 million square meters, on the Iskenderun Bay coast. It provides great facilities to reach Middle East, North African and EU markets. TAYSEB-Toros Adana Yumurtalik Free Zone Founder and Operator is empowered to found and operate the zone. The zone is planned to be intensified on heavy industries like petrochemicals and energy sectors, and commercial activities have started in 2000 after completion of infrastructure works. The port facilities of Toros Fertilizer and Chemical Industry Inc. adjacent to the zone are also used for the purpose of transfer of goods. There are 16 firms holding operating licences. By the end of 2004, the volume of trade by zone users is $70.214.000. Employment in the zone is 254 by the end of 2004.
Rize Free Zone is founded and operated by RISBAS on an area of 85,000 square meters, 8 kilometers to Rize Port and put into operation in April 1998. There are 11 firms holding operating licences. By the end of 2004, the volume of trade by zone users is $11.347.000. Employment in the zone is 15 by the end of 2004.
Commercial activities started in the zone on August 4, 1992. The founder-operator company of the zone is TRANSBAS and has a foreign share of 94 percent. TRANSBAS rent an area of 44.692 square meters in Trabzon Harbor from General Directorate of Turkish Marine Works Organization. By the end of 2004, the volume of trade realized by zone users is $15.316.000. Employment in the zone is 51 by the end of 2004. There are 9 licensed firms in the zone of which 8 are foreign. 5 firms hold purchasing and selling operating licences while the rest hold storing and renting operating licences.
With the aim of accelerating the tendency of high technology based and high technology producing small and medium sized enterprises in Turkey towards technology, the location and borders of Tubitak Marmara Research Center Technology Free Zone was determined and Tubitak Marmara Research Center Management is empowered to found and operate the zone in 1999. The Zone is established on an area of 360.000 square meters adjacent to Tubitak Marmara Research Center. The Zone is designed to create an appropriate environment for Research Studies while accelerating the production of hi-tech goods. Targeted sectors of the zone as the first technology free zone of Turkey are envisaged as follows: biology (diagnostic kits production relating to human, plant and animal health), electronics and industrial automation (robots, security systems, measuring technology), environment technologies (drinking and utility water, waste water and recycling technologies), energy (energy saving, energy production through natural resources), agriculture and food technologies (additives for agricultural products and food health), data processing (computers, software). There are 27 firms holding operating licences of which 3 are foreign. By the end of 2004, the volume of trade by zone users is $ 12.341.000. Employment in the zone reached 204 by the end of 2004.
Mardin Free Zone is established within Mardin Organized Industrial Zone on an area of gross 515.000 square meters, 365.998 square meters of this area is allocated for investment. There are 42 firms holding operating licences of which 4 are foreign. By the end of 2004, the volume of trade by zone users is $10.211.000. Employment in the zone reached 14 by the end of 2004.
The Zone was established on an area of 496.000 square meters and was put into operation on November 1995. The volume of trade realized in this free zone is $ 82.000 by the end of 2004. There are 5 licensed firms in the zone. 1 of them holds operating licence in purchasing and selling, 2 in production, and the rest in other fields.
Istanbul International Stock Exchange Free Zone started its activities on February 24, 1997. In this free zone, in a climate where the risk of taxation and rate of exchange were lifted, the export and second hand transactions of stocks from Turkey and other countries are realized within the framework of principles defined by Istanbul Stock Exchange and necessary liquidity is created with the participation of international investors.
The dynamism in Turkey’s economy and foreign trade in 2004 showed its positive reflections also on free zones and the trade volume of free zones recorded a significant increase. The trade volume of free zones in 2004 surpassed the 2003 figure of US $ 16,6 billion, and exceeded US $ 22.1 billion with an increase rate of 33,1 percent compared to the previous year. The share of raw materials and intermediate goods is over 82 percent in the sales from free zones to domestic market and this figure proves that free zones, especially through procuring inputs of the economy in an economic fashion, is an important tool in the increase of Turkey’s exports.
96,5 percent of the total trade volume of free zones is composed of trade in industrial products, which exceeded US $ 21,3 billion with an increase rate of 34 percent. The textiles and clothing industry and machinery industry share the first two ranks in the total trade volume of free zones and their shares are 19,4 percent and 17,6 percent respectively.
Istanbul Leather and Industry, Istanbul Attar Airport, Mersin and Aegean Free Zones cover 70 percent of the total trade volume of the free zones. Bursa, Istanbul Thrace, Europe, Antalya, Izmir Menemen Leather and Kayseri Free Zones respectively follow these four free zones with significant increases in their trade volumes. In 2004 5.000 new jobs were generated in the free zones and the total employment in the free zones reached 39.433.
In 2004 the total number of companies operating in the zones are 4.069. There are 736 manufacturer and 656 foreign firms operating in the free zones. The share of EU countries is 30,5 percent, other OECD Countries is 6,2 percent and Turkey is 46,8 percent. In the first seven months of 2005 the trade volume of free zones is realized as US $ 13 billion. This figure indicates that by the end of 2005 the total trade volume of free zones will exceed US $ 25 billion.