Economic Forecasts

Turkey with its expanding market based in the manufacturing industries has allowed the country to become recognised as a profitable venture. According to the OECD’s latest Economic Outlook, Turkey will be among the top if not the first among the OECD countries in terms of growth rates for the periods 2011-2017. The country’s annual growth rate is expected to come to approximately 6.7 percent.

According to the International Monetary Fund, Turkey is getting back on its feet from the financial crisis at a faster pace in comparison with the rest of Europe. The internal market has been able to recover from the initial external shock thus the flow of capital and trade are headed towards normal levels once again.

The country’s macroeconomic figures have been hopeful even though the country has had, and still has, political problems both internationally and domestically. Even labour productivity has risen, investment spending has soared and most importantly Turkey’s record growth has been possible even with a tight monetary policy.

It has been evident that Turkey has a dynamic economy and is situated as such that it will engage in an important role in the European Union in the future.

Strength of the Turkish Economy

The Turkish economy has shown high resistance towards the global crisis.

Strength of the market

» Turkey has had a successful economy by being the 16th largest economy in the world and the 6th largest economy in comparison with the EU area in 2009. This has been possible by a booming economy which had an increase in GDP from US$230 billion to US$618 billion during the period of 2002 to 2009. In addition there has been a 4.3 percent increase in real GDP for the past 7 years which has led to sustainable economic growth.
» Furthermore, Turkey’s population is 60 percent composed of young people who are under the age of 35, creating a dynamic and well-educated, multi-cultural workforce. Thus it is the 5th largest labour force in comparison with the EU.
» The market allows for highly competitive investment conditions with a strong industrial and service culture
» Liberal and reformist investment climate
» Well established transportation and developed infrastructure
» Centrally located
» An energy terminal and corridor in Europe connecting the East and West

The significant advantage of Turkey as an international business centre

» Corporate Income tax reduced to 20 percent
» Individual tax varies between 15% - 35%
» New research and development and innovation support lawTotal or partial exemption from Corporate Income Tax in industrial zones
» Large domestic market
» Technology development zones support

Other Benefits of Turkey Companies

» National Recruitment Agency may support vocational training projects for a maximum period of 6 months
» Technology Development Foundation of Turkey presents long term interest-free loans

Taxation Strengths

Turkey has one of the most competitive corporate tax rates in the OECD area. The country’s corporate tax legislation now has clearer, more objective and greater coordinated provisions due to the new Corporate Tax Law, which has assisted in matching with international standards.

The tax regime can be divided under three main headings; income tax, taxes on expenditure, taxes on wealth.

Income taxes in Turkey are charged on all income, both on domestic and foreign individuals and corporations established in the country. Non-residents earning income in Turkey are also subject to taxation, but only on the income earned in Turkey.

Taxes on expenditure include the Value Added Tax (VAT), Special Consumption Tax (SCT), and Banking and Insurance Transaction Tax. The generally applied VAT rate varies between 1%, 8% and 18% where as the SCT is applied to four main product groups:

» Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
» Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
» Tobacco and tobacco products, alcoholic beverages
» Luxury products

Banking and Insurance company transactions remain exempt from VAT but are subject to a Banking and Insurance Transaction Tax

The taxes on wealth are imposed upon inheritance and gift taxes, property taxes, and motor vehicle tax.

Tax Incentives include:

» Exemption from customer duties
» VAT exemption
» Corporate tax rates between 2%-10%
» Social security premium contribution for employers up to 7 yearsLand allocation
» Prioritised development zones
» Technology development zones
» Organised industrial zones
» Free zones
» Research and development
» Private educational corporations
» Cultural investments and enterprises

Finance and banking strengths

Turkey houses five types of banks: state-owned banks, private banks, foreign banks, development and investment banks, as well as participation banks. As a whole, the banking sector indicated a rapid growth performance during 2002-2008.

» Value of the total assets rose from US$130 billion to US$465 billion
» Ratio to GDP rose from 57% to 77%
» Capital adequacy ratio continued to grow and reached 20.5% at the end of 2009 (18% December 2008)