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Overview of company formation in Mersin Free Trade Zone

Published on : 05 Dec 2018
Mersin Free Trade Zone
At the beginning of 1987, Turkey set up various Free Zones. The First Free Trade Zone was built up in Mersin and Antalya in 1985. The building of the Mersin Free zone is on a geopolitically significant area in the Eastern Mediterranean shores. It lays contiguously with the Mersin port, the most significant port in the region and a standout amongst the essential export ports in Turkey. Mersin has become in the last few years the most alluring investment destination in Turkey for foreign and local investors and stands out amongst the most alluring in the region. Some identify Turkey by the name of "Pearl of the Mediterranean." Mersin Free zone is a center for foreign speculators with proximity to major global markets – Middle-East, North African countries, East and West Europe and the Russian Federation.  Free zones are well-defined as fenced-in zones in which special regulatory treatment exists for the operating clients, keeping in mind that the end goal is to promote exports of goods and services.  These zones are considered as an exception of customs areas and are primarily designed to increase export opportunities. Around 70% of more than 400 companies working in the free zone are Turkish, with the rest being either remote or worked as a joint venture amongst local and foreign capital. The free zones offer remarkably competitive tariffs and incorporation in a matter of weeks when space is made accessible. It is also well equipped with financial services, as five banks work in the Mersin free zone. They serve the free zone’s organizations directly be accrediting, offering credit and providing money transfer.
Free zones have been set up in Turkey with the Free Zones Law No. 3218 (FZL) which has been in force in the Turkish System since 1985. As of now, there are 19 Free Zones in Turkey. They are liable under the same regulation. Therefore, the characterization of all the opportunities and conditions which are underneath have similar circumstances. 
Free zone types:
  • Semi-private free zones
  • The land Is owned by the state, and the leading company can rent places and operate in the zone private free zones
  • The land is under the ownership of the operator company, and along with the operation of the zone, Operator company can rent/sell places to its investors
The Objectives of free zones are:
  • To incentivize the local companies to export;
  • To expand foreign trade volume;
  • Ease the import and export activities;
  • To Expedite technology transfers into the nation.
  • To encourage export-oriented investment and production
  • To encourage FDI and joint ventures
  • To provide uncomplicated access to stocks of raw materials and equipment on favorable terms
  • To encourage international finance and trade possibilities
  • To speed up the integration with the world economy
  • To create a favorable environment for research and development.
Advantages of Free Zones:
  • 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 relevant documents.
  • 100% exemption from income tax on employees' wages for certain companies
  • Goods can remain in free zones for an unlimited period.
  • Companies are free to transfer profits from free zones to abroad as well as to Turkey, without restrictions.
The companies which are set up in a free zone cannot carry out their commercial activities out of the free zone as it is a Turkish Company. FZ directorate websites state that the acceptable field of activities in the Mersin Free Trade Zone is:
  • Production of varying types of light industries – Electronics, optics, machinery, spare parts, textiles, and clothing.
  • Wholesale trades
  • Packing and repacking
  • Workplace Rental
  • Assembling
  • Warehousing
  • Repair and maintenance
  • Banking – Insurance
  • Installation / Dismounting
The advantage of Free Zone is:
1. Availability to Benefit from Tax Advantages for Manufacturer Users
  • Until the end of the tax assessment year including the date, Turkey turns into a full member of the European Union, the proceeds of the manufacturer users, produced through the sales of the goods. The production of which took place in the free zones are exempted from the income or corporate expenses or taxes.
  • The wages of the laborer's employed by the users that export at least 85 percent of the FOB value of the products they produce in the free zones will be exempt from income tax. The Council of Ministers can diminish this rate to 50 percent.
  • There is an exclusion for the transactions and arranged documents related to the activities carried out in the zones by the manufacturer users from stamp duties and fees.

The free zone users that acquired “operating license” other than “production” before 06/02/2004, the wage or corporate tax exemption continues during the validity period of the Operating License.

The free zone users that got operating license other than production after 06/02/2004 do not enjoy income or corporate tax exemption. 

2.    The opportunity of Medium and Long-Term Planning 
The validity period of an operating license: 
  • 15 years for tenant users. 
  • 20 years for manufacturer tenant users. 
  • 30 years for users who build their working premises (investor users).
  • 45 years for manufacturer-investor users. 
Constructing plots and buildings on Treasury owned land can be leased or permitted easement until 49 years for the investor users. 
3.    Opportunity to Transfer Profits 
The proceeds and earnings from free zone activities can be freely transferred to Turkey or abroad without any permission. 
4.    Facilitation of Foreign Trade 
Since the goods sold from Turkey to free zones are liable to export regime, free zone users can acquire goods and services from Turkey without paying VAT (value added tax). On the other hand, the exchange between free zones and third countries is not liable to the foreign trade regime.
5.    Trade Facility Free from Customs Duty Procedure 
The goods in free flow can be sent to Turkey or the EU nations from the free zones without any customs duty payment. Additionally, there is no application of customs duty to the goods of third country origin at the entrance into the free zones and exit to the third nations. Also, goods can remain in FTZs without any time limit.
6.    Easy Access to EU Countries 
Due to the fact that the Turkish free zones are part of the Turkey-EU Customs Territory, the goods in free flow can be sent to the EU nations by an A.TR certificate. Customs duties for the goods of third country origin are likewise not paid at the entry into the free zones. In any case, the goods of third country origin that are not in free circulation can be sent to the EU nations by an A.TR certificate, only after the payment of customs duties over the rates determined in the Common Customs Tariff.
7.    Equal Treatment 
The rewards and benefits provided in the free zones are available to all firms regardless of their origin.
8.    No limitation 
as to time frames
9.    Managing Trade Activities According to Market Demands and Conditions 
In the stated Free Zones, except the manufacturer's request, any authority regarding prices, quality, and standards granted to public institutions and agencies bylaws or by other legislation is not valid. Also, legislative provisions relating to customs and foreign exchange obligations are not applicable to the zones.
10.    Inflation Accounting Opportunity 
The making of every payment in the Turkish Free Zones is with Convertible Currencies.
11.    Able to access Domestic and Foreign Markets
Contrary to the regulatory framework of most of the free zones in the world, there is permission of sales to the local market except for consumer and risky products.
12.    Reduced Bureaucratic Procedures and Dynamic Management 
During operation and application process bureaucracy is curtailed. Professional private sector companies manage free zones.
13.    Strategic Location 
Turkish Free Zones are positioned close to the European Union, and Middle East Markets, adjacent to the significant Turkish Ports on the Mediterranean, Aegean and the Black Sea and have easy access to international airports and highways.
14.    Competitive Infrastructure Standards 
The infrastructure of the Turkish Free Zones is competitive with international standards. 
15.    Supply Chain Management 
Turkish Free Zones, principally for the companies which manufacture for export, offer supply chain management opportunities in providing intermediate and raw materials. 
16.    The zone is a hub for foreign investors.

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