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Tax Deduction in the Investment Incentive System

📉 What is Tax Reduction Support in Investment Incentives? (2025 Guide)

Tax reduction is the application of a discounted rate on the income or corporate tax calculated on the investor's earnings after investment expenditures are completed, until a limit determined by the state is reached.

This practice is carried out under Article 32/A of the Corporate Tax Law No. 5520. The main goal is to direct the investor towards more production and employment by increasing profitability.

Investment Contribution and Tax Reduction Rates

Investment Contribution Rate (ICR): This is the rate that shows how much of your total investment the state will reimburse you through tax reduction.
Tax Reduction Rate: This is the discount percentage to be applied to the Corporate Tax rate you would normally have to pay.

Incentive Program Investment Contribution Rate Tax Reduction Rate
💡Technology Move Program50%60%
🗺️Local Development Move Program50%60%
🎯Strategic Move Program40%60%
⭐Priority Investments Incentive System30%60%
🏭Target Investments Incentive System20%60%

Important Application Details and Conditions

➕ Can it be Applied to Other Earnings?

Yes. For investments under the relevant incentive programs, the tax reduction can also be applied to the investor's earnings from other activities, provided it does not exceed 50% of the total entitled investment contribution amount. This provides an opportunity to benefit from the tax advantage even before the investment starts generating profit.

🧮 Important Condition: How is the Investment Base Amount Calculated?

The tax reduction is not calculated on the total investment budget, but on the "Investment Base Amount for Tax" which remains after deducting certain expenses.

Formula: Fixed Investment Amount - (Land Cost + State Supports Received) = Investment Base Amount for Tax

Example:

  • Fixed investment amount: 400 Million TRY

  • Land cost: 100 Million TRY

  • State supports received (interest/machinery): 10 Million TRY

→ Investment Base Amount for Tax: 400 - 100 - 10 = 290 Million TRY.

✨ Strategic Option for Newly Established Companies

If the company's establishment date is no more than 1 year prior to the incentive certificate application, the investor may opt out of the tax reduction support upon request. In this case, for a company that is not yet profitable, an opportunity may arise to benefit from more urgent elements such as interest/profit share or machinery support at higher rates.

Who Cannot Benefit and the Application Process

🚫 Who Cannot Benefit from Tax Reduction Support?

  • Electricity generation, distribution, and storage investments.

  • Certain investments made in the province of Istanbul (especially target investments).

  • Non-depreciable expenses such as land, plots, royalties, and spare parts.

  • Institutions under special legislation, such as finance and insurance.

  • Investments made with the Build-Operate and Build-Operate-Transfer models.

  • Investments based on a royalty agreement.

Application Process

  1. The incentive certificate is obtained, and tax reduction support is requested during the application.

  2. The right to the reduction arises after the investment is completed (with the completion visa).

  3. The investor applies the discounted rates during tax declarations (provisional tax and corporate tax).

  4. The reduction amounts are shown in the tax return submitted to the tax office, along with the necessary annexes.