What Is a Free Zone in Turkey?
Turkey’s free trade zones (Serbest Bölgeler) are specially designated areas where businesses operate under a favorable legal and tax regime distinct from the general Turkish customs territory. Companies established in free zones can benefit from significant tax exemptions, simplified customs procedures, and relaxed currency controls.
Turkey currently operates 21 free zones across the country, situated near major ports, airports, and industrial centers. They are governed by Free Zones Law No. 3218 and supervised by the Ministry of Trade.
Key Tax Advantages
Corporate Income Tax Exemption
Companies operating in Turkish free zones and exporting at least 85% of the FOB value of goods they produce enjoy a full exemption from corporate income tax on manufacturing profits. This is one of the most significant incentives and is explicitly provided under Free Zones Law No. 3218 as amended by Law No. 5084.
Companies that do not meet the 85% export threshold pay corporate income tax at the standard 25% rate on free zone profits.
Income Tax Exemption on Wages
Wages paid to employees of free zone companies engaged in qualifying manufacturing and export activities are exempt from personal income tax. This reduces the total payroll cost burden considerably.
VAT and Customs Duty Exemptions
- Goods entering and leaving free zones to/from foreign countries are exempt from Turkish VAT and customs duties
- Transactions within the free zone between two zone companies are also VAT-exempt
- Goods transferred from the free zone into the Turkish domestic market are treated as imports and are subject to normal VAT and customs duties
No Time Limit on Storage
Goods can be stored in free zones indefinitely without time restriction — a significant advantage for trading and logistics companies.
Currency Freedom
Free zone companies can hold accounts and conduct transactions in any currency. There are no restrictions on transferring funds between the free zone and abroad.
Available Free Zones in Turkey
| Free Zone | Location | Primary Focus |
|---|---|---|
| Atatürk Airport Free Zone | Istanbul | Trading, logistics |
| Istanbul Leather & Industry | Istanbul | Leather, manufacturing |
| Izmir Free Zone | Izmir | Manufacturing, trade |
| Mersin Free Zone | Mersin | Logistics, manufacturing |
| Antalya Free Zone | Antalya | Manufacturing, tourism services |
| Trabzon Free Zone | Trabzon | Trade with Black Sea region |
| Adana-Yumurtalık | Adana | Petrochemicals |
| Bursa Free Zone | Bursa | Automotive, manufacturing |
| Kayseri Free Zone | Kayseri | Manufacturing |
| Aegean Free Zone | Izmir | Diversified |
Each free zone has a private operator (zone manager) appointed by the Ministry of Trade who manages day-to-day operations, leases of land and facilities, and coordinates with public authorities.
Eligible Activities
Free zone companies may engage in:
- Manufacturing and assembly
- Storage and warehousing
- Trading (import/export)
- Banking and insurance services (with appropriate licensing)
- Software development and IT services
- Maintenance and repair services
- Packaging and labeling
Note: Service companies (non-manufacturers) generally do not qualify for the corporate tax exemption unless they qualify as export service providers. Legal and tax advice specific to your activity is recommended.
Company Structure in a Free Zone
Free zone companies are formed as standard Turkish commercial entities — most commonly as an LLC (Ltd. Şti.) or JSC (A.Ş.). The usual formation rules apply:
- LLC minimum capital: 50,000 TRY
- JSC minimum capital: 250,000 TRY
- 100% foreign ownership permitted
- Formation via MERSIS and Trade Registry
The difference is that the company’s registered address is located within the free zone, and a Free Zone Operating License must be obtained from the zone operator.
How to Obtain a Free Zone Operating License
Step 1: Select the Free Zone
Choose the zone based on your activity, location needs, infrastructure, and available facilities. Contact the zone operator to understand available plots, buildings, and rental rates.
Step 2: Apply to the Ministry of Trade
Submit a license application to the Ministry of Trade (Ticaret Bakanlığı) — Free Zones Directorate General. Required documents include:
- Application form
- Business plan describing planned activities, employment projections, and expected export volumes
- Financial statements or proof of financial capacity of the investor
- Articles of association (for existing companies) or draft articles (for new formations)
- Identity documents of shareholders and management
Step 3: Incorporate the Company
Once the license is approved (or simultaneously), incorporate the Turkish company through MERSIS and the Trade Registry in the same jurisdiction as the free zone.
Step 4: Sign the Lease Agreement
Execute a lease or usage agreement with the free zone operator for office space, warehouse, or land within the zone.
Step 5: Commence Operations
Begin operations and ensure accounting and reporting systems accurately segregate free zone activities from any non-zone activities.
Compliance and Reporting
Free zone companies must:
- Maintain Turkish-compliant accounting records
- File annual activity reports with the Ministry of Trade confirming compliance with operating license conditions
- Track export ratios to confirm eligibility for the corporate tax exemption
- File payroll tax filings (withholding tax declarations) with the tax office even though wages may be exempt from income tax — proper documentation is required
Comparison: Free Zone vs. Standard Company vs. Technopark
| Feature | Free Zone | Standard Company | Technopark |
|---|---|---|---|
| Corporate tax | Exempt (if ≥85% export) | 25% | Exempt (on R&D income) |
| VAT | Exempt (zone transactions) | 20% standard | Standard (some exemptions) |
| Wage income tax | Exempt (qualifying) | Standard | Exempt (R&D staff) |
| Best for | Manufacturing, trading, logistics | General business | Software, R&D, tech |
| Location flexibility | Within designated zones | Anywhere in Turkey | Within technoparks |
Practical Considerations
- Free zones are best suited for companies with significant manufacturing or export activities. Pure service businesses with no export component will not benefit from the corporate tax exemption.
- Operating in a free zone involves lease costs for the zone premises, which can be higher than equivalent space in the general market.
- The 85% export threshold must be carefully monitored — sales to the Turkish domestic market count against the threshold.
- Consider engaging a free zone specialist alongside your formation advisor.
Frequently Asked Questions
Can a free zone company sell goods into the Turkish domestic market? Yes, but sales to the Turkish domestic market are treated as imports, subject to normal customs duties and VAT. Domestic sales also count against the 85% export threshold for the corporate tax exemption.
Do free zone companies need to file corporate tax returns? Yes. Even if profits are exempt, the company must file annual corporate tax returns with the tax office and document its eligibility for the exemption.
Is 100% foreign ownership allowed in free zones? Yes. The same rules that allow 100% foreign ownership in standard Turkish companies apply in free zones. There are no additional nationality restrictions.
How long does it take to set up a free zone company? Company formation takes 5–10 business days (same as standard formations). The free zone operating license approval may take an additional 2–6 weeks depending on the Ministry’s review timeline. Total setup time is typically 4–8 weeks.