3/24/2008

With the new R&D Law, Turkey will be the technology base of the world giants

The new R&D Law, which was enacted to increase Turkey’s share in the export of products that are small in size but large in value, opens a new door for investments. The new incentives to be offered for the research and development activities in different sectors ranging from automotive and pharmacy to telecommunications and textile have already become the limelight of the companies. The R&D Law which stipulates tax reductions up to 100% is expected to attract the giant companies that are spending billions of dollars for new inventions to Turkey. Nortel, a Canadian telecommunications equipment firm, is the first example showing that these expectations are not unrealistic. Alpaslan Korkmaz, President of Investment Support and Promotion Agency of Turkey, who made a statement concerning the investment in question said, “What makes the investment by Nortel with its $10.5 billion turnover and its 30,000 employees important? The answer lies in the following statements by Mike Zafirovski, CEO of Nortel: We established the data processing centre in India 15 years ago when I was a senior official at the General Electric. The number of employees which was 350 at the time has now increased to 15,000. We established the perfection centre of Nortel in Turkey. This centre has 750 employees. I would like to anticipate where we can go." Alpaslan Korkmaz, President of Investment Support and Promotion Agency of Turkey, has emphasized that the local and global companies which have long been waiting for the R&D Law will help Turkey have more share in technology sector. Hasan Angı, Vice President of the Parliament’s Industry and Commerce Commission, has stated that with this regulation the gap between the exports and imports which is considered as the most important reason for the current account deficit will be closed in the medium term. In accordance with this Law, investors, without distinction of sector or field of activity, will be provided with some incentives and support until 2024. The objectives of these incentives are to increase the amount of the exports tending towards the quality products and to attract the R&D departments of the international companies to Turkey. Procedures and principles regarding the implementation and supervision of the Law will be designated by consulting TUBITAK and with the regulation to be issued by the Ministry of Finance and the Ministry of Industry and Trade. Tarul Kucuk, President of Istanbul Chamber of Industry, said, “The fact that our government aims at allocating %2 of GDP for R&D until 2013 and that it introduces some tax reductions are indications of the future continuation of the improvements in this area. Exemptions granted regarding the R&D spendings will contribute to the increase in the spendings of the private sector in this field.” Scope of the R&D incentive Investors, without distinction of sector or field of activity, will be provided with incentives and support until 2024 There will be a condition of a minimum of 50 R&D employees for the incentives. 40% tax base reduction in the R&D spendings will be increased to 100%. Documents to be drawn up concerning Innovation and R&D activities will not be subject to Stamp Duty. 80% of the income tax calculated through the wages of the R&D staff and 90% of the income tax calculated through the wages of the R&D staff with a doctor’s degree will not be subject to taxation. 50% of the insurance premium to be calculated through the wages of the staff that will be paid by the employer will be paid from budget for 5 years. People who would like to effectuate their original ideas in technology and who are trained in a technical area will be provided with a techno-initiative capital support of up to 100,000 YTL without being asked for a guarantee. All spendings regarding R&D and innovation projects as well as the pre-competition cooperation projects and %50 of the additional spendings they make compared to the previous year will be annually excluded from the tax bases of the companies with a R&D staff of over 500 people. If the R&D projects are relinquished or could not be complemented in the following years, the amounts activated under the R&D activity as well as the spendings regarding the immaterial rights will directly be included under the expenses.