Investment Zones in Turkey: Free Zones, Technoparks, OSB

Investment zones in Turkey are usually presented as a single ladder of privilege, with free zones at one end and organised industrial zones at the other. The legislation does not work that way. Four separate statutes establish four regimes, each with its own purpose, its own designating authority, its own central actor and its own restrictions:

• free zones (3218 sayılı Serbest Bölgeler Kanunu);
• technology development zones, commonly called technoparks (4691 sayılı Teknoloji Geliştirme Bölgeleri Kanunu);
• organised industrial zones, the OSB (4562 sayılı Organize Sanayi Bölgeleri Kanunu);
• industrial zones (4737 sayılı Endüstri Bölgeleri Kanunu).

The fourth is routinely left out of English-language summaries, and the first is routinely described in a way that overstates what it does. This guide sets out what each statute actually establishes, and ends with the comparison that the choice turns on.

1. Free Zones in Turkey: Inside the Customs Territory, Treated as Outside

The purpose clause is explicit about what free zones are for: encouraging export-oriented investment and production, accelerating direct foreign investment and the entry of technology, directing enterprises towards exports and developing international trade (3218 sayılı Serbest Bölgeler Kanunu m.1). The statute covers their establishment, the determination of their locations, boundaries and fields of activity, their management and operation, and the structures and facilities within them.

The provision that defines their legal character is the one most often paraphrased loosely. Free zones are parts of the Turkish Customs Territory, while being places whose location and boundaries are determined by the President, where goods not in free circulation may be placed without being subject to any customs regime and without being put into free circulation, on condition that they are not used or consumed other than in the cases provided for in customs legislation; they are deemed to be outside the Turkish Customs Territory in terms of the application of import duties, trade policy measures and exchange legislation; and goods in free circulation benefit, by being placed in a free zone, from the possibilities normally attached to their export (m.6). The provisions of the legislation on customs and exchange obligations are not applied in these zones (m.6).

The distinction matters because “outside Turkey” is a description that fails in several directions at once. A free zone is inside the country and inside its customs territory. What sits outside is a defined list: import duties, trade policy measures and exchange legislation. Everything not on that list continues to apply unless another provision says otherwise, and the staffing section below is the clearest illustration.

1.1. Free Zones in Turkey: Operator and User Are Different Roles

The statute defines three terms, and the first two are frequently merged (m.3):

• Operator (işletici): the public institution or organisation, or the domestic or foreign natural or legal person, that operates the free zone (m.3-a).
• User (kullanıcı): the natural or legal person who has obtained an operating licence and has a particular workplace in the zone (m.3-b).
• Foreign currency (döviz): currencies considered convertible by the Central Bank of the Republic of Turkey, or accounts and documents of any kind providing payment (m.3-c).

A company entering a free zone becomes a user, and the two elements of that definition are cumulative: the operating licence and a workplace in the zone. Neither on its own produces the status.

1.2. Free Zones in Turkey: How the Operating Licence Is Obtained

Domestic or foreign natural or legal persons may operate in free zones on condition that they obtain a licence (3218 sayılı Serbest Bölgeler Kanunu m.5). The statute still names the Ministry of Economy as the licensing ministry in that sentence; the Regulation’s current definitions name the Ministry of Trade as the Ministry (Serbest Bölgeler Uygulama Yönetmeliği m.4). All other permits and licences concerning the use of land and the design, construction and use of buildings and facilities in the zone are issued and supervised by the Zone Directorate (m.5).

The Regulation sets the order of steps (Serbest Bölgeler Uygulama Yönetmeliği m.11):

1. The applicant delivers the operating licence application form to the Zone Directorate in person or by registered post, and pays the application fee into the Free Zones Special Account at the Central Bank. The application is made once both are done.
2. The Zone Directorate obtains the opinion of the operator, or of the zone founder and operator, and forwards the form with its own opinion to the General Directorate.
3. Where the General Directorate finds the application suitable, the applicant is told so in writing and given thirty days to send a copy of the contract securing the workplace from which it will operate, together with the other required documents. The licence is issued once they arrive.
4. If the documents are not sent in time, the right to obtain the licence is lost, the file is closed and the application fee is recorded as revenue. An applicant refused on the merits is told so in writing and the fee is refunded.

The thirty days are the step most often missed, because they start from the approval letter and are tied to a document, the workplace contract, that depends on a third party. Land and buildings in the Treasury’s private ownership may be leased to investor users, or an easement of up to forty-nine years may be established over them (3218 sayılı Serbest Bölgeler Kanunu m.5).

The Regulation leaves the evaluation criteria, the licence periods and the fees to communiqués and circulars issued by the General Directorate (Serbest Bölgeler Uygulama Yönetmeliği m.11). Periods and amounts quoted for a free zone licence therefore come from those instruments, not from the Law or the Regulation.

1.3. Free Zones in Turkey: Foreign Staff and Social Security

Foreign managers and qualified personnel may be employed in workplaces operating in free zones, and the principles relating to this are determined in the regulation (m.10).

The Regulation supplies the procedure. Users must obtain a Foreign Personnel Work Document for the foreign managers and qualified personnel they need to employ in the zone; the application is made to the Zone Directorate on the printed form with its annexes, and the document is issued if the General Directorate approves the application forwarded to it (Serbest Bölgeler Uygulama Yönetmeliği m.18). The document is valid together with a permit to reside in Turkey (m.18), so it does not replace the residence side of the foreigner’s position.

Two things follow from the statute, and they point in opposite directions. The statute permits the employment of foreign managers and qualified staff as a matter of principle, which is not the ordinary position outside the zones. But it states no quota, ratio or ceiling: it delegates the principles to the regulation, so any number quoted as “the free zone quota” comes from an instrument below the statute and has to be checked there rather than here.

The same article closes with a sentence that surprises people who have read the customs provision first: the provisions of the social security legislation of the Republic of Turkey are applied in free zones (m.10). The treatment as outside the customs territory does not carry across to social security, and it was never drafted to.

1.4. Free Zones in Turkey: Selling Goods into Turkey

Trade between a free zone and the other parts of Turkey is subject to the foreign trade regime; the foreign trade regime is not applied between a free zone and other countries or other free zones (3218 sayılı Serbest Bölgeler Kanunu m.8). Users make wholesale sales from the zone abroad or to Turkey, and may make wholesale sales or transfers to other users in the same zone on written notice to the Zone Directorate (Serbest Bölgeler Uygulama Yönetmeliği m.35).

That is the provision to set against descriptions of goods moving “duty-free into Turkey”. A sale from the zone into the rest of the country is a movement into the customs territory and is treated as trade under the foreign trade regime. The free zone advantage lies on the other side: in trade with other countries and other free zones, where that regime does not apply at all (m.8).

1.5. Free Zones in Turkey: Suspension, Cancellation and Leaving the Zone

The Regulation grades its sanctions in four steps (Serbest Bölgeler Uygulama Yönetmeliği m.14):

Step	Examples of the situations listed	Consequence
One-month suspension (m.14-a)	documents or information not supplied on time or supplied wrongly; damage to zone facilities not remedied after a warning; breach of the lease or sale contract with the operator; failure to notify changes to what was declared in the application form	the user’s transaction forms for goods leaving the zone and for sales within it are not processed for one month; processing resumes if the matter is corrected within the month
Three-month suspension (m.14-b)	goods brought in or taken out contrary to the legislation, or an unexplained stock difference not exceeding 5% per item	transaction forms not processed for three months; the free zone customs office is informed
Cancellation after assessment (m.14-c)	continuing the breach after the one-month period or repeated breaches; no activity at all for three years, force majeure apart; untrue declarations; public interest, public order or public security; non-compliance with the Law, Regulation, communiqués or circulars	the General Directorate cancels the licence where it considers it necessary
Cancellation without warning (m.14-d)	an unexplained stock difference of more than 5% per item; tax evasion by presenting income earned outside the zone as income earned in it; repetition of a three-month suspension case	the licence is cancelled without any warning

These administrative sanctions apply regardless of proceedings under other legislation and their outcome (m.14).

Leaving the zone after a cancellation has its own statutory timetable. In free zones whose land is in the Treasury’s private ownership, tenant users whose operating licence is cancelled, and investor users whose licence attached to the superstructure is cancelled, are given not less than one month and not more than six months to remove their goods from the superstructure. At the end of that period the user’s power of disposal over goods not removed ends; the goods are counted by a commission chaired by the zone director and handed over for liquidation under the Customs Law, and any balance of the sale price after duties, service charges and costs is held in a deposit account and paid to the user on request (3218 sayılı Serbest Bölgeler Kanunu Ek m.5). The same rules apply when the licence period expires rather than being cancelled (Ek m.5).

2. Technoparks in Turkey: Technology Development Zones

The purpose of the technopark statute is cooperation between universities, research institutions and production sectors, in order to give the country’s industry an internationally competitive and export-oriented structure: producing technological knowledge, developing innovation in products and production methods, raising product quality or standards, increasing productivity, lowering production costs, commercialising technological knowledge, supporting technology-intensive production and entrepreneurship, helping small and medium-sized enterprises adapt to new and advanced technologies, creating investment opportunities in technology-intensive fields, creating employment for researchers and qualified people, assisting technology transfer, and providing the technological infrastructure that will accelerate the entry of foreign capital supplying high or advanced technology (4691 sayılı Teknoloji Geliştirme Bölgeleri Kanunu m.1).

The definition of the zone itself carries the conditions that a prospective tenant has to satisfy. A technology development zone is a site, or a technopark with those characteristics, within or near a particular university, high technology institute, or R&D centre or institute, where firms using high or advanced technology or oriented towards new technologies produce or develop technology or software by benefiting from that institution’s facilities, and operate in order to transform a technological invention into a commercial product, method or service, thereby contributing to the development of the region, and in which the academic, economic and social structures are integrated (m.3-b).

Two elements of that definition are conditions rather than description: the physical proximity to the named institution, and the nature of the activity, which is producing or developing technology or software, or commercialising a technological invention. A company whose Turkish operation is sales or distribution does not meet the second.

2.1. Technoparks in Turkey: the University Inside the Manager Company

The structural feature that distinguishes a technopark from every other zone in this guide sits in the manager company. Among the founders of the manager company responsible for the management and operation of the zone there must be at least one university, high technology institute, or public R&D centre or institute located within the zone or in the province where the zone is (4691 sayılı Teknoloji Geliştirme Bölgeleri Kanunu m.5).

Chambers and exchanges affiliated to the Union of Chambers and Commodity Exchanges of Turkey, chambers, unions and federations affiliated to the Confederation of Turkish Tradesmen and Craftsmen, local authorities, banks and financing institutions, domestic and foreign private law legal persons, foundations, cooperatives and associations concerned with R&D and technology development, relevant public institutions and exporters’ associations may also be founders or become partners later (m.5). Local authorities may become partners on the basis of their own council decision without any further procedure, and foreign private law legal persons participate within the framework of the foreign direct investment legislation (m.5).

A technopark is therefore not simply an address with incentives attached. The academic institution is a structural participant in the entity that runs it.

3. Organised Industrial Zones (OSB) in Turkey

The purpose of the OSB statute is the narrowest of the four: to regulate the principles of the establishment, construction and operation of organised industrial zones (4562 sayılı Organize Sanayi Bölgeleri Kanunu m.1).

The statute’s definitions set out who the actors are (m.3):

• Participant (katılımcı): those to whom a parcel is allocated or sold for the establishment of an enterprise, together with those who produce, or undertake to produce, on a parcel they own and who operate in accordance with the purpose of the statute, and the financial lessee (m.3-e).
• Tenant (kiracı): the natural or legal person who leases the participant’s facility in accordance with the procedures and principles set in the regulation (m.3-f).
• Specialised OSB (ihtisas OSB): an OSB containing facilities operating in the same sector group and in the sub-sectors within it (m.3-d).
• Service and support areas: areas in which activity is carried on as a participant or as a participant’s tenant in small-scale manufacturing and repair, trade, education and health (m.3-ç).

Entry to an OSB is therefore through allocation, and the status obtained is that of participant rather than tenant or licensee.

3.1. OSB in Turkey: the Restriction Annotated on the Title Deed

Preliminary allocation and parcel allocation are made by the board of directors, in line with the principles determined by the entrepreneurs’ committee or the general assembly and the principle of transparency, within the procedures set in the regulation, and the Ministry is informed within the first week of the month following the allocation (m.18).

The restriction attached to what is allocated is the provision an investor should read before committing:

• Land allocated or sold to participants cannot under any circumstances be used for a purpose other than that of the allocation (m.18).
• It cannot be sold, transferred or assigned by the participants or their heirs before the debt has been paid in full and the facility has started production (m.18).
• This is annotated on the title deed (m.18).

An OSB parcel is consequently not a property investment that can be resold on a change of plan. The restriction is registered against the title, which is what makes it effective against later dealings rather than merely contractual between the participant and the zone.

The Ministry may also, where it considers it necessary, determine in the establishment protocol the basic qualifications and the fields of activity of those to whom a place will be allocated in the OSB (m.18).

4. Industrial Zones in Turkey: the Fourth Regime

The industrial zone statute regulates the principles relating to the establishment, management and operation of industrial zones, and covers the establishment and announcement of industrial zones, the investment permit process, incentive measures and the duties and powers of the manager company (4737 sayılı Endüstri Bölgeleri Kanunu m.1).

The designation route is distinct from the other three. The Ministry may propose the establishment of industrial zones on the application of institutions and organisations or of the manager company, or on its own motion by carrying out site selection; in areas determined by the Ministry, the President may authorise the establishment of industrial zones; and the manager company must have been established before the determined areas are submitted to the Presidency. Presidential decisions on the establishment of industrial zones are published in the Official Gazette (m.3).

Two further features appear in the same provision. Decisions on adding new areas to industrial zones or removing areas from them are taken by the Ministry and published in the Official Gazette. And areas designated as industrial zones cannot be used for any other purpose (m.3).

The combination of an investment permit process, a manager company that must pre-exist the designation, and an area locked to its purpose marks this regime out as the one built for large, single-site investments rather than for a tenant taking space in an existing zone.

5. Investment Zones in Turkey: Which Regime Fits Which Investment

	Free zone	Technopark	OSB	Industrial zone
Statute	3218	4691	4562	4737
Stated purpose	export-oriented investment and production, direct foreign investment and technology inflow, international trade (m.1)	university and industry cooperation; produce, develop and commercialise technology (m.1)	establishment, construction and operation of organised industrial zones (m.1)	establishment, management and operation of industrial zones, including the investment permit process (m.1)
Who designates the area	the President determines locations and boundaries (m.2)	the zone is defined by proximity to the named academic or R&D institution (m.3-b)	site selection under the site-selection regulation	the Ministry determines; the President authorises; published in the Official Gazette (m.3)
Your status	user: operating licence and a workplace in the zone (m.3-b)	firm in the zone, operating through the manager company’s structure	participant: parcel allocated or sold, or production on an owned parcel (m.3-e)	investor under the investment permit process (m.1)
Structural requirement	operator and user are separate roles (m.3-a, m.3-b)	a university or public R&D institution must be among the manager company’s founders (m.5)	allocation by the board under the transparency principle (m.18)	the manager company must exist before the area goes to the Presidency (m.3)
Land restriction	—	—	no use outside the allocation purpose; no sale or transfer before the debt is paid and production has started; annotated on the title deed (m.18)	designated areas cannot be used for any other purpose (m.3)
Sales into Turkey	subject to the foreign trade regime (m.8)	—	—	—
Customs and exchange	part of the Customs Territory, deemed outside it for import duties, trade policy measures and exchange legislation (m.6)	—	—	—
Foreign staff	foreign managers and qualified personnel permitted, with a Foreign Personnel Work Document valid together with a residence permit (Yönetmelik m.18); Turkish social security legislation applies (m.10)	—	—	—

The table is best read down the “your status” row. The four regimes hand an investor four different legal positions, and the documents, the restrictions and the exit options follow from which position is taken rather than from a general ranking of the zones.

6. Foreign Investors and Investment Zones in Turkey

None of the four statutes excludes foreign investors, and two refer to them expressly. The free zone statute names accelerating direct foreign investment and the entry of technology among its purposes (3218 sayılı Serbest Bölgeler Kanunu m.1), and defines the operator so as to include foreign natural and legal persons (m.3-a). The technopark statute names providing the technological infrastructure that will accelerate the entry of foreign capital supplying high or advanced technology (4691 sayılı Teknoloji Geliştirme Bölgeleri Kanunu m.1), and allows foreign private law legal persons to be founders or partners of the manager company within the framework of the foreign direct investment legislation (m.5).

The free zone is the exception to the usual framework. The Free Zones Law lists the Foreign Direct Investment Law, No. 4875, among the statutes that are not applied in free zones, together with the provisions of other laws that conflict with the Free Zones Law (3218 sayılı Serbest Bölgeler Kanunu m.12). Entry to a free zone therefore runs through the operating licence, which domestic and foreign persons obtain on the same footing (m.5), rather than through the foreign direct investment route.

For the other three regimes a Turkish vehicle or presence of the appropriate kind is still needed, and the choice between a company, a branch and a liaison office is made under the foreign direct investment framework rather than under the zone statutes. That choice is set out in the guide to setting up a company in Turkey as a foreigner and, for a non-trading presence, in the guide to the liaison office of a foreign company in Turkey.

7. What the Legislation Does Not Fix

The four statutes establish the regimes. Several of the things most often quoted about these zones are not in them.

• The exemptions and their scope. Tax, duty and charge exemptions attached to these regimes are set by separate provisions and instruments, and they have been changed repeatedly. A percentage or an exemption quoted from an older source is not a current legal position and must be verified as at the date of the investment.
• The free zone staffing quota. The statute permits foreign managers and qualified personnel and delegates the principles to the regulation (3218 sayılı Serbest Bölgeler Kanunu m.10). Any ratio or ceiling comes from that regulation, not from the statute.
• Application fees, licence periods and licence costs. No amount is stated for the operating licence, the parcel allocation or the investment permit in the provisions above. For free zones the Regulation expressly leaves evaluation criteria, periods and fees to communiqués and circulars of the General Directorate (Serbest Bölgeler Uygulama Yönetmeliği m.11).
• Processing times. None of the four statutes fixes an end-to-end period for obtaining the relevant status. The free zone Regulation fixes one deadline inside the process, the thirty days for sending the workplace contract after approval, and that deadline runs against the applicant (Serbest Bölgeler Uygulama Yönetmeliği m.11).
• Which zone is “best”. The statutes define different regimes for different activities. The question a particular investment raises is which set of conditions it can actually satisfy, not which zone ranks highest.