Turkey’s Shifting Investment Policy: Incentives Sharpen Focus on High-Tech and Green FDI

Türkiye’s investment policy is undergoing a fundamental transformation in 2025, moving away from broad incentives toward a highly targeted and selective support architecture.¹ While the legal framework remains one of the most liberal for Foreign Direct Investment (FDI) among OECD members, new policies prioritize high value-added, technology-intensive, and green projects, directly aligning investor benefits with the country’s strategic goals.²

The government’s new Medium-Term Program (MTP) for 2025-2027 aims to boost Turkey’s share of global FDI to 1.5% by 2028, underscoring the shift towards quality investment that strengthens supply chains and reduces external dependencies.

Core Pillars of Turkey’s Investment Policy

1. Investment Incentives: A Tiered Approach

The Turkish Incentive System, recently updated by a Presidential Decree, is now defined by a multi-tiered structure, with benefits increasing based on regional location, technology level, and strategic importance. The core support mechanism remains the Investment Incentive Certificate (IIC), which applies equally to domestic and foreign investors.³

Key Incentives for Investors:

• Tax Reduction: Reduced corporate or income tax rates applied until the investment reaches a specific contribution amount.⁴
• Exemptions: Full VAT Exemption and Customs Duty Exemption for imported and domestically supplied machinery and equipment.⁵
• Employment Support: Government coverage of Social Security Premium contributions (both employee and employer shares) for new hires, particularly in less-developed regions.⁶
• Land Allocation: Land provided free of charge or at subsidized rates for approved investments.⁷

2. Strategic and High-Tech Focus

The most compelling incentives are now reserved for projects deemed critical to the national economy and future competitiveness:⁸

• Project-Based Incentives (PBI): Reserved for very large-scale investments (minimum ⁹$\text{TRY } 2$ billion, or approximately ¹⁰$\text{USD } 57$ million) that address significant import gaps.¹¹ Benefits include energy and infrastructure support, qualified personnel wage subsidies, and government procurement guarantees—packages tailored to specific corporate needs.¹²
• High Tech Türkiye Investment Incentive Programme (HIT-30): This program offers a ¹³$\text{USD } 30$ billion incentive package targeting high-tech and green sectors like electric vehicles, batteries, semiconductors, and green energy.¹⁴ These projects receive maximum support regardless of their geographical location.
• R&D and Free Zone Incentives: R&D centers and firms operating within Technology Development Zones (TDZs) and Free Trade Zones benefit from 100% tax deductions on R&D expenditure and corporate tax exemptions for export-focused activities.

Risks and Challenges for Investors (Balanced View)

While the legal environment is liberal, prudent investors must factor in systemic challenges:

• Policy Predictability: Opaque rulemaking and a frequent pace of regulatory changes can add bureaucratic and legal risks for investors, requiring greater engagement with local counsel (State Department Report).¹⁵
• Macroeconomic Volatility: Despite the MTP’s goal of reducing inflation to single digits by 2027, the current economic environment characterized by high inflation and currency volatility remains the primary risk impacting financial predictability and real returns.
• Local Content Requirements: Foreign companies participating in public tenders may face local manufacturing and technology transfer requirements, particularly in the telecommunications and defense sectors.¹⁶

💡 The Investor Takeaway

Turkey’s policy stance is clear: it welcomes FDI, but is actively filtering for projects that offer the highest value-added.¹⁷ Investors focusing on advanced manufacturing, digital transformation, and green technology will find the most attractive financial and operational support packages. Projects in traditional sectors, while still welcome, will receive standard regional benefits, reinforcing the signal to global companies to upgrade their production capabilities when choosing Turkey as a manufacturing and export hub.