Corporate & Commercial
Free Zones in Turkey: Tax Benefits & MNC Setup 2026
Free zones in Turkey under Law No. 3218: the manufacturing earnings exemption, wage tax relief for 85% exporters, VAT and customs status, and 2025–2026 changes.
Free zones offer foreign investors and multinational groups that manufacture or trade for export from Türkiye a separate customs and tax regime. They are governed by the Free Zones Law No. 3218 and the Free Zones Implementation Regulation, and administered by the Directorate General of Free Zones (Serbest Bölgeler Genel Müdürlüğü) of the Ministry of Trade. The package combines a corporate tax exemption for qualifying earnings, VAT and customs advantages, relief from wage income tax for exporters, and stamp duty and fee exemptions, each with its own conditions that need to be documented.
For groups planning export-oriented manufacturing, logistics or regional operations, the choice of zone and licence decides which of these incentives are available. Two recent laws changed the manufacturing exemption: Law No. 7524 limited it to sales abroad for earnings from 1 January 2025, and Law No. 7577 extended it again to sales within the zone and to other free zones for earnings from 1 January 2026. Law No. 7524 also introduced a domestic minimum corporate tax, from which earnings exempt under Law No. 3218 are carved out. Our corporate and commercial law practice in Turkey can review the structure before the licence application is filed.
Key Takeaways
Earnings of taxpayers engaged in production in a free zone from selling the products they manufacture there abroad, within the zone or to other free zones are exempt from income or corporate tax until the end of the tax period of the year in which Türkiye becomes a full member of the EU (Law No. 3218, Provisional Article 3).
Free zones are treated as outside the Turkish Customs Territory for import duties, trade-policy measures and foreign-exchange rules (Article 6); goods under the free zone regime are exempt from import VAT (VAT Law Article 16(1)(c)), and services rendered in free zones are exempt from VAT (Article 17(4)(ı)).
Taxpayers exporting at least 85% of the FOB value of the products produced in the zones have the income tax calculated on their employees' wages cancelled through the withholding return; the President may lower the ratio to 50% (Provisional Article 3).
The President determines the location and boundaries of each zone and authorises its establishment and operation (Article 2); operating licences are issued by the Directorate General of Free Zones (Regulation Article 11).
The 10% domestic minimum corporate tax introduced by Law No. 7524 (Corporate Tax Law Article 32/C) applies from the 2025 tax periods, but earnings exempt under Law No. 3218 are deducted when computing it.
Legal Architecture of Turkish Free Zones
Law No. 3218 was adopted on 6 June 1985. Its stated purpose (Article 1) is to promote export-oriented investment and production, accelerate foreign direct investment and technology inflows, steer businesses towards exports and develop international trade. Under Article 6, free zones are parts of the Turkish Customs Territory but are treated as outside it for the application of import duties, trade-policy measures and foreign-exchange legislation, and customs and exchange-obligation legislation does not apply in them. The Law is supplemented by the Free Zones Implementation Regulation and by communiqués and circulars of the Directorate General.
Statutory Framework Under Law No. 3218
Under Article 5, domestic or foreign natural or legal persons may operate in a free zone once they obtain an operating licence (faaliyet ruhsatı). Under Article 11 of the Regulation, the application is lodged with the Zone Directorate, which forwards it with the operator's opinion to the Directorate General of Free Zones (Serbest Bölgeler Genel Müdürlüğü); the Directorate General issues the licence, and the criteria, periods and fees are set by its communiqués or circulars. Article 4 of the Law allows any industrial, commercial or service activity approved by the High Planning Council. The licensed activity matters for tax: the earnings exemption in Provisional Article 3 covers production taxpayers and a defined list of service businesses, not trading as such.
Regulatory Bodies and Oversight
Each zone is run by an operator, which under Article 3 may be a public institution or a domestic or foreign natural or legal person. The Zone Directorate issues and supervises land-use, building and all other permits in the zone, and security in the zones is provided by the police (Article 5). The Turkish Revenue Administration (Gelir İdaresi Başkanlığı) remains responsible for income tax, corporate tax and VAT matters. Because the incentives depend on the licence, the activity and the destination of sales, a compliance failure in one of these areas can remove the benefit for the affected earnings.
Tax, Customs, and Fiscal Incentives in 2026
Corporate Income Tax Exemption (Manufacturing Licenses)
The exemption sits in Provisional Article 3 of Law No. 3218, not in Article 6. Until the end of the tax period of the year in which Türkiye becomes a full member of the European Union, the earnings of taxpayers engaged in production in free zones from selling the products they manufacture there abroad, within the zone or to other free zones are exempt from income or corporate tax. The words "within the zone or to other free zones" were added by Law No. 7577 for earnings from 1 January 2026; for 2025 earnings, Law No. 7524 had limited the exemption to sales abroad. Sales of the products into the rest of Türkiye are outside the exemption. The same provision exempts service businesses in maintenance, repair, assembly, disassembly, handling, sorting, packaging, labelling, testing and storage, provided that they render all of their services to persons not resident in Türkiye and the goods are sent to a foreign country without entering Türkiye. The exemption does not affect withholding under Income Tax Law Article 94(1)(6)(b) and Corporate Tax Law Articles 15 and 30.
VAT, Customs, and Stamp Tax Relief
Goods brought into a free zone from abroad are not subject to Turkish import duties, because the zones are treated as outside the Customs Territory for that purpose (Law No. 3218, Article 6), and goods subject to the free zone provisions of the Customs Law are exempt from import VAT under Article 16(1)(c) of VAT Law No. 3065. Deliveries from Türkiye to a buyer in a free zone can qualify as export deliveries under Article 12(1) and are exempt under Article 11(1)(a), which also covers contract manufacturing services for customers in free zones. Services rendered in free zones, and freight transport to or from free zones for export, are exempt under Article 17(4)(ı). Under Provisional Article 3 of Law No. 3218, transactions carried out and papers issued in connection with activities in the zones are exempt from stamp duty and fees until the end of the tax period of the year of full EU membership.
Employee Income Tax Relief
Under Provisional Article 3 of Law No. 3218, taxpayers that export abroad at least 85% of the FOB value of the products produced in the zones benefit on the wages of the personnel they employ: the income tax calculated on those wages is cancelled (terkin edilir) by deducting it from the tax accrued on the withholding return. The provision is not limited to production staff. The President may lower the 85% ratio to 50% or raise it back to the statutory level, and may differentiate by region, sector or activity for strategic, large-scale or priority investments. If a taxpayer's annual sales fall below the ratio, the tax not collected on time is collected without penalty but with late-payment interest (gecikme zammı). Foreign-controlled groups should therefore monitor the export ratio throughout the year.
Profit Repatriation
The free zone exemption does not switch off withholding on distributions: Provisional Article 3 states that it has no effect on withholding under Income Tax Law Article 94(1)(6)(b) and Corporate Tax Law Articles 15 and 30. Dividends distributed to a non-resident corporate shareholder are therefore subject to the withholding in Corporate Tax Law Article 30(3), whose statutory rate is 15% and which the President may vary under Article 30(8); a double tax treaty with the shareholder's state may cap the Turkish tax. Holding structures are discussed in our analysis of corporate tax in Turkey for foreign investors. Payments related to activities in free zones are made in foreign currency unless the President decides that Turkish lira may be used (Law No. 3218, Article 9).
Free Zone Incentives at a Glance
| Incentive | Legal basis | Main condition |
|---|---|---|
| Income or corporate tax exemption on manufacturing earnings | Law No. 3218, Provisional Art. 3 | Production in the zone; sales abroad, within the zone or to other free zones; until the end of the EU-membership year |
| Exemption for listed service businesses | Law No. 3218, Provisional Art. 3 | All services to non-residents; goods sent abroad without entering Türkiye |
| Cancellation of wage income tax | Law No. 3218, Provisional Art. 3 | Export of at least 85% of the FOB value of products produced in the zones |
| Stamp duty and fee exemption | Law No. 3218, Provisional Art. 3 | Transactions and papers connected with activities in the zones |
| No import duties; import VAT exemption | Law No. 3218, Art. 6; VAT Law Art. 16(1)(c) | Goods under the free zone regime |
| VAT exemption for services | VAT Law Art. 17(4)(ı) | Services rendered in free zones |
| Carve-out from the domestic minimum corporate tax | Corporate Tax Law Art. 32/C(2)(c) | Earnings exempt under Law No. 3218 |
Common questions about this topic
Are foreign investors permitted to own 100% of a Turkish free zone company?
Law No. 3218 contains no Turkish-ownership requirement. Under Article 5, domestic or foreign natural or legal persons may operate in a free zone once they obtain an operating licence, and under Article 12 the Foreign Direct Investment Law No. 4875 does not apply in free zones. Payments related to activities in the zones are made in foreign currency unless the President decides that Turkish lira may be used (Article 9). The company-law and sector rules that apply to the specific activity should still be checked before the structure is fixed.
Does the corporate income tax exemption apply to all activities within the zone?
No. Provisional Article 3 of Law No. 3218 exempts the earnings of taxpayers engaged in production from selling the products they manufacture in the zone abroad, within the zone or to other free zones, and the earnings of listed service businesses (maintenance, repair, assembly, disassembly, handling, sorting, packaging, labelling, testing and storage) that render all their services to non-residents, where the goods are sent abroad without entering Türkiye. Other earnings, including those from sales into the rest of Türkiye, are taxed under the general rules; under Corporate Tax Law Article 32(1) the rate is 25%, and 30% for banks and certain financial companies.
How does the domestic minimum corporate tax affect free zone operators?
Law No. 7524 added Article 32/C to the Corporate Tax Law for tax periods from 2025: corporate tax may not be less than 10% of corporate earnings before deductions and exemptions. Under Article 32/C(2)(c), earnings exempt under Law No. 3218 are deducted when this minimum tax is computed, so the free zone exemption is not eroded by it; taxable earnings outside the exemption remain within its scope. Companies starting business are outside the rule for their first three tax periods (Article 32/C(5)). Separately, constituent entities of multinational groups with consolidated revenue above EUR 750 million in at least two of the four preceding fiscal years are subject to the 15% minimum tax rules added to the same Law.
Can a free zone company sell into the Turkish domestic market?
Yes. Under Article 8 of Law No. 3218, trade between a free zone and the rest of Türkiye is subject to the foreign trade regime, and Article 7 provides for fees on certain goods movements, including 0.9% of the FOB value of goods sent from a zone to Türkiye, subject to the exceptions in the same article. The manufacturing exemption in Provisional Article 3 does not cover earnings from sales into Türkiye, so a zone company with significant domestic sales should model the tax on that income separately.
Which Turkish free zone is most appropriate for a foreign tech or software company?
Law No. 3218 does not rank zones or create a separate tax regime for software. The President sets each zone's location and boundaries (Article 2), and any industrial, commercial or service activity approved under Article 4 may be carried out once an operating licence is issued. The earnings exemption in Provisional Article 3 applies to taxpayers engaged in production and to the listed service businesses, and the wage tax relief to taxpayers exporting at least 85% of the FOB value of products produced in the zones. Whether a software activity falls within these categories should be confirmed against the licence before either incentive is relied on; the choice of zone then turns on location and infrastructure.
How long does free zone authorization last, and is it renewable?
Law No. 3218 does not fix a licence term. Under Article 11 of the Free Zones Implementation Regulation, the procedures and principles for operating licences, including criteria, periods and fees, are set by communiqués or circulars of the Directorate General of Free Zones, and each licence states its operating period. A user that wants to continue after expiry needs a new operating licence. On Treasury-owned land, buildings erected by users pass to the Treasury when the licence expires or is cancelled (Regulation Article 8), so the licence term should be aligned with the investment plan from the outset.
This guide is general information on Turkish law, not legal advice on your own matter. Rules and practice change; check the position before you act.