WORLD TRADE  
ORGANIZATION  G/SCM/Q2/TUR/18 
28 September 2007 
 (07-4116) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
  
SUBSIDIES 
 
Replies to Questions from the UNITED STATES
1 
Regarding the New and Full Notification of TURKEY2 
   The following communication, dated 27 September 2007, is being circulated at the request of the Delegation of Turkey.   
 
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ENCOURAGING INVESTMENTS IN TURKEY 
 
General Investment Encouragement Programme (GIEP) 
 
Exemption from customs duties and fund levies  
 
Question 1 
 
 Could Turkey provide further information re garding the qualifications that investment 
projects must meet in order to be elig ible for benefits under this program?   
 
Response
 
 
Exemption from customs duties and fund levies is one of the measures provided under the 
General Investment Encourag ement Program (GIEP).   
 
The program covers all investment activities re lated to the production of goods and services, 
research and development (R&D), environmenta l protection and improvement of quality and 
standards.   
 
In order to qualify for the measure exemption from customs duties and fund levies as well as 
other investment encouragement measures, the fo reign investors must first apply and qualify to 
receive an investment encouragement certificate fro m the General Directorate of Foreign Investments 
(GDFI), domestic investors alike must apply, qua lify and receive their certificates from the General 
Directorate of Incentives and Implementation (GDII).  Both of these General Directorates are parts of 
the Undersecretariat of Treasury.    
For issuance of an investment encouragement certificate investors are required to submit an 
application letter accompanied by a number of supp orting documents like:  investment application 
                                                     
 
1 G/SCM/Q2/TUR/17.   
2 G/SCM/N/123/TUR + Add.1.   G/SCM/Q2/TUR/18 
Page 2  
 
  form, a notarized copy of authorized signatures of  the company and a copy of the trade registry 
gazette in which the Articles of Association is published.    
The project proposals concerning the investment  encouragement certificate applications in 
both financial and the technical terms are evaluated by the related branches of the Undersecretariat.  
Once the investment project is granted an invest ment encouragement certificate, investors will be 
eligible to benefit from the encouragement measures enlisted on the certificate.    
Provided that the measure "exemption from customs duties and fund levies" is among the 
enlisted measures, imports of the machinery and equi pment to be used in the production process shall 
be subject to exemption.  Then, the investor is able to import the machinery and equipment indicated 
on the approved "Machinery and Equipment List" as an attachment of investment encouragement 
certificate without paying any customs duties.    
Question 2 
 
 Could Turkey provide more detailed informat ion as to the particular criteria that 
investors have to meet to be eligible for inv estment encouragement certificates?  (Follow-up 
question)  
Response
 
 
 As also explained in the first reply of Turkey  to the question regarding the qualifications that 
investment projects must meet in order to be eligible for benefit conferred by "Exemption from 
customs duties and fund levies" that is one of the measures provided under the "Investment 
Encouragement Program3 (IEP)", investors are required to get an investment encouragement 
certificate at first in order to qualify for inv estment encouragement measures offered under the 
Program.  In other words, receipt of an investment encouragement certificate is a prerequisite to qualify to benefit from all investment encouragement measures under IEP.     Investment encouragement certificate is a doc ument entitled to the name of the company, 
which specifies the information regarding the invest ment project in question such as the subject and 
type of the investment, terminati on period, fixed investment cost and enables investors to benefit from 
encouragement measures enlisted on it.     To obtain an investment encouragement certif icate, as a rule all investors, domestic or 
foreign, who have prepared their investment feasibility studies and proposals, apply to the 
Undersecretariat of Treasury with the related documents for the evaluation of their investment 
projects to be considered for encouragement.     Among the applications to be made to the Unders ecretariat of Treasury, all investments to be 
made by companies having foreign capital and their branches will be received by General Directorate 
of Foreign Investment (GDFI) and for other inv estments;  applications are made to General 
Directorate of Incentives and Implementation (GDII).   
 
                                                     
 
3 In our previous answer, the name of the program has been stated as "The General Investment 
Encouragement Program (GIEP)".  Sinc e then, there has been a major change  regarding previously existing two 
programs, namely "The General Investment Encourag ement Program (GIEP)" and "The Program for Aids 
Granted to Small and Medium Sized Enterprises' (SMEs) Investments", for encouraging investments in Turkey.  
Presently, instead of having two separate programs, encouragement of SMEs' investments and encouragement of investments with other objectives (such as regional development, R&D and environmental protection, which 
were previously under the coverage of GIEP), were integrated into one single program, namely, "The 
Investment Encouragement Program (IEP)".    G/SCM/Q2/TUR/18 
 Page 3 
 
 
   An investor should complete and submit the following documents during the application:   
 
- Investment application form 
- The receipt of the amount deposited in the Central Bank, 400 TRY4  
- A notarized copy of authorized  signatures of the company  
- Copies of the trade registry gazettes in which th e Articles of Association and current status of 
the company is published 
  Once the application is completed and presented for the evaluation, in conformity with the 
Decree
5 and Communiqués, eligible investment projects are granted an investment encouragement 
certificate, after an evaluation and analysis of each  project proposal made in financial and technical 
terms and by taking into consider ation of macroeconomic policies and overcapacities in accordance 
with supply and demand conditions on the project subject.  The Decree covers all investment 
activities related to the production of goods and services (including the SMEs'), research and 
development (R&D), environmental protection a nd improvement of quality and standards.   
 
 For investment projects to be granted an i nvestment encouragement certificate the amount of 
total fixed investment cost6 should be;   
 
- minimum 200 thousand TRY and maximum 2 million TRY for SMEs' investments, 
- minimum 200 thousand TRY for investments to be made via financial leasing, 
- minimum 2 million TRY for all other investments.   
  It should be noted that, as far as the mechanis m is concerned, domestic and foreign investors 
are equally treated;  the companies having foreign capital can benefit from all encouragement measures granted to domestic companies with the same conditions.  The encouragement measures 
offered under the program are not related directly  to trade and do not include any local content 
requirement.     
OTHER PROGRAMMES 
 
Deduction from Taxable Income for Export Revenue 
 
Question 3 
 
 It is our understanding that the Income Tax Law was amended in 1995 by the Ministry 
of Finance to allow companies that export goods or services to claim a deduction from corporate 
income taxes equal to 0.5 percent of the hard  currency income derived from their export 
activities.  Could Turkey please explain whether this program is still in effect?  If so, please explain how this program is consistent with the provisions of Article 3.1(a) of the SCM 
Agreement.   
  
                                                     
 
4 TRY is the abbreviation used for New Turkish Liras.   
5 Currently, the legislative basis for the Progra m is "Decree Concerning State Encouragements to 
Investments" (Decree No. 2006/10921, dated:  August 28th, 2006 which has been amended by Decree No. 2007/12142) 
6 The amount of fixed investment cost was specified as minimum 200 Thousand TRY for investments 
to be realized in Priority Development Regions and minimum 400 Thousand TRY for those to be realized in other regions within the set framework of the previo us Decree, i.e. Decree No: 2002/4367 Concerning State 
Encouragements to Investments that has been abolished by the current Decree No. 2006/10921 which 
determines minimum fixed investment costs as specified in the main text.   G/SCM/Q2/TUR/18 
Page 4  
 
  Response
 
 
 The deduction from taxable income is neither a separate nor a new program.  On the contrary, 
it is one of the components of the general fiscal program.    
 The main reason for this implementation is to overcome the difficulties faced by Turkish 
exporter and service provider companies abroad with  respect to the documentation of expenditures 
particularly in the purchases of services such as cl ean-up, transportation and repair.  Such difficulties 
are especially prevalent in Turkey's neighbors mo st of which are non-WTO member countries.  In 
addition to this, the shares of those non-WTO me mbers constitute a significant portion of Turkey's 
total goods and services exports d estined to her neighbors.   
  The Income Tax Law constitutes a legal ground for this implementation.  Pursuant to related 
provisions of that Law, taxpayers can deduct a li mited and inconsiderable amount of undocumented 
expenditures in addition to the docum ented expenses & expenditures.   
 
 
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