Turkey Extends Renewable Incentives For Local Production

The Turkish government launched a new incentive program, which has taken effect on November 19, 2015, for certain investments. These are investments in the manufacturing of (i) turbines and generators used in renewable energy projects (covering hydro, wind, biomass and geothermal power), and (ii) blades used in wind energy projects (“Eligible Investment Projects”).

Requirements for Eligibility

In order to be eligible for the incentive program, the minimum capital expenditure of the investment must be 500,000 Turkish Liras (approximately US$170,000 as of December 15, 2015) and the non-tangible component (trademark, licenses, know-how etc.) must not exceed 50% of total capital expenditure. Investors are also required to apply to the Ministry of Economy to obtain a certificate of incentive in order to be eligible for the below-listed incentives.

Scope of Incentives

Eligible Investment Projects will benefit from:

• Customs duty exemption for imports of machinery and equipment used for the Eligible Investment Project;
• Exemption from value-added tax for domestic and international purchases of machinery and equipment used for the Eligible Investment Project;
• Corporate tax discount equal to 70% of annual tax payable, with the aggregate amount of such discount being capped at 30% of aggregate capital expenditure for the Eligible Investment Project;
• Government support on social security premium payments for six years, capped at the premium payable for minimum wage;
• Upon the discretion of the Ministry of Economy, interest payment support in the amount of 5% for Turkish Lira denominated loans and 2% for foreign currency denominated loans. Loans must have a tenor of at least one year to be eligible for this incentive, and the incentive is available for the first five years of the loan; and
• Upon the discretion of the Ministry of Finance, land allocation up to 49 years for a yearly payment amounting to 1% of the property tax applicable to the allocated land.

Investments in certain regions of Turkey are eligible for additional support under this program. Such projects benefit from 90% corporate tax discount, capped at 35% of aggregate capital expenditure; interest rate support in the amount of 7% for Turkish Lira denominated loans; and support on social security premium payments for seven years.

These incentives are in addition to the existing incentives granted to renewable energy generation facilities, such as feed-in tariffs applicable to all renewable energy projects and local production premium over feed-in tariffs for projects that use locally manufactured components.