The new R&D Law came into effect as of April 1 2008 in Turkey and introduced incentives and supports for investors in R&D activities, through tax incentives, land allocations and other financial instruments. The new law allows companies to deduct their R&D investments from their tax base.
The law, in general, aims to encourage R&D in the private sector, to increase exports of high-technology products while decreasing technology imports, to attract multinational companies to move their R&D facilities to Turkey and to cover the current account deficit of the country in the medium term, which increased from $32 billion in 2006 to $38 billion in 2007.
According to the new law:
- Incentives will be granted regardless of sector or industry until 2024.
- Companies will have to employ at least 50 staff in their R&D departments.
- Foreign companies with no production facility in Turkey can also benefit from the incentives by establishing an R&D facility there.
The law brings important advantages such as:
- full subtraction of R&D expenditures from taxes;
- 80% discount on income taxes of R&D personnel.
- 50% of the R&D personnel insurance fees will be paid by the employer for five years; and
- all expenditures concerning pre-competition cooperation projects and half of additional expenditures made in enterprises with over 500 R&D personnel will be reduced from tax assessment (in the following years via amortization).
It is considered likely that a series of reforms in the fields of tax, bureaucratic transactions and IP rights will follow to enhance these incentives.
The primary targets are the automotive, textile, pharmaceutical and telecommunication industries. It is estimated that Turkey has the potential to attract investment of $1 billion just from pharmaceutical companies' R&D funds, which totalled $70 billion worldwide while Turkey received only $30 million (in 2007).
Turkish R&D expenditure was about $3.5 billion in 2006, which accounted for 0.76% of the gross domestic product. There are about 54,000 full-time R&D personnel. Turkey received 6,188 patent applications in 2007, 70% (4.350) of which come from foreign applicants. An increase of 68% in domestic applications (1,838) was recorded while foreign applications had only a 7% increase last year.
Criticisms against the new law are focused on three topics: small and medium-size enterprises (SMEs), independent R&D companies and the training costs of R&D personnel are not in the scope of the law.
Consequently, this law is believed to provide a very suitable climate for companies investing in R&D facilities in Turkey, which has relatively low labour cost compared to EU countries.
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| Ersin Dereligil |
Destek Patent Inc
Tophane Orta Pazar Cad. No.7
Bursa 16040
Turkey
Tel: +90 224 2249194
Fax: +90 224 2221686
destek@destekpatent.com
www.destekpatent.com
