A Turkish free zone is not a tax-free Turkey. It is a fenced area that Law 3218 treats as outside the customs territory for import duties, trade policy measures and exchange legislation, inside which a company operates under an operating licence from the Ministry of Trade, and in which the income tax exemption most foreign founders come for belongs to one class of user only: the producer selling abroad. In my files the disappointment is always the same shape. A trading or consulting company is set up in a zone on the strength of a brochure, and discovers after the first year that non-production licences issued since February 2004 carry no income or corporate tax exemption at all, that sales into Turkey are imports with customs duty and VAT, and that the business it actually runs would have been simpler and cheaper as an ordinary company in Istanbul. This page sets out what the statute exempts and for whom, the licence types and their terms, the branch rule, the VAT position, work permits and property inside the zone, as they stand in September 2026.
Sources, checked 9 September 2026. Free Zones Law No. 3218, Articles 1, 5, 6, 7, 8, 9, 10 and 12 and Provisional Article 3; International Labour Force Law No. 6735, Article 18; Value Added Tax Law No. 3065, Articles 11(1)(a), 12(1), 16(1)(c) and 17(4)(ı); Property Tax Law No. 1319, Article 4(m); Ministry of Trade, General Directorate of Free Zones, information note of May 2026, advantages note and licence procedure note.
What a free zone is in law
Article 6 of Law 3218 defines the zones. They are parts of the Turkish customs territory whose location and boundaries the President fixes, in which goods not in free circulation may be placed without a customs regime and without entering free circulation, and which are treated as outside the customs territory for the application of import taxes, trade policy measures and exchange legislation. The second paragraph of the article states the consequence: the legislation on customs and exchange obligations is not applied in the zones. Article 12 disapplies, inside the zones, the Foreign Direct Investment Law, most of the Municipality Law, the Passport Law and the old residence law, and the provisions of other laws contrary to Law 3218; the ordinary Turkish company, tax, labour and social security laws otherwise apply, and Article 10 says so expressly for social security.
Article 1 states the purpose: export-oriented investment and production, foreign direct investment and technology, and international trade. There are nineteen zones on the Ministry's list, from Mersin and Antalya in 1985 to Batı Anadolu in 2021, including the three Istanbul zones, Avrupa and Kocaeli in the Marmara region, Ege and İzmir on the Aegean, Bursa, Denizli, Kayseri, Gaziantep, Adana-Yumurtalık, Samsun, Trabzon, Rize and the TÜBİTAK-MAM technology zone. Each is run by a founder and operator company authorised by the President, which lets space, collects the zone's charges and, under Article 5, obtains the building and other permits from the zone directorate.
Who may operate, and the licence
Article 5(2) is the gateway: domestic or foreign natural or legal persons may operate in a free zone provided they obtain a licence from the Ministry, and investor users may lease Treasury land and buildings or take a right of superficies over them for up to forty-nine years. The Ministry's procedure note describes the route. The applicant completes the operating licence application form, pays the application fee set by the Ministry into the Central Bank's account, and files the form with its annexes at the directorate of the zone it has chosen, together with the company's registry gazettes and chamber registration, or for a foreign company its constitutional documents legalised by the Turkish mission in its country, the last three years' balance sheets and profit and loss accounts, and evidence of foreign currency brought into Turkey in the last three years if any. The General Directorate assesses the application against production and export orientation, technology level, investment and export undertakings, employment and fit with the zone's cluster. If the answer is yes, the applicant has thirty days to sign a lease with the operator or with a licensed user that lets premises, or in a zone on private land a purchase contract, and the licence is then issued; if the answer is no, the fee is refunded.
Two user statuses exist, and the licence term follows the status and the activity. An investor user builds its own superstructure or takes over an existing one and receives a licence of forty-five years for production and thirty years for other activities; a tenant user rents an office or production space from the operator or a letting licensee and receives twenty years for production and fifteen for other activities. Licences are issued for production, trading, warehousing, assembly and disassembly, simple processing and handling, letting of premises, maintenance and repair, banking and such other activities as the General Directorate approves. An investor user then applies to the zone directorate for a construction permit for its project and, on completion, for an occupancy permit before trading begins.
The company form: free zone company or branch
The Ministry's information note states the rule that decides the structure. A firm resident in Turkey must conduct its zone activity through a branch it establishes in the zone, with capital allocated to the branch and operating expenses provided for; a company headquartered in the zone may not trade or open a branch elsewhere in Turkey under the same name; and a zone-headquartered company must obtain the General Directorate's approval before amending its name, objects, seat or duration. A foreign group therefore chooses between a Turkish company outside the zone with a zone branch, and a company whose only Turkish seat is the zone. The zone-headquartered company is the cleaner vehicle for a business that exists to produce for export; the branch is the right vehicle where the group also sells in Turkey, because the domestic business needs a Turkish seat the zone company cannot have. The company itself is formed under the Commercial Code like any other, with the capital and deadline rules described on the company formation page, and its bank account under the rules on the bank account page.
The tax exemptions, and who actually gets them
Provisional Article 3 of Law 3218 is the whole of the tax case, and its opening words set the clock: the exemptions run until the end of the tax period of the year in which Turkey's full membership of the European Union takes effect. Within that period, three exemptions apply.
The first, in paragraph (a), belongs to producers and to a defined class of service businesses. Taxpayers holding a production licence are exempt from income and corporate tax on the profits from selling the goods they manufacture in the zone abroad, within the zone or to other free zones. Service businesses in the zone providing maintenance, repair, assembly, disassembly, handling, sorting, packaging, labelling, testing and storage are exempt on the profits from those services where the whole service is rendered to persons not resident in Turkey and the goods concerned are sent to a foreign country without entering Turkey. The exemption does not touch withholding on distributions, which the article says expressly. The Ministry's advantages note completes the picture: users with non-production licences issued before 6 February 2004 keep their exemption until the licence expires, and non-production licences issued from that date carry no income or corporate tax exemption. A trading, consulting or holding company in a zone pays corporate tax like any other Turkish company.
The second, in paragraph (b), is the wage exemption. Where a producer exports at least eighty-five per cent of the FOB value of the goods it manufactures in the zone, the income tax calculated on the wages it pays its staff is cancelled by being set off against the tax accrued on the withholding return; the President may lower the threshold to fifty per cent and restore it. A producer whose annual sales fall short of the threshold pays the tax not collected in time without penalty but with late payment interest, so the exemption is claimed during the year and settled at its end.
The third, in paragraph (c), exempts the transactions and documents relating to activities carried out in the zone from stamp duty and fees. Separately, Article 4(m) of the Property Tax Law exempts buildings in free zones from building tax, the Ministry's note adding the condition that the building is the user's own and not let. The Ministry's note also records that the operator companies of newly established zones are exempt from income and corporate tax on their operating profits for thirty years.
Value added tax follows the customs status. Under Articles 11(1)(a) and 12(1) of the VAT Law a delivery to a buyer in a free zone is an export delivery, exempt with credit, provided the goods leave the customs territory and arrive in the zone; contract processing services for zone customers are exempt under Article 11(1)(a); goods under free zone provisions are exempt from import VAT under Article 16(1)(c); and services rendered in the zones, together with export-purpose freight to and from them, are exempt under Article 17(4)(ı). The Ministry's summary that a zone user buys from Turkey without VAT and from abroad without customs duty is correct as far as it goes; the reverse flow, from the zone into Turkey, is an import on which both are due.
Trade with Turkey and with the world
Article 8 draws the line. Trade between a zone and the rest of Turkey is subject to the foreign trade regime; trade between a zone and other countries or other zones is not. Goods sent from Turkey to the zone are exports, goods sent from the zone into Turkey are imports under the release for free circulation regime, and Turkish-origin goods worth no more than five thousand US dollars may at the user's option be moved into the zone without an export procedure. Under Article 7(1)(b) a charge of one per thousand of the CIF value on goods entering from abroad and nine per thousand of the FOB value on goods leaving for Turkey is paid into the zones' special account, which the Ministry's note describes as applying to production-licensed users; the second paragraph of the article exempts several categories of goods from that charge and sets separate rules for non-producer users licensed after 6 February 2004. Because the zones are treated as part of the Turkey-EU Customs Union, Turkish or EU-origin goods and goods in free circulation may be sent from a zone to the EU under an A.TR movement certificate; third-country goods must first be released into free circulation at the zone customs office at the Common Customs Tariff rate. Goods may remain in a zone without time limit.
Payments, staff and work permits
Article 9 requires all payments relating to zone activities to be made in foreign currency, and allows the President to permit payment in Turkish lira; a decision on the payments that may be made in lira is among the instruments listed on the Ministry's legislation page. Article 10 allows foreign managers and qualified staff to be employed in the zones under the regulation, and applies Turkish social security law in full. Work permits for foreigners in the zones follow a route of their own under Article 18 of Law 6735: the application is made to the Ministry of Trade, which assesses it and notifies the Ministry of Labour of the foreigners it finds suitable, and the Ministry of Labour issues the permit; the Labour Law's own objection, exemption and penalty articles for permits, Articles 21 to 23, do not apply in the zones, the Free Zones Law governing those matters instead. The founder's own position as a working manager is otherwise the one described on the founder work permit page.
Property inside the zone
In a zone on Treasury land, the superstructure an investor builds reverts to the Treasury at the end of the use right, and may be transferred during the term to another person the General Directorate approves; the underlying right is the lease or superficies of up to forty-nine years under Article 5(2). In a zone on private land, an investor may own its land and building and may sell or let them to persons the General Directorate approves, and Article 5(2) makes owners who are not users liable for the same participation charges as users. A foreign company buying premises in a private-land zone is acquiring Turkish real estate through a company, and the rules for a foreign-owned company acquiring Turkish real estate, summarised on the foreign investment guide, apply to the acquisition even though the zone regime applies to the use.
What a free zone company is not good for
The regime rewards one business model, production for export, and a few service models that never touch the Turkish market. It penalises the others. A company that imports finished goods for sale in Turkey gains nothing from the zone and pays for the licence, the zone charges and the special account fee on every consignment leaving for Turkey. A consulting or software company with no production licence pays corporate tax in full, and if its clients are in Turkey it has added a customs frontier between itself and them. A holding company gains nothing, because the exemption in Provisional Article 3 does not extend to withholding on distributions. The exemptions are also expressly temporary, ending with the tax year of EU accession, which no one can date, and the Ministry may set additional conditions in the licence, including export undertakings the assessment is based on. For high-technology producers the specialised zones offer, under Presidential Decision 2635, additional support toward the wages of up to ten qualified staff and toward rent, on the percentages and annual caps the decision sets. Montenegro's equivalent, a much smaller customs-and-VAT regime with no income tax exemption of this kind, is described on the Montenegro free zone page.
The free zone timeline
| Step | What happens | Rule | Source |
|---|---|---|---|
| 1 | Choose zone and status: investor (own building) or tenant (leased space) | Terms 45/30 or 20/15 years by activity | Ministry information note |
| 2 | Form the Turkish company, or resolve to open a zone branch of the existing one | Turkey-resident firms operate through a branch; zone-seated company cannot trade elsewhere under the same name | Ministry information note; Commercial Code |
| 3 | File the licence application at the zone directorate with the form, corporate documents, three years' accounts and fee receipt | Fee refunded if refused | Law 3218 Art. 5(2); procedure note |
| 4 | Assessment by the General Directorate: production and export orientation, technology, undertakings, employment, cluster fit | – | Ministry information note |
| 5 | Within 30 days of approval, sign the lease or purchase contract; licence issued | – | Procedure note |
| 6 | Investor users: construction permit from the zone directorate, then occupancy permit | Art. 5 | Procedure note |
| 7 | Work permits for foreign staff through the Ministry of Trade | Law 6735 Art. 18 | Statute |
| 8 | First year: track the 85% export ratio for the wage exemption; settle any shortfall at year end | Prov. Art. 3(b) | Statute |
| Ongoing | Payments in foreign currency; special account charges on goods movements; all movements recorded on the zone system | Art. 7, 9 | Statute; information note |
Whose side we are on, and how we are paid
The operator company that lets you space is paid by the square metre and by the year, whatever your tax position turns out to be. The consultant who "sets up your free zone company" is paid for the set-up. Neither is paid to tell you that your business does not hold a production licence, that your customers are in Turkey, or that the exemption you were sold ended for your kind of licence in February 2004.
We take no commission or referral fee from zone operators, formation agents or consultants, in any form, on any file. The fee you pay us is our only income from your matter, and it does not depend on your choosing a zone. Because our position does not move with the licence, telling you that an ordinary company in Istanbul or Izmir serves you better costs us nothing to say.
One boundary, stated plainly. We are lawyers, not licensed investment advisers and not customs brokers. We do not tell you whether the business will succeed or forecast the EU accession date. What we protect is the legal position: whether your activity falls within the exempt class, which structure the branch rule requires, what the licence will bind you to, how the VAT and customs flows work in your actual supply chain, and what your staff and premises arrangements need.
Before you apply
Send us a description of what the business will actually do, where its customers are, whether it will manufacture, and whether the group already has a Turkish company. We will tell you whether the zone regime helps you at all, which status and licence to seek, whether to form a zone company or a branch, and what the exemption you would rely on requires year by year. Our company work is described on the company formation page.
What this page does not settle
The detailed conditions of the Free Zones Implementing Regulation, whose current text we could not read from the official database on the date checked, the customs procedures for specific goods, transfer pricing between a zone company and its group, and the specialised zone supports in detail are separate subjects. The Ministry's evaluation criteria and charges change; the figures above are those in the Ministry's own notes on the date checked.
