With competition increasing today, companies must invest in innovative, high value-added products, in design and in their brands in order to enter the market, become competitive or sustain their competitiveness. Accordingly, under the legislation on R&D and Technology Development Zones, the state provides many incentives, grants and supports with the aim of increasing our country’s international competitiveness, producing high value-added products and unlocking investment potential. Capital companies whose legal seat or place of business is in Türkiye, including the Turkish workplaces of non-resident corporations, may establish one or more R&D and/or Design Centres and benefit from these incentives.
What Is an R&D Centre?
R&D centres are defined as units established to carry out R&D and innovation projects, or R&D and innovation activities conducted on a contract basis, which are organised as a separate unit within the organisational structure of capital companies whose legal seat or place of business is in Türkiye, including the Turkish workplaces of non-resident corporations; which carry out research and development activities exclusively in Türkiye; which employ at least 15* full-time equivalent R&D personnel; and which have sufficient R&D experience and capability.
In the following sectors, at least 30 full-time equivalent R&D personnel must be employed.
- 29 – Manufacture of motor vehicles, trailers and semi-trailers
- 30.30 – Manufacture of air and spacecraft and related machinery
- 30.40 – Manufacture of military fighting vehicles
- 30.91 – Manufacture of motorcycles
- 30.99 – Manufacture of other transport equipment not elsewhere classified
What Is a Design Centre?
Units established to carry out design projects, or design activities conducted on a contract basis, which are organised as a separate unit within the organisational structure of capital companies whose legal seat or place of business is in Türkiye, including the Turkish workplaces of non-resident corporations; which carry out design activities exclusively in Türkiye; which employ at least 10 full-time equivalent design personnel; and which have sufficient design experience and capability.
Incentives Provided to R&D and Design Centres
✓ Additional R&D and design deduction in determining taxable income: under Law No. 5746 on the Support of Research, Development and Design Activities, all (100%) of the R&D and innovation or design expenditure incurred in R&D/Design Centres may be deducted in determining corporate income until 31/12/2023.
Additional Performance-Based Deduction in Determining Taxable Income
In R&D/Design centres that achieve an increase of at least twenty per cent over the previous year in any one of the indicators below, 50 per cent of the increase in that year’s R&D and innovation or design expenditure over the previous year may be deducted in determining commercial income.
- The share of R&D or design expenditure in total turnover,
- The number of national or international patents registered,
- The number of internationally supported projects,
- The ratio of researchers with postgraduate degrees to total R&D personnel,
- The ratio of total researchers to total R&D personnel,
- The ratio of turnover from new products resulting from R&D to total turnover.
Revaluation of the R&D Deduction Carried Forward
Under Law No. 5746, the amount of the R&D and design deduction that cannot be deducted in the relevant accounting period because income is insufficient is carried forward to subsequent accounting periods. The amounts carried forward are taken into account in the following years, without any time limit, increased by the revaluation rate determined each year under Tax Procedure Law No. 213.
✓ Recognition of contract-based R&D, innovation and design activities as a deduction in determining taxable income
Income Tax Withholding Incentive for Personnel
Under Law No. 5746, with the exception of public personnel, of the income tax calculated on the wages earned by R&D and support personnel working in R&D centres in return for this work:
- 95% for those with a doctorate or at least a master’s degree in one of the basic sciences,
- 90% for those with a master’s degree or a bachelor’s degree in one of the basic sciences,
- 80% for others, is cancelled by being deducted from the tax accrued on the withholding tax return to be filed.
Employer’s Share of Social Security Premium Support
Under Law No. 5746, with the exception of public personnel, half of the employer’s share of the social security premium calculated on the wages earned by R&D and support personnel working in R&D centres in return for their R&D and innovation work is met by the Treasury from an appropriation in the budget of the Ministry of Finance.
Employment Support for Basic Sciences Graduates
For R&D centres employing R&D personnel with at least a bachelor’s degree in the basic sciences (mathematics, physics, chemistry, biology), the portion of the monthly wage paid to each such employee equal to the monthly gross minimum wage applicable for that year will be met for two years from an appropriation in the budget of the Ministry of Science, Industry and Technology.
Stamp Duty Exemption
Documents issued in connection with all R&D and innovation activities under Law No. 5746 are exempt from stamp duty.
Customs Duty Exemption
Goods imported for use in research relating to R&D, innovation and design projects are exempt from customs duty and all funds, and the documents issued and transactions carried out in this context are exempt from stamp duty and fees.
The services we provide at Tenet in R&D advisory are based on the principle of achieving maximum tax savings and minimising risks within the legal framework. In this context we offer a wide range of services from the R&D centre application through to the final stage.
Our services at Tenet during the R&D advisory process
1. Our Services for the Application Process
- Analysis of whether the minimum conditions for establishing an R&D centre can be met,
- Determination of strategies for the R&D centre,
- Analysis of the incentives to which the company would be entitled on obtaining R&D centre status,
- Advice on the R&D centre application process,
- Support with R&D centre application papers and documents,
- The criteria set out in R&D legislation
2. Our Services for the R&D Implementation Period
- Carrying out periodic audits in line with the criteria set out in R&D legislation,
- Auditing the allocation of expenditure and costs relating to R&D centre projects to the relevant project accounts,
- Checking the number of R&D centre personnel in terms of full-time and equivalent headcount,
- Determining the amount of the R&D deduction (for each advance tax period),
- Advising on the application of the income tax withholding and social security premium support,
- Auditing the content of and accounting for R&D expenditure,
- Checking tax returns and declarations relating to R&D deductions and incentives,
- Reporting matters identified in the audits regarding R&D practices and holding meetings where necessary,
- Establishing and checking the accounting and documentation infrastructure that will ensure R&D expenditure is separated from expenditure on other activities and the fiscal incentive amounts are calculated correctly,
- Supporting companies during the audit carried out by the Evaluation and Audit Commission,
- Supporting the preparation of activity reports.