Innovation Funding Incentives - Türkiye

Innovation Funding Incentives – Türkiye

Türkiye has strategically positioned itself as a dynamic hub for innovation and entrepreneurship, driven by a comprehensive framework of funding incentives and supportive policies. These initiatives, spanning tax benefits, direct grants, and a growing venture capital landscape, aim to foster technological advancement, diversify the economy beyond traditional sectors, and enhance the country’s global competitiveness. This report will detail the primary innovation funding mechanisms available in Türkiye and their collective impact on the nation’s burgeoning innovation landscape.

Key Funding Incentives

1 | R&D and Design Incentives

Türkiye offers robust tax incentives to encourage significant investment in research, development, and design activities.

R&D Deduction: Companies can deduct 100% of their eligible R&D and design expenditures from their corporate tax base. For R&D centers exceeding 500 full-time equivalent R&D personnel, an additional 50% deduction applies to the increase in R&D expenditure compared to the previous year.

Income Tax Exemption for R&D Personnel: A substantial portion of the salaries of R&D, design, and support personnel (e.g., 95% for PhD holders, 90% for master’s/bachelor’s degrees in supported programs, 80% for others) is exempt from income tax.

Social Security Premium Support: The government covers 50% of the employer’s share of social security contributions for R&D, design, and support personnel.

Other Exemptions: VAT exemption for machinery and equipment used in R&D, and stamp duty exemption for R&D-related documents are also provided.

Impact: These incentives significantly reduce the cost of R&D for businesses, promoting innovation, fostering technological advancements, and encouraging the employment of skilled personnel in R&D roles.

2 | Technology Development Zones (Technoparks)

Technoparks are dedicated zones designed to foster R&D and software development by providing a supportive environment and numerous incentives.

Corporate and Income Tax Exemption: Profits derived from software development and R&D activities conducted within Technoparks are exempt from corporate income tax. Wages of R&D and support personnel working in Technoparks are also exempt from income tax.

VAT and Customs Duty Exemptions: Sales of software and R&D products developed in Technoparks are exempt from VAT. Imported machinery and equipment used in Technoparks are exempt from customs duties.

Impact: Technoparks create concentrated hubs of innovation, facilitating collaboration between academia and industry, and providing a highly attractive tax and regulatory environment for technology-focused companies.

3 | Investment Incentive Program

Türkiye’s Investment Incentive Program encourages both domestic and foreign investments across various sectors and regions.

Certificates: Investors obtain an Investment Incentive Certificate (IIC) from the Ministry of Industry and Technology, which grants access to a range of benefits.

Benefits: These can include VAT exemptions on machinery and equipment, customs duty exemptions on imported equipment, reduced corporate tax rates, social security premium support, interest rate support on loans, and land allocation. Incentives vary based on the region’s development level and the strategic importance of the investment.

Project-Based Incentives: High-value, innovative, and technology-driven projects aligned with national development goals can receive extensive support, including qualified personnel support and capital contribution support.

Impact: This program plays a crucial role in attracting and retaining investment, particularly in manufacturing, energy, and technology sectors, fostering economic diversification and job creation.

4 | Public Funding Agencies (TÜBİTAK and KOSGEB)

Key government agencies provide direct financial support for R&D and innovation projects.

TÜBİTAK (The Scientific and Technological Research Council of Türkiye): TÜBİTAK is the leading agency for managing, funding, and conducting research. It offers a wide variety of grant-based support mechanisms for private and public sector researchers, entrepreneurs, and scholars. Programs include:

- 1501 R&D Projects Support Program: Supports companies undertaking applied R&D to develop new products.

- 1507 SME R&D Support Program: Provides financial support to SMEs for R&D.

- 1512 Technological Entrepreneur Support Program (BiGG): Aims to support entrepreneurs and startups in technology and innovation.

- International R&D Projects (1509 Program): Supports private sector participation in international R&D projects (e.g., EUREKA, Horizon Europe).

KOSGEB (Small and Medium Enterprises Development Organization): KOSGEB provides financial support, loans, and consulting services primarily to SMEs. Its “R&D, Innovation, and Industrial Application Support Program” encourages innovative projects, technology development, prototype production, and commercialisation. KOSGEB also offers entrepreneurship support programs with grants and loans for new businesses.

Impact: These agencies are vital for direct funding of R&D across various stages and sectors, fostering collaboration between academia and industry, and nurturing entrepreneurial activity.

5 | Venture Capital Landscape

Türkiye’s venture capital (VC) landscape is developing, reflecting a growing interest in innovative startups, particularly in technology-driven sectors.

Growth and Focus: The Turkish startup ecosystem has seen substantial growth, with increasing investment in technology, particularly in AI, energy, cleantech, and fintech.

Investment Climate: While capital availability has historically been a challenge compared to more mature ecosystems, there’s a growing emphasis on revenue-driven models for startups. Initiatives like the Türkiye Tech Visa Fund aim to provide dedicated financial support to startups entering the Turkish market.

Impact: A maturing VC landscape, coupled with supportive government policies and the establishment of dedicated funds, is crucial for providing essential growth capital to Turkish startups and scale-ups.

Conclusion

Türkiye’s comprehensive approach to innovation funding is characterised by generous R&D and design tax incentives, the strategic establishment of Technoparks, and a robust Investment Incentive Program. This multi-faceted public support, delivered through agencies like TÜBİTAK and KOSGEB, effectively reduces the financial burden and risk associated with R&D and entrepreneurship. Coupled with a developing venture capital landscape and initiatives to attract international talent, Türkiye is actively fostering a dynamic ecosystem fundamental to its continued technological advancement, economic diversification, and global competitiveness.