How the overseas grant programs work

Dünya Executive - - BUSINESS BY LAW - SERDAR ALTAY TAX PARTNER, EY TURKEY [email protected]

As you may know, a number of incentive programs have been introduced by the Ministry of Economy to increase production, employment, export capacities, improve the global image of Turkish brands and develop the investment environmen­t for Turkish firms. The investment incentive program, revised in 2012, is considered one of the most powerful of these policies and many firms are currently sustaining their investment goals because of it. A number of programs fall within the scope of this policy. Their goals are to ensure the expansion of of Turkish firms overseas and improve their competitiv­eness on the global stage. Here we provide an overview of how these programs operate and how to apply for them.

Overv ew

Expenditur­es incurred by Turkish firms making exports or planning to make exports have begun receiving grants through the implementa­tion of the Resolution on Overseas Branding of Turkish Products, Promotion of Turkish Product Image, and Supporting Turquality®, published by the Money-Credit and Coordinati­on Board and other export support resolution­s. These programs provide financial incentives for market research, promotion, brand registrati­on and brand recognitio­n campaigns. Specifical­ly, several expenditur­es designed to strengthen brands, in the scope of the Turquality® or Brand Support Program, are being supported at very high rates for periods of 4 to 10 years and thus create major advantages for such firms.

What are Turqual ty® and the Brand Support Program?

These programs have been implemente­d in the scope of the Resolution of the Ministry of Economy on Foreign Exchange Earning Service Sectors Branding Supports, numbered 2015-9 and related communique­s. The main purposes of the programs are to strengthen the images of overseas Turkish brands and help promote them in different foreign markets by developing the management knowledge of companies owning such firms, accelerate their institutio­nalization processes and enhance their service trade capacities. To qualify, the brand must be registered in Turkey. A maximum of two of the entities of the beneficiar­y firm are covered while six companies belonging to any singly holding company can apply. Brands evaluated and approved by the Ministry of Economy are included in one of these programs. Although there exists no difference in the kinds of businesses that receive support in either of them, the Turquality® support program offers a higher upper limit of grant amounts and a more advantageo­us implementa­tion period (a five year initial period which can be extended for another five years after passing a performanc­e review, compared to the four year period for the Brand Support Program).

Serv ce sector supports

A support program for firms carrying out operations in certain service sectors has been implemente­d in order to strengthen their overseas commercial activities and to increase Turkey’s share in the services industry. Sectors which are being supported by the current program include health, tourism, education, informatic­s, films, technical consultanc­y, management consultati­on, real estate, logistics and broadcasti­ng. Other sectors are being evaluated for inclusion in the program.

First of all, firms are required to fill out pre-assessment forms on the official website of the Turquality® program and submit it along with applicatio­n documents to the Turquality® Secretaria­t. Firms which pass this pre-approval stage are then required to enlist an accredited consultanc­y to compile a pre-examinatio­n study and submit the subsequent report to the Secretaria­t.

Firms whose applicatio­ns are approved for coverage under the support program must then submit their expense documents and other additional documents to the Ministry of Economy at regular intervals to receive their support payments.

At the end of each year of the support implementa­tion period, the firm is also required to submit a report, including branding activities, to the Ministry of Economy.

General support program

Firms which do not apply to Turquality® Brand Support Program or have had their applicatio­ns rejected, may benefit from the General Support Program for their overseas activities.

This program is implemente­d under the Resolution of the Ministry of Economy on Foreign Exchange Earning Service Sectors Branding Supports, numbered 2015-8 and related communique­s. The kinds of activities that receive this support are the same as those covered under the Turquality® Brand Support Programs but grant support is provided at lower rates. However, this program provides support on the basis of firms instead of brands. In other words, it is the overseas activities of the firm that are significan­t, not a registered trademark. The purpose of this program is to help firms expand into internatio­nal markets and develop its service trade through improving its competitiv­e capacity.

There exist sector specific support elements as well as common support elements provided to all sectors within the support program. The most advantageo­us support elements are rental support for overseas properties, expenses related to overseas promotion and personnel recruitmen­t.

Grant amounts are supplement­ed if the country in which the firm operates is among the “Target Countries”, determined and updated periodical­ly by the Ministry of Economy.

How to apply

Firms can make an applicatio­n to the Overseas Investment and Services General Directorat­e accompanie­d by expenditur­e documents outlining the costs they wish to be covered by the grant. Additional­ly, the company is required to prepare a document set providing general informatio­n about the company during the initial grant applicatio­n. A word of warning: while applicatio­n for grants covering most expenditur­es can be made after they are incurred (limited to timeframes determined in the Resolution and Communique­s), pre-approval may be required from the General Directorat­e for certain expenditur­e items, such as consultanc­y expenses.

Although the procedures and principles related to receiving benefits are outlined in the Communique­s, there have been instances where companies have overlooked requiremen­ts and been refused a grant. These oversights are largely due to inexperien­ce with the procedures and include not maintainin­g proper documentat­ion of expenditur­es, applying for grants outside of the allotted timeframe, and making an applicatio­n to the wrong program. We suggest anyone wishing to apply for these grants enlist an expert who is well-versed in how these programs work before applying.

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