Why do Turks invest in European countries?

Studies by Foreign Economic Relations Board (DEIK) show that Turkish companies are investing mostly in European countries. Africa comes second, attracting half as much as Europe (see table at the end of this column). PwC Turkey Tax & Legal Services head, Zeki Gunduz, discusses the reasons for Turkish companies to invest in European countries in his latest column in daily DUNYA.

“The investment incentive legislation in Turkey is of great importance for investors and urge them to invest by reducing important costs like VAT, customs duties, and the insurance premiums,” Gunduz says.

“There are no incentives provided in cash in the investment incentive legislation other than Project Based Supports, and these incentives are applied under the categories of “exemp- tions” or “discounts”. Thus, cash investors in Turkey can reduce cash outflow by being given “the right not to pay” or a “discount payment.”

Looking at southern and eastern Europe, incentives such as “repayment” or “cash aid” are carried out under the name of financial support in countries like Romania, Bulgaria, Poland, the Czech Republic and Hungary, he notes. These countries also benefit from cash support for European countries known as the EU aid fund which meets certain investment principles.

Overseas ncent ves for profess onals

“Looking at Romania and Bulgaria, there are incentives such as financial support in education, R&D and investment projects, training and salary support for new employment, EU funds, tax returns and country-specific cash support,” Gunduz says.

Turkish companies have started to invest in many countries, taking advantage of the incentives offered by European countries. “In fact, most major companies are recruiting specifically for issues related to overseas incentives.”

According to Gunduz, the main reasons for Turkish companies to invest in Europe in particular are to penetrate the market, gain access to raw materials and intermediate goods, to reduce labor costs, gain access to technology, reduce the tax burden, facilitate customs procedures, reach a stable market provided by the European Union and to reduce transportation costs.

Tax amounts also matter

“The economic situations of countries in southern and eastern Europe also play an important role in attracting investors,” Gunduz says. “Looking at the last three years, GDP growth in these countries is noteworthy, as Eurostat reports. Besides, IMF data shows that inflation rates are lower in most European countries, which creates an attractive environment for foreign investors.”

Finally, he notes lower corporate taxes and VAT, which have great importance for Turkey. The rate of average corporate tax is 13 percent and the average rate of VAT is 20 percent in southern and eastern Europe countries, he notes.