Pursuant to the Law No. 4691 on Technology Development Zones (“Technopolis Law“), income and corporate taxpayers operating in technology development zones (“Technopolis“) were exempted from income and corporate tax until 31.12.2028 on their earnings derived exclusively from software, design and R&D activities in Technopolis (“Technopolis Exemption“). In addition, pursuant to the Law No. 5746 on Supporting Research, Development and Design Activities (“R&D and Design Law“), all R&D and innovation expenditures made in R&D and design centers (“R&D and Design Center“) shall be subject to a deduction in the determination of the income subject to income and corporate tax (“R&D Deduction“).

Through the amendments to the Technopolis Law and R&D and Design Law, companies benefiting from the Technopolis Exemption and R&D Deduction shall invest in venture companies. As of 01.01.2022, taxpayers whose exempted profit subject to Technopolis Exemption or deducted expenditures subject to R&D Deduction are TRY 1,000,000 or more shall, with 2% of the amount subject to deduction or exemption, acquire the venture capital investment fund shares that are established to invest in entrepreneurs resident in Turkey, or capitalize in venture capital investment partnerships or entrepreneurs operating in business incubators under the Technopolis Law until the end of the year in which it is transferred to the temporary account (“Investment Obligation”). The Investment Obligation was limited to TRY 20,000,000 on an annual basis.

With the Presidential Decree numbered 7953, published in the Official Gazette dated 16.12.2023 and numbered 32401 (“Decree”), the amount subject to deduction or exemption in order to be subject to the Investment Obligation was increased from TRY 1,000,000 to TRY 2,000,000. In addition, with the Decree, the ratio of the benefited amount to be allocated for investment was increased from 2% to 3%. Finally, the annual upper limit of the Investment Obligation was increased from TRY 20,000,000 to TRY 100,000,000.

As a result of the amendment, if the amount of Technopolis Exemption or R&D Deduction granted to a company operating in a Technopolis or R&D and Design Center is equal or more than TRY 2,000,000, such company shall be obliged to invest 3% of this amount in venture companies, effective from 01.01.2024, when the Decree shall enter into force. This Investment Obligation is limited to TRY 100,000,000 on an annual basis.

In case of non-compliance with this obligation, 20% of the income subject to Technopolis Exemption or 20% of the expenditures subject to R&D Deduction shall be excluded from the scope of income and corporate tax exemption utilized in the relevant year and the tax not collected on time shall be levied without applying tax loss penalty.

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