What is a Free Zone and What are its Benefits?

Free Zone

Although free zones are located within the political borders of the country in which they are located, they are regions that are considered outside the customs line in terms of foreign trade, taxation, and customs legislation. In these regions, legal and administrative regulations in financial, commercial, and economic fields are not applied or partially applied. Free zones, which are physically separated from other parts of the country they are in, are given wider incentives and exemptions for industrial and commercial activities compared to other regions.

Free zones are generally located close to an international port or airport, but they are processed separately from the customs area. Goods that are not subject to customs procedures at the entrance to the zone can be stored, processed, and used in production in free zones. As long as they do not enter the customs borders, there is no need to pay taxes on these goods.

Free zones generally cover activities such as production, packaging, storage, research and development, banking, insurance, sorting, loading, consultancy, architecture, engineering, leasing, software, maintenance, and repair.

Free zones are generally established for the following purposes:

·       To encourage export-oriented investment and production,

·       To accelerate foreign direct investment and technology entry,

·       Directing businesses to export,

·       To develop international trade.


Free Zone Incentives

Companies located in free zones can obtain various incentives and benefits according to the countries in which they are located. These incentives and advantages, which vary for each country, can be summarized as follows for Turkey:

·       Tax advantages for producers

·       Opportunity to obtain medium and long-term operating license

·       Profit transfer opportunity

·       Facilitation of trade

·       Trade opportunity free from customs duty procedures

·       Possibility of obtaining free movement documents required by EU and Customs Union criteria

·       Interest support on loans

·       Equality principle

·       No time restrictions

·       Access to domestic and foreign markets

·       Reduced bureaucracy

·       Strategic advantages of free zones due to their location

·       Affordable infrastructure opportunities

·       Rental support


Contribution of Free Zones to the Country's Economy

·       Free zones not only increase the foreign exchange inflows of the country in which they are established, but also contribute to the increase in the export revenues of the country and the expansion of the export markets with the exports to be made from the region.

·       Thanks to the raw materials, semi-processed and finished goods exported from the domestic market of the country in order to use in the production activities of the users in the free zones, a contribution is made to the country's production.

·       Free zone users, who have tax advantages, will have the opportunity to produce under the same conditions as their competitors abroad.

·       Thanks to the economic activities in the free zones, the country's employment is contributed.

·       Foreign capital investments in the free zones, where production is made, bring along technological developments, and provide technology transfer to the country.

·       Goods brought to free zones in large quantities can be imported into the country in small batches when necessary, thereby reducing production costs.

·       They act as a steppingstone in facilitating and accelerating the export of export products.

·       The sale of goods coming from abroad can be carried out through cross trade.


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