Operations In Free Zones example essay topic

TURKISH FREE ZONES Free Zones are defined as special sites within the country but deemed to be outside of the customs border and they are the regions where the valid regulations related to foreign trade and other financial and economic areas are not applicable, are partly applicable or new regulations are tested in. Free Zones are also the regions where more convenient business climate is offered in order to increase trade volume and export for some industrial and commercial activities as compared to the other parts of country. With the objective of increasing export-oriented investment and production in Turkey, accelerating the entry of foreign capital and technology, procuring the inputs of the economy in an economic and orderly fashion and increasing the utilization of external finance and trade possibilities, Free Zones Law numbered 3218 was issued in 1985. Since then, - Mersin (1987) - Antalya (1987) - Aegean (1990) - 'Ystanbul Atat " uk Airport (1990) - Trabzon (1992) - 'Ystanbul-Leather (1995) - Eastern Anatolia (1995) - Martin (1995) - ISE 'Ystanbul International Stock Exchange (1997) - 'Ymir Mene men-Leather (1998) - Rize (1998) - Samsun (1998) - 'Ystanbul Thrace (CATAL CA) (1998) - Kayseri (1998) Free Zones became operational. In general all kind of activities can be performed in Turkish Free Zones such as manufacturing, storing, packing, general trading, banking and insurance.

Investors are free to construct their own premises, while zones have also available office spaces, workshops, or warehouses on rental basis with attractive terms. All field of activities open to Turkish private sector are also open to joint-venture of foreign companies. INCENTIVES OFFERED IN TURKISH FREE ZONES Turkish Free Zones are tax free zones. Income generated through activities in the Zones are exempted from all kinds of taxes including income, corporate and value-added tax. The validity period of an operation licence is maximum 10 years for tenant users, and 20 years for users who wish to make their own offices in the zone; If the operating licence is for production, these terms are 15 and 30 years for tenant users and investors, respectively. The requested operation licence period can be prolonged to 99 years according to the type of investment.

Free Zones earnings and revenues can be transferred to any country, including Turkey, freely without any prior permission and are not subject to any kind of taxes, duties and fees. There is no limitation on the proportion of foreign capital participation in investment within the Free Zones. In contrary to most Free Zones of the world, sales into the domestic market are allowed in Turkish Free Zones. (Sales to the domestic market is subject to a fee of 0.5% of the transaction value.) Currencies used in the zone are convertible foreign currencies accepted by the Central Bank of Turkey. Infrastructure of the Turkish Free Zones is comparable with international standards.

Red tape and bureaucracy have been minimized during application and operation phases by authorizing only one agency in charge of these procedures. The geographical location of Turkey provides significant advantages to the Turkish Free Zones. Turkish Free Zones are adjacent to the major Turkish Ports on the Mediterranean, Aegean and Black Seas. In addition, they were established within easy access from international airports and highways.

There is no procedural restrictions regarding price, standards or quality of goods in the Turkish Free Zones. For a period of 10 years following the commencement of operations in the zones, the strikes and lockouts shall not be applicable. However, any disputes occurring within the context to collective bargaining during the period shall be resolved by the Supreme Arbitration Council. In the Turkish Free Zones, Municipality Law, Passport Law, Foreign Investment Law, Foreign Investment and Encouragement Law, and all other articles of laws contrary to the provisions of the Free Zones Law, shall not be applicable.

HOW TO OPERATE IN FREE ZONES In order to engage in operations in free zones, an Operating Licence have to be obtained from Undersecretariat for Foreign Trade Directorate General of Free Zones. An application form for Operating Licence can be obtained from Directorate General of Free Zones, Zone Directorates or Zone Operator, Founder / Operator Companies and has to be completed and the documents mentioned below have to be attached to the copy of the said form. 1- Descriptive information about the Applicant and its Free Zone operation, 2- Authorization document and specimen signature of the signatory and power of attorney and specimen signature of the representative of the firm (if any), 3- Turkish Trade Registration Gazette that announces the establishment of the Applicant Firm showing its current capital composition (For foreign firms Trade Registration Document ratified by the related Turkish Consulate), 4- Last three years' balance sheets and income statements, 5- The original receipt of application fee deposited to the Central Bank of Turkey, and its copy, 6- Documents related to the foreign currency brought into Turkey in the last three years, (If any), 7- Branch Establishment Permit obtained from General Directorate of Banking and Foreign Exchange for Banks, Off-Shore Banks and Financial Leasing Institutions and from General Directorate of Insurance for Insurance Institutions. The above mentioned documents have to be sent to Undersecretariat for Foreign Trade, Directorate General of Free Zones through Zone Operator or Founder / Operator Firms. Trade Registration: An Explanation: In order to obtain an Operating Licence, Turkish Trade Registration Gazette that announces the establishment of the domestic firm or a certificate indicating the registration of the foreign firm is required in addition to other related documents. This requires a trade registration either in the Chamber of Commerce or / and Industry in order to operate in free zones.

Within this framework; a) Real persons or legal entities residing in Turkey holding a trade registration may engage in free zone activities in their offices they have constructed or rented by obtaining an Operating Licence from Undersecretariat for Foreign Trade Directorate General of Free Zones. b) Turkish residents who intend to establish a firm to operate in a free zone; must apply to the Undersecretariat for Foreign Trade, Directorate General of Free Zones together with the draft of their contract to substitute the document mentioned above in item 3 along with other documents. If their application is approved, they may go along with the procedures to establish their firms. When the firm is established, the application is made by this firm to the Undersecretariat for Foreign Trade General Directorate of Free Zones along with the Trade Registration Gazette advertising the establishment of the firm together with the rental contract to obtain an Operating Licence. c) Real persons or legal entities residing abroad who hold a trade registration in their countries, may also apply directly to the Undersecretariat for Foreign Trade, Directorate General of Free Zones for an Operating Licence without getting any permission from the Undersecretariat for Treasury, Directorate General of Foreign Investment and may operate only in their offices they have rented or constructed in a free zone within the framework of the Operating Licence they are granted. d) If a foreign real person residing abroad does not hold a trade registration in his / her native country intend to operate in a free zone by establishing a company by themselves or with Turkish resident real persons or legal entities, or foreign real persons or legal entities residing abroad who hold a trade registration in their own countries intend to operate in a free zone by establishing a company with Turkish real persons or legal entities residing in Turkey; have to obtain a permission from the Undersecretariat for Treasury, Directorate General of Foreign Investment and apply to the Undersecretariat for Foreign Trade Directorate General of Free Zones to operate in Turkish Free Zones and obtain an Operating Licence. Establishment of Firms in Turkey or Free Zones by Real Persons or Legal Entities Residing Abroad Real persons and legal entities residing abroad, must apply to the Undersecretariat for Treasury, Directorate General of Foreign Investment in order to establish a joint-stock or a limited company, (the companies to be established with the purpose of carrying out Built-Operate-Transfer projects must be in the status of joint-stock companies) in compliance with the Turkish Commercial Code for the purpose of making investments and carrying out commercial activities in Turkey. 1. For legal entities residing abroad; a) Certificate of activity, b) Activity Report for previous year (including balance sheet and field of Activity for the previous year) 2.

For real persons residing abroad; a) A Copy of the passport, b) A detailed commercial and industrial background and the verifying documents. (Certificate of Activity and a copy of passport shall be certified by either the related Turkish Consulate or in accordance with the provisions of Convention Abolishing the Requirement of Legalization for Foreign Public Documents, prepared on the basis of the Hague Conference on International Private Law. If the copy of the passport is certified by a Public Notary in Turkey, no other certification is required.) 3. Letter of Intend by real person or legal entity residing abroad stating that the required capital for the desired field of activity to be realized in Turkey shall be transferred into the country.

4. An application form. 5. A draft contract of the company to be established.

6. Proforma invoices, prospectuses and catalogues of the machinery, equipment and material to be imported together with three copies of global lists in FOB (Currency of the Country of Origin), FOB (US Dollars), CIF (Turkish Liras) values and Customs Duties and Charges ther of. 7. Documents required by the Incentive Legislation if investment is considered to benefit from the incentive measures. 8. Power of attorney given by shareholders to the person who will be the contact person in the course of application procedure (power of attorney should be certified by a public notary or in the manner mentioned above) 9.

Other documents and information considered to be of value. Furthermore, each real person or legal entity residing abroad must transfer at least 50.000 US Dollars to establish corporations and become partners in existing companies or establish branch offices. Evaluation and Granting of Operating Licences by Directorate General: If firms which are found appropriate to get an Operating Licence intend to rent an open area must sign a rental contract with the Zone Operator, Founder / Operator Company. Firms intending to rent a closed area must sign a rental contract with one of the users holding Renting Operating Licence within 30 days of being so notified.

A copy of the rental contract approved by the related Zone Directorate is sent to General Directorate of Free Zones and Operating Licence can be obtained the rafter. Those who are not found eligible for an Operating Licence their application fee shall be repaid. Term of the Operating Licence is 10 years for tenant users who intend to rent a completed office, and 20 years for investor users who intend to build their own offices. However, this term is 15 years for tenant users and 30 years for investor users who are engaged in production activities. If the investor users engaged in production activities intend to operate in other fields of activities, then the term of the Operating Licence is 20 years on the condition that they operate in their same offices. If the investor users holding an Operating Licence on field of activities other than production then the term of the Operating Licence is also 20 years.

If the requested Operation License period is in excess of 20 years the period can be prolonged to 99 years. Furthermore, the requests for Operating Licences for a longer term, if found appropriate and approved on the basis of the project then a fee of 100.000 US Dollars for 49 years and 250.000 US Dollars for 99 years must be deposited. How to Start Operating in a Free Zone: Tenant users may start to operate when they receive their Operating Licences. On the other hand investor users after receiving their Operating Licence must obtain a 'construction licence'; to implement their construction projects. When the construction is completed they must get a permission to settle in before they start to perform their activities. However they may perform their free zone activities by renting a closed area during the construction period.