Free zone or organised industrial zone? Choosing an investment location in Türkiye

The main differences between a free zone and an organised industrial zone (OIZ; Turkish abbreviation: OSB) in Türkiye concern customs treatment, taxation and rights over the premises. Free zones offer a special framework for export-oriented manufacturing and international trade, while OIZs bring industrial facilities together with planned infrastructure and shared services.

For foreign investors, the right choice depends on their target markets, need for imported inputs and the terms on which they can use the premises. A manufacturer focused on exports may have different needs from one supplying customers in Türkiye. This guide compares free zone and OIZ investments in terms of tax benefits, customs procedures, land allocation, operating licences and the acquisition of existing facilities.

Table of contents

• What are the differences between a free zone and an OIZ?
• Can foreign investors invest in free zones and OIZs?
• Which sales qualify for free zone tax benefits?
• What tax benefits and investment incentives are available in OIZs?
• What customs and A.TR rules apply to exports from free zones to the EU?
• How are the operating licence and the period of use of premises in a free zone determined?
• What should investors check when acquiring land or facilities in an OIZ?
• Is admission to a free zone or OIZ enough to start production?
• Which investments may suit a free zone, and which an OIZ?
• What should investors check before choosing a location in Türkiye?
• Legal advice on free zone and OIZ investments

What are the differences between a free zone and an OIZ?

Free zones are located within Türkiye but are treated as being outside the Turkish Customs Territory for certain customs purposes. They offer a special framework for export-oriented manufacturing and international trade. The customs status under which goods enter the zone, and whether they are subsequently sent abroad or to the Turkish domestic market, affect the applicable customs procedures and tax treatment. Operating in a free zone does not mean that all activities and sales are tax-exempt.

OIZs, by contrast, bring industrial facilities together in a planned area. Land allocation, infrastructure, shared services and certain licensing procedures are handled through the zone administration. This allows the location of a manufacturing facility and the services it requires to be planned together. However, each OIZ differs in the activities it accepts, the plots available and its infrastructure capacity.

A facility in an OIZ is subject to the ordinary customs regime; the special customs status of a free zone does not apply. Investors may benefit from investment incentives or other customs arrangements if they meet the relevant conditions. When comparing the two options, they should consider not only their target markets and need for imported inputs, but also the permits and terms of use required to operate the facility.

Can foreign investors invest in free zones and OIZs?

Foreign investors can invest in free zones and OIZs and establish a wholly foreign-owned company in Türkiye. However, incorporating the company, obtaining admission to the zone and starting production are separate stages. The choice of company type and the incorporation process should be considered alongside the investment's financing, management and intended activities. For more information on company types and incorporation steps, see our guide to company formation in Türkiye.

Activities in a free zone are conducted through a company based in the zone or a branch established there, and an operating licence appropriate to the intended activity must be obtained. Manufacturing and trading licences differ in their scope and the benefits they offer. In an OIZ, the investment is assessed against the activities accepted by the zone, its allocation conditions and its infrastructure capacity. Investors should therefore confirm that their planned production can be carried out in the chosen zone before incorporating the company.

The legal structure of the investing company also matters when acquiring real estate. A Turkish company with foreign shareholders and a company incorporated under foreign law are subject to different rules. Turkish companies may be subject to a special real estate acquisition regime depending on foreign ownership and management control, but acquisitions of ownership and limited rights in rem within OIZs and free zones are excluded from that regime. Acquisitions by commercial companies incorporated abroad are assessed within the framework permitted by specific legislation.

This distinction does not remove the OIZ's allocation and transfer conditions or the administrative approvals required in a free zone. Real estate acquisition requirements for foreign investors should be examined in light of the investing company's country of incorporation and ownership structure. For details of the rules applying to different types of investors, see our guide to real estate acquisition by foreigners in Türkiye.

Which sales qualify for free zone tax benefits?

Eligibility for the exemption on manufacturing profits depends on whether the products are manufactured in the free zone and where they are sold. For profits earned from 2026 onwards, manufacturers may, subject to the relevant conditions, benefit from an income tax or corporate income tax exemption on profits from the sale of products they manufacture in the free zone to customers abroad, within the same free zone or in other free zones. Profits from sales to the Turkish domestic market do not fall within this manufacturing exemption.

For example, the same manufacturer selling a product made in the free zone to a customer in Germany and selling it to a customer in Türkiye will face different tax outcomes. Profits from the first sale may qualify for the manufacturing exemption, while profits from the domestic sale do not. When planning the investment's sales mix, investors should therefore also arrange for exempt and non-exempt profits to be tracked separately.

Sales to customers in Türkiye are possible within the scope of the operating licence and any restrictions applicable to the products concerned. However, the entry of the goods into Türkiye must be assessed separately under the release for free circulation procedure and the relevant customs obligations. From 2027 onwards, profits from domestic sales of manufactured products that fall outside the exemption may qualify for the 12.5% corporate income tax rate applicable to manufacturing profits, provided the industrial registry certificate and actual manufacturing requirements are met. An increase in domestic sales may therefore change the investment's original tax and logistics calculations.

Obtaining a trading licence alone does not automatically entitle a new investor to an exemption from tax on profits. The manufacturing exemption and the special rules for certain service activities must be assessed separately. The income tax withholding incentive for employee remuneration is also subject to its own conditions; eligibility for the manufacturing profits exemption does not establish that all conditions for the payroll incentive have been met. The export ratio required of manufacturing businesses must be examined separately.

What tax benefits and investment incentives are available in OIZs?

Being located in an OIZ does not, in itself, give a participating company a general corporate income tax exemption. Exemptions granted to the OIZ legal entity do not apply on the same basis to every company manufacturing within the zone.

The support available to an investor depends on the nature and location of the investment and the scope of its investment incentive certificate. The rules governing investment incentives must be taken into account when calculating that support. For example, the provision applying a lower regional tier to OIZ investments concerns support for the employer's share of social security contributions; investors should not assume that every incentive automatically becomes more favourable. For details of the available incentives and the application process, see our article on the implementation rules for investment incentives.

The tax period in which profits are earned also affects the comparison. A 12.5% corporate income tax rate has been provided for profits derived exclusively from manufacturing activities by entities that hold an industrial registry certificate and actually engage in manufacturing. The provision will apply to the 2027 and subsequent tax periods. For entities with a non-calendar accounting period, it will apply to the accounting period beginning in the 2027 calendar year and subsequent tax periods. The same manufacturing profits benefiting from this rate cannot also receive the additional five-percentage-point export tax reduction.

This rate is not specific to OIZs. An investment comparison covering 2027 and later periods should therefore not rely solely on the rates applicable in 2026. For multinational groups subject to domestic and global minimum top-up corporate tax rules, the effect of the free zone exemption on the group's ultimate tax burden must also be assessed separately.

What customs and A.TR rules apply to exports from free zones to the EU?

The calculation should cover the entire supply chain, from the arrival of raw materials in Türkiye to delivery to the customer. Alongside any advantage gained when imported inputs enter the free zone, the destination of the finished product and the documentation accompanying it are also decisive.

Manufacturing in a free zone does not automatically confer Turkish origin on a product or guarantee duty-free access to the EU in every case. The A.TR movement certificate is not a certificate of origin; it evidences free circulation status. It is used for industrial products and processed agricultural products under the Türkiye–EU Customs Union. Since duties on the agricultural component of processed agricultural products may still apply, an A.TR certificate should not be assumed to eliminate all duties.

For goods from third countries that are not in free circulation, the relevant customs duties and any applicable compensatory tax must be taken into account. In particular, when a product manufactured using third-country inputs is sent to the EU, the customs status of those inputs and the procedure used for manufacturing affect the calculation. These amounts should also be included in costs when setting the EU sales price.

The comparison should also take account of the product's customs classification, origin and delivery terms, together with the customs arrangements and investment incentives available under the OIZ option.

How are the operating licence and the period of use of premises in a free zone determined?

Ownership of the land, rights over the buildings, the lease and the operating licence must be examined together. Manufacturing users that lease premises are generally granted licences for 20 years. For manufacturing users with investor status that construct or acquire premises in accordance with the applicable rules, the general licence term is 45 years. Acquiring an existing facility does not mean that these periods will start afresh in every case.

The first step is to establish who is transferring the rights and which licence will apply. Where a new licence is issued for a transfer between users, the transferor's licence commencement date is used. By contrast, where a building or other structure that has passed to the Treasury is acquired from the Treasury under a new licence, the commencement date is the date of the transfer protocol. Where the acquisition takes place under an existing licence, the provisions governing earlier commencement dates apply. The fact that a facility stands on Treasury-owned land does not, in itself, establish the remaining term of use.

A building or other structure on Treasury-owned land passes to the Treasury when the associated licence expires or is cancelled. Different ownership conditions apply in zones on privately owned land. Privately owned real estate may be sold subject to administrative approval. The commencement date of a new licence is linked to the date of the title deed or, for an instalment sale, the date of the notarised promise-of-sale agreement. Separate rules apply to users continuing under an existing licence. A building or other structure erected on private land leased from the zone's operating company may pass to that company under the terms governing expiry or termination of the lease or contract.

In transfers between users of the right to use buildings or other structures, applications to acquire that right under an operating licence for letting business premises are not accepted. Where such a transfer involves a change from another licence category to a manufacturing licence, a capacity report must demonstrate that manufacturing is ongoing or that the machinery and equipment investment has already been completed and manufacturing is to commence.

The purchase price should be assessed alongside the scope and remaining duration of these rights. Legal due diligence at this stage examines title records, contracts and licences together to establish which rights will be acquired, for how long and which approvals the transfer requires. For more information on the scope of this review and how it is conducted, see our due diligence guide.

What should investors check when acquiring land or facilities in an OIZ?

Investors should first establish whether the transaction involves a land allocation, registered ownership or a lease. A land allocation requires the investment to be completed within a specified timetable. As a general rule, the project plans must be approved by the OIZ and a building permit obtained within one year of allocation; a workplace opening and operating licence must then be obtained within two years of the building permit date. Failure to meet these obligations, taking any granted extensions into account, may lead to cancellation of the allocation.

Where there are reasonable grounds, the OIZ board may extend each of these two periods separately by no more than one year in total. On application, the Ministry may also grant an extension totalling no more than three years to a participant that has obtained a building permit but has not obtained a workplace opening and operating licence. Extensions are not automatic; the relevant decisions and revised deadlines must be incorporated into the investment timetable.

Decisions granting extensions under Provisional Articles 12 and 13 of the Regulation on the Implementation of Organised Industrial Zones may affect the investment timetable for a facility being acquired. An extension granted by the Ministry under Provisional Article 13 ends no later than 31 March 2028. When acquiring a facility, investors should therefore check whether a relevant Ministry decision exists and, if so, its scope and the time remaining.

Transfers and leases are subject to the OIZ's approval and other conditions. Even where the investment is made by acquiring shares in the company operating the facility, allocation conditions must be examined separately during the acquisition process. In particular, certain ownership changes in companies at the pre-allocation or allocation stage require Ministry approval. Title records and annotations, existing permits and previous investment commitments should be checked before the transaction. If you are planning to acquire an existing company, see our guide to the mergers and acquisitions process for the stages involved.

Is admission to a free zone or OIZ enough to start production?

An operating licence or admission to a zone does not replace all the permits required for manufacturing. The OIZ's powers concerning construction and operating permits do not remove the obligations imposed by environmental legislation or other sector-specific permitting requirements.

Technical suitability must also be checked. The presence of electricity, natural gas and wastewater infrastructure does not establish that sufficient capacity is available for the planned production. Where energy demand is high or specialist treatment is required, capacity should be confirmed with the zone administration in advance.

Aligning the licensing and permitting timetable with the lease commencement date and financing obligations helps avoid costs arising for a facility that cannot yet be used.

Which investments may suit a free zone, and which an OIZ?

Manufacturing mainly for EU customers: A free zone may be one of the first options to consider. The manufacturing profits exemption, the flow of imported inputs and port connections should be assessed together. A final decision should not be made before examining the customs conditions applicable on entry into the EU.

Exporting while also supplying manufacturers in Türkiye: A suitable OIZ may offer advantages in proximity to customers and day-to-day operations. This choice should be confirmed against the zone's capacity and the specific incentive conditions.

Acquiring an existing factory: Under either option, the priority is to establish the scope of the rights acquired and the remaining term of use. Existing permits and investment commitments must also be taken into account when assessing the purchase price.

Different options may suit two investors in the same sector; the outcome depends on their sales objectives and facility requirements.

What should investors check before choosing a location in Türkiye?

Before signing a binding agreement for land, premises or a lease, investors should clarify the following:

• Whether the planned activity is accepted in the zone and whether a suitable plot or building and the necessary infrastructure capacity are available.
• The expected distribution of sales between Türkiye, foreign markets and free zones, both at the outset and as the investment grows.
• The total customs, tax and logistic costs, taking account of the origin of inputs and the destination countries.
• The incentives available and the records and commitments required to maintain eligibility.
• The scope and duration of rights over the facility, and the approvals required for expansion, transfer, leasing and exit.
• Whether the licensing and permitting timetable aligns with the lease commencement date and financing obligations.

Neither a free zone nor an OIZ is the better choice for every investor. The decision becomes clearer when sales and supply plans are assessed alongside the legal rights over the premises.

Legal advice on free zone and OIZ investments

The choice of investment location should be assessed in light of the corporate structure, tax and customs regulations, rights over the premises, and licensing procedures. GEMS Schindhelm assists foreign investors with the legal structuring of their investments in Türkiye – from company formation to the acquisition, leasing, and takeover of business premises. For individual legal advice on this matter, please feel free to contact our law firm directly.