Turkey’s ruling Justice and Development Party (AKP) has submitted a bill to parliament offering tax incentives to exporters, foreign investors and companies operating in the İstanbul Financial Center, while reviving a controversial asset repatriation scheme criticized for rewarding undeclared wealth.
The 15-article bill, submitted to the Turkish Parliament on Tuesday, aims to attract foreign capital, bring assets held abroad back into the country and make Turkey a regional hub for international companies.
AKP parliamentary group chairman Abdullah Güler announced the proposal, which was drafted following work by Finance Minister Mehmet Şimşek and the government’s economic team.
Under the bill, the corporate tax rate for manufacturing companies that directly export their products would be reduced to 9 percent, while the rate for other exporters would be lowered to 14 percent.
According to an impact analysis cited by the Anka news agency, the tax cut for exporting manufacturers is expected to cost the public budget around 34 billion lira ($752 million).
The proposal also includes a 20-year exemption from Turkish income tax on foreign-sourced income and gains for people who have lived abroad and have not been tax residents in Turkey for the past three years.
The package was first announced by President Recep Tayyip Erdoğan at an investment event in İstanbul in late April.
“We will tax only their income inside the country, if any,” Erdoğan said at the time, according to a transcript published by the AKP.
The bill expands incentives for the İstanbul Financial Center, a government-backed business district opened in 2023 as part of Erdoğan’s effort to turn Turkey’s largest city into a finance hub.
The corporate tax deduction for earnings from financial service exports by companies operating there would be extended until 2047, while the exemption period for financial activity fees would rise from five years to 20 years.
Controversial asset repatriation scheme returns
One of the most contentious parts of the proposal is the reintroduction of an asset repatriation scheme, known in Turkey as “asset peace,” which would allow money, gold, foreign currency and securities held abroad to be brought into Turkey until July 31, 2027.
The arrangement will also cover unregistered assets held in Turkey if they are declared to banks or intermediary institutions. A 5 percent tax would normally be applied to declared assets, but the rate could fall to zero depending on whether the assets are kept in domestic government debt securities or lease certificates.
The bill will also provide legal assurance that declared assets would not be subject to tax inspections.
The proposal resembles previous asset repatriation programs used by Turkey. Critics say such programs risk rewarding undeclared wealth while placing a heavier burden on ordinary taxpayers.
Opposition parties have also questioned the origins of the assets to be brought into the country and warned that Turkey could again face scrutiny from the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog.
Turkey was added to the FATF grey list in October 2021 over weaknesses in its system for combating money laundering and terrorist financing and was removed in June 2024 after the watchdog said Ankara had completed its action plan.
Şimşek said in March that Turkey faced no risk of being put back on the grey list, saying the country’s compliance with global standards left “no reason” for renewed listing.
He has defended the new asset repatriation proposal, saying the government is trying to bring Turkish capital held abroad back into the country to deepen financial markets.
Güler said no impact analysis had been conducted on how much money the scheme could bring into the economy but added that the government expected a higher amount than in previous schemes.
The bill also extends the maximum installment period for public debts from 36 months to 72 months and increases the amount of debt that can be deferred without collateral from 50,000 lira ($1,105) to 1 million lira ($22,109).
The bill is expected to be discussed by parliament’s Planning and Budget Committee on Wednesday, with debate in the General Assembly expected next week.
The main opposition Republican People’s Party (CHP) has objected to the proposal, arguing that Turkey needs the rule of law and legal security to attract foreign investment.
The party also questioned the focus on İstanbul as a finance center due to earthquake risks and warned that asset repatriation and tax amnesty-style arrangements may encourage taxpayers to avoid paying taxes in the long term.
The measures come as Turkey is seeking foreign currency inflows after years of high inflation, pressure on the lira and investor concern over economic policy and the rule of law. Official annual inflation reached 85 percent in October 2022. Data released by the Turkish Statistical Institute (TurkStat) earlier this week showed annual inflation rose to 32.37 percent in April, up from 30.9 percent in March.
The lira has depreciated sharply since mid-2022, rising from around 17.5 lira to the dollar to more than 40 lira.
Erdoğan said the measures were meant to strengthen Turkey’s investment environment at a time when regional conflict has increased risks for energy, trade, tourism and transportation.
Turkey, which imports most of its energy, has faced added pressure from the Iran conflict because higher oil and gas prices can increase the current account deficit and feed inflation.
The government has promoted Turkey as a supply, logistics and manufacturing hub between Europe, the Middle East and Central Asia, but investors have also raised concerns over inflation, currency volatility and political pressure on courts, media, the opposition and civil society.