What is a Free Zone and What are its Benefits?

A free zone meaning refers to a designated area that offers unique incentives for businesses. The benefits of free zone include tax exemptions, full foreign ownership, and simplified processes, making them attractive for investors. Free Zones are special sites within a country that are deemed to be outside of the customs territory, offering businesses tax exemptions, full foreign ownership, simplified setup processes, profit repatriation, and state-of-the-art infrastructure. These fenced-in areas provide special regulatory treatment to promote free zone trade of goods free zone and services, creating a more convenient and flexible business climate compared to other parts of the country.

 


What is 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. A commercial free zone, which is 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 zone area 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 zone company 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.

 

What are 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 Turkiye:

·       Tax advantages for producers

·       Opportunity to obtain medium and long-term operating license

·       Profit transfer opportunity

·       Facilitation of trade free zone

·       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

 

What are Advantages of Free Zone?

Free zone advantages offer numerous benefits for businesses, including 100% foreign ownership, allowing business owners to retain full control without local partnerships. Tax incentives such as exemptions on corporate income, import/export duties, and VAT provide significant financial relief. Companies benefit from streamlined business setup processes, unrestricted profit repatriation, and access to global markets with no trade barriers, attracting foreign businesses through proximity to ports and airports. Combined with flexible regulatory environments, skilled labor, and strong legal protection, Free Zones present an ideal environment for businesses to grow, innovate, and expand globally while enjoying operational and financial benefits.

 

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.

 

How TradeAtlas Supports Free Zone Trade

TradeAtlas plays a crucial role in enhancing trade activities in free zones by providing comprehensive trade data and market intelligence. With TradeAtlas, businesses in free zones can easily identify potential markets, track competitor activities, and find reliable suppliers or buyers globally. TradeAtlas serves as a bridge between free zone businesses and international trade opportunities, driving growth and competitiveness in the global market.

For detailed information on the subject of export import ratio, you can review the content “The Ratio of Exports to Imports”.