Foreign investors relocating to Turkey will receive a 20-year tax holiday under a package of incentives unveiled by President Recep Tayyip Erdogan on April 24.

Officials in Turkey are striving to boost the “offer” of the country as they target “golden” investors who might depart the Gulf in the wake of the security shock dealt to the region by the Middle East conflict that erupted at the end of February and could re-erupt if the ceasefire does not hold. However, as IntelliNews reported on April 18 (see, Could it be Goodbye Dubai, Hello Istanbul?) a big difficulty with Turkey is that there is little trust in the rule of law and the courts and, on the macro side, the economy remains something of a basket case.

Speaking at the Dolmabahce Working Office in Istanbul during the "Türkiye Century Strong Center for Investment Program" event, Erdogan pledged to transform Turkey into what he described as a global centre of attraction for international capital, trade and talent.

He announced a broad package of tax incentives that will be put before parliament in the near term.

"Every business and economic circle is trying to find its way and direction through a thick fog," Turkiye Today reported Erdogan as saying. He reportedly referred to how the effects of ongoing conflicts were being felt deeply across energy, production, trade, tourism and transportation.

Erdogan was also reported as arguing that the conventional description of Turkey as a bridge between east and west is no longer adequate as nowadays it does not reflect the country's strategic weight. Turkey, he asserted, is not merely a corridor but "the indispensable base of the energy and trade corridors of the region."

Turkey is now one of the strongest candidates to emerge as a new pole in a multipolar world order, with the government already laying the legal, administrative and institutional groundwork for such a role, Turkiye Today also cited him as saying.

Istanbul Financial Centre (IFC), on the Asian side of Istanbul, was inaugurated in 2023. It hosts the central bank, Borsa Istanbul and various regulatory agencies. Officials want to see it rival Dubai and London and other investment hubs.

Detailing the tax holiday proposal, Erdogan, clearly with an eye on unsettled wealthy individuals and professionals who might consider moving to Turkey, said persons who have not been tax residents of the country for the past three years and who relocated would face no Turkish tax on their foreign-source income and capital gains for 20 years.

Only income earned domestically would be taxed.

Inheritance and gift tax for such individuals, meanwhile, would be set at 1%.

The incentives programme also looks set to permit Turkish citizens and companies to repatriate assets held abroad at a reduced tax rate.

Erdogan’s fiscal package also proposes a sharp reduction in corporate tax for manufacturing exporters, which would take the rate from 25% to 9%.

Other exporting companies would be taxed at 14%.

Currently, exporters only receive a 5-percentage-point rate reduction and manufacturers an additional one-point discount.

On transit trade, Erdogan wants the existing 50% income deduction on profits from transit commerce and cross-border trading intermediation to be hiked to 100%. That would effectively eliminate corporate tax on such earnings for companies operating within the IFC.

For companies outside the IFC, 95% of transit trade profits would be excluded from taxable corporate income.

Turkey, on the doorstep of Europe, lies at one end of the rapidly expanding Middle Corridor transit routes that run to and from China via the South Caucasus and Central Asia. A major investment in hugely raising rail capacity for freight movements across the Bosporus Strait from the Asian and European sides of Istanbul is under way.