Türkiye’s indirect tax support for research and development jumped 59.5 percent in 2025 to 169.03 billion Turkish lira, underscoring Ankara’s use of the tax system to pull more corporate capital into software, manufacturing technology and design. For foreign investors, the headline is not just the size of the relief, but its distribution: most beneficiary companies are SMEs, while most of the money is captured by larger firms with the scale, taxable income and compliance systems to qualify.
A Larger R&D Bill, And A More Competitive Incentive Race
The Turkish Statistical Institute, cited by Anadolu Agency and A Haber on September 4, said R&D-related tax incentives rose from 105.98 billion lira in 2024 to 169.03 billion lira in 2025. The number of beneficiary enterprises reached 11,835.
The largest support line was income tax withholding relief for R&D personnel, at 86.11 billion lira. Corporate tax relief followed closely at 81.06 billion lira, with 1.73 billion lira in income tax incentives and 141 million lira in VAT support. According to Anadolu Agency, withholding relief accounted for 50.9 percent of total indirect R&D incentives, while corporate tax, income tax and VAT incentives made up the remaining 49.1 percent.
That composition matters for international investors because Türkiye’s R&D regime is heavily tied to operating substance. Companies do not simply receive a grant for announcing an innovation project. They need payroll, qualified personnel, approved activities, project documentation and, in many cases, a presence in a technology development zone or an approved R&D or design center.
The increase also comes as R&D incentives have become a global competitiveness tool. The OECD reported in April 2025 that close to 55 percent of total government support for business R&D across the OECD area was delivered through tax incentives, rather than direct grants. Türkiye’s latest figures show it is moving in the same direction, with tax relief serving as a core instrument for attracting business R&D.
Software Leads By Count, Manufacturing Leads In Strategic Weight
The sector breakdown shows two different stories. By number of applicants, information and communication dominates. TurkStat data reported by Anadolu Agency showed 6,098 beneficiary enterprises in information and communication, followed by 2,421 in manufacturing and 1,627 in professional, scientific and technical activities.
But by policy relevance, manufacturing remains central. Under Law No. 5746, the R&D and Design Activities Support Law, income and corporate tax R&D incentives reached 39.56 billion lira in 2025. Of that amount, 72.9 percent went to manufacturing companies, according to Anadolu Agency. Under Law No. 4691, the Technology Development Zones Law, income and corporate tax incentives reached 43.23 billion lira, with 71.2 percent going to information and communication companies.
The split is important for foreign investors comparing routes into the market. A software company may find the technopark route more natural, especially if its revenue can be linked to approved software or R&D projects. A foreign industrial group, automotive supplier, machinery producer or life sciences manufacturer may be more likely to evaluate an approved R&D center under Law No. 5746, especially where laboratory work, prototyping, process engineering or design functions sit inside a wider production footprint.
Dünya newspaper reported that 7,087 enterprises received income and corporate tax R&D support in 2025, with 5,321 benefiting under Law No. 4691 and 1,766 under Law No. 5746. That means 75.1 percent of beneficiaries were in the technopark framework, while 24.9 percent used the R&D and design center framework. However, the 5746 system carries outsized relevance for industrial FDI because it is closely tied to manufacturing-led innovation.
SMEs Are Numerous, But Large Firms Capture The Largest Share
The distribution by company size is perhaps the most important signal for corporate decision-makers. TurkStat data cited by Dünya showed that SMEs made up 89.5 percent of the 11,835 enterprises receiving indirect R&D incentives. Yet SMEs captured only 38.2 percent of the total incentive amount. Large companies, representing just 10.5 percent of beneficiaries, received 61.8 percent of the total.
This is not unusual in R&D tax systems. Large firms tend to have bigger payrolls, higher taxable profits, deeper documentation capacity and more established accounting controls. They are also more likely to run continuous R&D programs rather than one-off projects. For foreign investors, this means incentive access is partly a scale question and partly an execution question.
Among SMEs, the 64.60 billion lira in support was also uneven. According to Anadolu Agency, medium-sized firms received 61.1 percent of SME R&D incentives, small firms received 32.1 percent and micro enterprises received 6.8 percent. The practical lesson is clear: early-stage foreign entrants may qualify, but the value of support often rises after the Turkish entity has enough staff, cost base and project continuity.
This is where market entry, incorporation, investment incentives and legal/tax compliance work intersect. A foreign technology or manufacturing investor needs to decide whether to enter through a limited liability company, joint stock company, branch, acquisition or joint venture. That choice affects payroll, IP ownership, eligible expenditure, profit allocation and the ability to document R&D activity under Turkish rules.
The Broader Innovation Base Is Expanding
The R&D incentive increase follows a broader rise in Türkiye’s research spending. TurkStat’s 2024 Research and Development Activities Survey found that gross domestic expenditure on R&D reached 651.82 billion lira in 2024, up by 274.28 billion lira from the previous year. The R&D expenditure ratio rose to 1.46 percent of GDP from 1.39 percent in 2023.
Companies are the main driver. TurkStat said financial and non-financial corporations accounted for 64.8 percent of R&D expenditure in 2024, while higher education accounted for 30.9 percent and the general government sector for 4.3 percent. Businesses also financed 53.8 percent of total R&D spending. Full-time-equivalent R&D personnel reached 310,473, with 67.1 percent employed in companies.
The geography is concentrated. Istanbul accounted for 33.4 percent of R&D expenditure in 2024, Ankara for 27.8 percent, and the Kocaeli, Sakarya, Düzce, Bolu and Yalova region for 9.4 percent. For foreign investors, these numbers point to where talent, universities, suppliers, technoparks and public agencies are most accessible.
The foreign investment context is also improving, although still exposed to macroeconomic risk. The Presidency of Türkiye’s Investment and Finance Office said Türkiye attracted 13.1 billion dollars of FDI in 2025, up 12.2 percent year on year, based on Central Bank balance of payments data. Manufacturing attracted 31 percent of inflows, while information and communication attracted 14 percent.
At the same time, inflation remains a material operating issue. The Central Bank of the Republic of Türkiye’s inflation data showed annual CPI at 31.51 percent in August 2026, after 30.89 percent at the end of 2025. This makes tax relief valuable, but it also complicates salary planning, transfer pricing, working capital, lease negotiations and project budgeting.
Policy Direction: High Technology, Selective Support
Türkiye is pairing broad R&D tax relief with more selective industrial policy. In July 2024, President Recep Tayyip Erdoğan announced the HIT-30 high technology investment program, which the Investment and Finance Office described as a 30 billion dollar incentive package targeting electric vehicles, batteries, semiconductors and energy technology. The same announcement included a 4.5 billion dollar package for battery production and a 5 billion dollar package aimed at expanding electric vehicle capacity.
In May 2025, Türkiye also overhauled its investment incentive system through Presidential Decree No. 9903. Legal analyses of the decree, including Nazalı Gündem’s summary, said the new framework prioritizes product and sector-based incentives, project-based evaluation, digital transformation and green transformation. The decree replaced the previous 2012 incentive system and put greater emphasis on strategic production, technology level and contribution to employment.
For investors, this means the R&D tax regime should not be viewed in isolation. A foreign manufacturer considering Türkiye for an engineering center, battery component plant, defense technology supplier, industrial software unit or medical device operation may need to combine several layers of support. These can include R&D deductions, payroll withholding relief, VAT and customs exemptions, regional investment incentives, project-based incentives, free zone benefits and export-related facilitation.
PwC’s Turkey tax summaries state that Law No. 5746 allows a 100 percent deduction for eligible R&D and design expenditure, income tax exemptions for R&D personnel at rates of 95 percent, 90 percent or 80 percent depending on qualifications, 50 percent social security premium support and VAT exemption for qualifying machinery and equipment. These benefits are powerful, but they are also technical. Misclassifying staff, failing to separate eligible and non-eligible income, or weak project documentation can reduce the expected benefit.
Academic evidence also argues for realism. A 2023 study by Esra Taş on the effectiveness of R&D tax incentives in Turkey found a positive effect on business R&D intensity, but a limited additionality impact, with an incentive multiplier between zero and one. In practical terms, incentives help, but they do not automatically create innovation capacity. Investors still need management depth, engineering talent, local partners, IP controls and a commercial route to market.
What This Means For Foreign Investors
Türkiye’s 169.03 billion lira R&D tax incentive figure confirms that the country is willing to share part of the cost of corporate innovation. The opportunity is strongest where investors combine real technical activity with a clear operating footprint, rather than treating incentives as a postscript to a sales office.
The first advisory step is market entry analysis: whether Türkiye should host software development, applied engineering, manufacturing R&D, regional technical support or a full production platform. The second is incorporation and corporate structuring, because the local entity, IP model, shareholder arrangements and payroll setup shape eligibility. The third is investment incentives mapping, comparing technoparks, R&D centers, design centers, free zones, regional supports and project-based incentives.
Legal/tax compliance is central throughout. Companies need defensible accounting for R&D expenditure, personnel classification, payroll withholding, VAT treatment, transfer pricing and documentation under Laws 4691 and 5746. Government relations and regulatory liaison also matter, since applications and approvals involve technopark administrations, the Ministry of Industry and Technology, tax offices and other public bodies.
For industrial investors, import-export planning can determine whether machinery, prototype components and specialized inputs qualify for customs or VAT advantages. Expo representation can help identify Turkish technology partners, universities, suppliers and public programs before committing capital. Project management then becomes the practical layer that keeps incentives, hiring, site selection, licensing and launch milestones aligned on the ground.
The headline increase in R&D tax relief is therefore less a simple subsidy story than a signal about Türkiye’s investment model. The state is rewarding companies that can document genuine innovation activity, build local capacity and connect Türkiye to higher-value supply chains. Foreign investors that approach the system with careful structuring and disciplined compliance will be better placed to turn the incentive surge into a durable operating advantage.