With the aim of increasing the availability of equity financing for MSMEs, Turkey introduced a tax deduction for licensed business investors as part of a wider law regarding the regulation and promotion of business angel investments. It hopes to institutionalize business angel investments and to improve business culture and ethics in the angel investment market. Further, licensing will improve the data collection regarding business angel operations in Turkey.
Licensed business angel investors can deduct 75 per cent of the capital that they invest in innovative and high growth MSMEs from their annual personal income tax base. The annual deduction is capped at TRy 1,000,000. However, licensed business angel investors can co-invest in the venture capital firms. The amount of investment that is eligible for tax support in those co-investments is TRy 2,000,000. In order to be accredited as a business angel by the Treasury, certain qualifications are required, pertaining to the wealth and income of the investor as well as his or her experience as fund manager of a financial institution, manager of a business or member of a business angel network. The 75 per cent deduction rate will be increased to 100 per cent for those investors investing in MSMEs whose projects are supported by Ministry of Science, Industry and Technology, the Scientific and Technological Research Council of Turkey (TÜBİTAK) and Small and Medium Enterprises Development Organization (KOSGEB) in the last five years. The given licenses will be valid for 5 years and the tax deduction will be applied until 2017 with the option to extend it for another five years.
Certain conditions have to apply in order to be eligible for this tax deduction. The MSMEs’ shares that are not traded at stock market must be held by the investors for at least two years. Moreover, it only applies investments in businesses with annual net sales of TRy 5 million or less and 50 employees or fewer. Between 15 February 2013 and 1 July 2015, 313 business angels have been licensed out of 321 applicants. In the same period 6 investments benefitting from the tax incentive have been made for a total amount of TRy 2,650,882.
TBAA Home Page - Business Angels Association of Turkey
