The importance of venture capital investments, which play a crucial role in supporting innovation activities, increasing efficiency, creating employment, and reducing the current account deficit in economies, is growing day by day. The Innovative and Advanced Technologies Participation Venture Capital Investment Fund, established in partnership with Vakıf Katılım Bankası Anonim Şirketi, Ziraat Katılım Bankası Anonim Şirketi, and Türkiye Kalkınma ve Yatırım Bankası Anonim Şirketi under the auspices of the Presidency of the Republic of Turkey Presidency of Defense Industries and the leadership of SSTEK Defense Industry Technologies Corporation, aims to support companies working in advanced technologies, primarily in the defense industry sector.
The fund transfer process takes place as follows: The resources provided by qualified investors are transferred to venture companies based on the decisions approved by the investment committee.
Tax Advantages of the Innovative and Advanced Technologies Participation Venture Capital Investment Fund:
- Companies investing in the fund can deduct 10% of their annual taxable income (up to 20% of their own capital amount) as “Venture Capital Fund Investment” from their taxable income.
- Since theoretical deductions are made on the gains of the VC fund within the corporate structure, the dividends distributed to participation shareholders by VC funds are not subject to tax withholding.
- Capital gains arising from the revaluation of participation shares, like securities, are not subject to taxation.
- 75% of the gains from the sale of participation shares are exempt from corporate income tax.
- Entrepreneurial participation shares are not subject to tax withholding when refunded to the fund, and investors are not subject to withholding.
With the Law on Technology Development Zones No. 7263 published in the Official Gazette dated February 3, 2021, and the Law Amending Certain Laws for Technology Development Zones, it is mandatory for companies operating in Technology Development Zones to transfer 2% of their exemption gains to venture capital participation funds. If these amounts are not transferred by the end of the relevant year, 20% of the amount subject to deduction on the annual declaration under this law will be subject to taxation.
In this regard, the Presidency of the Republic of Turkey Presidency of Defense Industries Affiliates and TSKGV Companies have stated that they will evaluate the amount made mandatory for the purchase of venture capital investment fund shares within the framework of the relevant law for the shares of the Innovative and Advanced Technologies Participation Venture Capital Investment Fund.
With this legislative change covering the Innovative and Advanced Technologies Participation Venture Capital Investment Fund, which will open the door to future elements of the defense industry, from unmanned technologies to laser and electromagnetic defense systems, cyber security, and satellite technologies, it is foreseen that the investment obligation introduced will be beneficial for the expansion of our fund.
