Did you know that in total 357 angel investors have been accredited since 2013 in Turkey? It is a fact that the enterprises at their start up stages encounter difficulties to access the financing they need and this is why they seek contributions of angel investors. A new system called Individual Participation System (IPA) to promote angel investment has been launched by the Undersecreteriat of Treasury in 2013 following enactment of the relevant legislation.
A tax advantage was established with this new system for the accredited angel investors. On the condition to hold the participation shares that they acquired in enterprises at least for two years, accredited angel investors may deduct 75% of the said shares from their annual income tax base. Annual deduction amount shall not exceed TL 1,000,000. This state aid may be benefited from if the angel investor is not the controlling shareholder and is not directly or indirectly, individually or together controlling the company. In addition, angel investors shall not appoint more than half of the members of the board of directors, save for veto rights with respect to material issues regarding the management of the venture company.
Legal entities are not entitled to apply for licences. Only real persons fulfilling the following requirements applicable to (i) high net worth investors or (ii) experienced investors may apply.
(i) High Net Worth Investors:
- Annual gross income above TL 200,000 for the last two years, or
- Total assets value above TL 1,000,000.
(ii) Experienced Investors:
- Minimum two years of experience as a fund or portfolio manager in a bank or financial institution or director in the departments of SMEs financing, project financing or corporate financing of a bank or financial institution or manager in a venture company or
- Minimum two years of experience during the last five years as a deputy director or higher position in a company with minimum TL 25,000,000 annual turnover or
- Minimum one year membership in the local business angel networks and having shares in minimum three SMEs or
- Having investments in at least three technology companies supported by incubation enters or technocenters with minimum TL 20,000 investments for each.
Licences are granted for five years and may be renewed for additional five years.
Venture Companies to Invest in
Not every investment will benefit from the system and the tax advantage. The following criteria must be met by the venture company to invest in:
- Annual net sales above TL 5,000,000 for the last two years,
- No more than 50 employees,
- Not controlled by another company,
- Not an affiliated company,
- Operating in the sectors determined by the Treasury,
- Not a listed company.
According to the IPA Progress Report dated February 2016 of the Undersecreteriat of Treasury:
- 155 licenses were granted in 2013, 120 licences in 2014, 69 licences in 2015 and 13 licences were given in February 2016.
- 84% of the applications came from Marmara Region and 10% came from Central Anatolia.
- First investment over the system was completed in June 2013. Average amount for 10% share participation is TL 210,600.
- Most of the applications sought software application development sector.