Turkey, officially the Republic of Turkey, is a country bridging Europe and Asia. It shares borders with Greece and Bulgaria to the northwest; the Black Sea to the north; Georgia to the northeast; Armenia, Azerbaijan, and Iran to the east; Iraq to the southeast; Syria and the Mediterranean Sea to the south; and the Aegean Sea to the west. Turks form the vast majority of the nation's population and Kurds are the largest minority. Turkey's capital is Ankara while its largest city and financial center is Istanbul.
Turkey is a regional power and a newly industrialized country, with a geopolitically strategic location. Its economy, which is classified among the emerging and growth-leading economies, is the twentieth-largest in the world by nominal GDP, and the eleventh-largest by PPP. It is a charter member of the United Nations, an early member of NATO, the IMF, and the World Bank, and a founding member of the OECD, OSCE, BSEC, OIC, and G20. After becoming one of the early members of the Council of Europe in 1950, Turkey became an associate member of the EEC in 1963, joined the EU Customs Union in 1995, and started accession negotiations with the European Union in 2005.
ESTABLISHING A BUSINESS
Turkey’s FDI Law is based on the principle of equal treatment, allowing international investors to have the same rights and liabilities as local investors.
The conditions for setting up a business and share transfer are the same as those applied to local investors. International investors may establish any form of the company set out in the Turkish Commercial Code (TCC), which offers a corporate governance approach that meets international standards, fosters private equity and public offering activities, creates transparency in managing operations, and aligns the Turkish business environment with EU legislation as well as with the EU accession process.
Turkey has introduced reforms with a view to making it easier to do business in order to enhance the investment environment, eliminating red tape in setting up a business, and minimizing costs and procedures. To this end, establishing a company is now only carried out at Trade Registry Offices located in Chambers of Commerce and designed to be a ‘one-stop shop’. The process is completed within the same day.
Company Types under TCC and Alternative Forms
There are corporate and non-corporate forms for companies under the TCC, which states that companies may be established under the following types:
a. Corporate forms
- Joint Stock Company (JSC)
- Limited Liability Company (LLC)
- Cooperative Company
Although some financial thresholds (i.e., minimum capital) and organs differ from each other, the procedures to be followed for establishing a JSC or an LLC are the same.
b. Non-corporate forms
- Collective Company
- Commanded Company
Although companies may be established according to these five different types, JSC and LLC are the most common types chosen both in the global economy and Turkey.
Branch Office
- No shareholder.
- Not an independent legal entity. Its duration is limited to the duration of the parent company.
- No capital requirement, however, it would be wise to allocate a budget for the operations of a branch office.
- A branch office may be incorporated only for the same purposes as those of the parent company.
- Repatriation of branch profit is allowed. The branch profit transferred to the headquarters is subject to dividend withholding tax at a rate of 15 percent, which may be reduced by Double Taxation Prevention Treaties.
Liaison Offices
Any company incorporated under the laws of a foreign country may establish a liaison office (aka representative office) in Turkey upon obtaining a license from the Ministry of Industry and Technology, provided that the company does not engage in any commercial activities in Turkey. To establish a liaison office, the following documents should be submitted to the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Investment (GDIIFI).
Application form*
Statement outlining the works to be conducted by the liaison office, an undertaking that the office shall not engage in any commercial activities*, and proof that the signatory to the statement is fully authorized by the company
A certificate of activity issued by the foreign country and verified by the relevant Turkish Consulate or in accordance with the provisions of the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents (the Apostille Convention)
A certificate of activity issued to foreign companies or balance sheet and income statement
A certificate of authorization issued to the individual(s) appointed to conduct the activities of the liaison office
A power of attorney in the event that the procedures for establishing the liaison office are carried out by another representative
Reasons to Invest in Turkey
Turkey has a dynamic economy that attracts numerous foreign investors. It also has promising economic growth and the country is expected to have one of the fastest-growing economies among the OECD members. Moreover, Turkey encourages foreign direct investments and has a dynamic private sector.
Good infrastructure and a qualified and competitive workforce are two other key reasons why investors look towards Turkey to base their business. The country also has a favorable tax regime and the government offers incentives and tax benefits to those who open companies in certain free zones. Incentives are also applicable to research and development activities, strategic investments, or large-scale investments.
The following types of entities can be created in Turkey, regardless of any minimum share capital requirements:
- the sole proprietorship, which is the simplest business form and, as such, requires no minimum share capital;
- the private limited liability company which is preferred by most foreign investors and requires a minimum share capital of 10,000 Turkish liras (TL);
- the joint-stock company which is usually employed for completing large projects, therefore, will require a higher share capital amounting to 50,000 TL;
- the commanded company which is similar to a partnership in European countries and which requires no minimum amount of money as a share capital;
- the collective company which must be set up by natural persons who are not required to deposit a specific share capital.
Company incorporation steps in Turkey
The following steps need to be completed when registering a company in Turkey:
- selecting a business form which respects the requirements of the Company Law in Turkey - our agents can help;
- reserve a trading name for the company to be incorporated - the name must be unique and can be verified prior to the reservation;
- prepare the documents which need to be filed with the Turkish Trade Register in order to obtain the Certificate of Registration;
- opening the company's bank account in which the share capital will be deposited prior to the registration;
- filing the incorporation documents, obtaining the tax identification number and the VAT number, and registering for employment.
Tax registration for companies in Turkey
As mentioned above, tax registration is one of the company registration steps in Turkey. This step is very important because it will allow the company to account for all its commercial transactions. The following documents are required for tax registration as a company in Turkey:
- The company’s Articles of Association are in the original.
- The request form was issued by the local tax office in Turkey.
- The document indicating the company’s local address.
- A power of attorney, if the process is concluded by a third party, such as our agents.
We can help with the whole company formation procedure in Turkey. This process can include the registration of the company with the Trade Register, the opening of the bank account, and the tax registration procedure.
Applying for business licenses in Turkey
The business licensing phase must be completed if the Turkish company will undertake certain activities. In this case, specific business licenses and permits must be obtained with the authorities representing the industry the company will operate in. Among the industries in which special licenses and permits are necessary are trading, the financial industry, and manufacturing. These are also some of the most developed economic sectors in Turkey. We kindly invite you to get in touch with our company registration consultants in Turkey for personalized advice on how to start a business.
Rules and regulations for companies in Turkey
The Commercial Code introduces provisions regarding good management practices and requirements for an internal and independent audit. A company must base its economic and business activities on transparency, fairness, accountability, and responsibility. The Code contains guidelines regarding:
- the mandatory financial statements a Turkish company must prepare and file with the tax authorities;
- the organizational structure of the company which comprises the shareholders and the company directors and managers;
- the annual audit process – Turkish companies must have their financial accounts audited;
- the company’s shareholders, also known as stockholders, are the owners of the company;
- the structural changes within the company must be reported to the Trade Register in Turkey;
- the division/split-up of a company must also be reported to the Companies Register;
- the Company Law also provides for the liquidation of companies in Turkey.
Company formation in Istanbul
Istanbul is the largest seaport city in Turkey and home to a vast number of foreign companies that enjoy a proper business climate and relaxed company formation requirements. Our company formation agents in Istanbul can help international entrepreneurs start their activities in this city by taking care of all the formalities implicated in business registration. The limited liability company is the most popular business structure available, yet foreigners can decide on joint-stock companies, collective or commandite companies. A sole proprietorship is also a solution for entrepreneurs who want to do business on their own and be liable for losses in the firm. Small and medium entrepreneurs can enjoy the business climate in Istanbul, Turkey, and benefit from fast business incorporation, helped by one of our company formation specialists in Istanbul. If you are ready to start a business in Turkey, feel free to discuss all the aspects with our company formation agents in Istanbul.
Company formation in Izmir
Izmir is another solid and representative business center in Turkey, the third most populous in the country, with more than 3 million citizens. The industry of Izmir is quite representative, and the city hosts a large number of free zones and technological parks. Opening a company in Izmir is a straightforward process that can be entirely supervised by our specialists with experience in this field. Regardless of the selected business type in Turkey, we suggest foreigners get in touch with our team of company formation specialists in Izmir and find out more about the entire incorporation process of a firm. We can provide business advice to foreigners wanting to start a company in Izmir.
Company formation in Ankara
We have a dedicated team of specialists in Ankara, the capital of Turkey, the second-largest city in the country, with a population of more than 3,4 million citizens. Ankara is a representative financial and business center that accommodates a big number of thriving companies established with foreign capital. Having a free-market economy is a great advantage to foreigners wanting to start a limited liability company or any other type of business. We remind you that we have a dedicated team of company formation agents in Ankara who can provide comprehensive assistance to international entrepreneurs who want to start a company in Ankara, the capital of Turkey.
Frequently Asked Questions
1. What are the types of companies that can be incorporated in Turkey?
The joint-stock company, the limited liability company, the collective and commandite companies, the cooperative, or the branch are all options for a legal entity in Turkey.
2. Can a foreigner open a company in Turkey?
Yes. Foreigners have equal rights to open companies, just as nationals. Turkey welcomes foreign investments in various business fields.
3. How fast can you start a new business in Turkey?
A business can be incorporated in one week if all the documents are in order.
4. Does the company need to have an office in Turkey?
Yes. A registered office is necessary for a newly incorporated company in Turkey. This also applies to branches of foreign companies.
5. What are the steps for company incorporation in Turkey?
The business owner must draw up and submit the Articles of Association, notarize the company documents, deposit the minimum share capital and apply for registration at the Trade Registry Office.
6. What is the minimum share capital in Turkey?
The minimum share capital depends on the type of company. This amount is larger for joint-stock companies than for limited liability companies: 50,000 TRY as opposed to 10,000 TRY.
7. What are the requirements for opening a bank account in Turkey?
The bank account is mandatory for the company because the share capital is deposited upon incorporation. Banks will generally request the registration certificate of the company and other documents attesting to the identity of the founding members. Certain fees apply, as per the bank’s policy.
8. Do you need special permits and licenses in Turkey?
Yes. For example, import and export activities are regulated and business owners engaging in this activity based on certain permits obtained before starting the actual trading.
9. What are the taxes for companies in Turkey?
The corporate tax in Turkey is 20% but lower rates can apply. A payroll tax, real property tax, social security tax, and other taxes also apply.
10. What are the reasons to invest in Turkey?
A good location between two important markets, its own large domestic market, good economy, an open investment climate, and good infrastructure are good reasons why investors should choose to open a company in Turkey.