Turkey’s FDI Law is based on the principle of equal treatment and allows international investors to have the same rights and liabilities as local investors.
The conditions for setting up a business and transfer of shares are the same as those applied to local investors. International investors may establish any form of company set out in the Turkish Commercial Code (TCC), which provides for a corporate governance approach that meets international standards, fosters private equity and public offering activities, creates transparency in managing operations and brings the Turkish business environment in compliance with EU legislation as well as with the EU accession process.
Turkey has initiated 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 Directorates 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 of 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)
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
- General Partnership
- Limited Partnership
- Partnership Limited by Shares
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.
Establishing a Company
In case of establishing of a company in Turkey, related rules and regulations must be followed:
Pursuant to the Trade Registry Regulation, trade registration transactions must be fulfilled through MERSIS (Central Registry Record System).
MERSIS is a central registry system for carrying out commercial registry processes and storing commercial registry data electronically on a regular basis. A unique number is given to legal entities that are actively involved in business. Online establishment of new companies is possible on MERSIS, and already-established companies may operate through the system after the transfer of their records.
The following documents are required for registration application at the relevant Trade Registry Directorate:
- Articles of incorporation signed by all the founders before Trade Registry Directorate authorized personnel or a Notary Public (four copies, one original)
- For each real person shareholder, two copies of their passports (translated notarized copy of passport; if residing in Turkey, notarized residence permit, tax identification number obtained from the tax office.)
- In case the foreign partner is a legal entity, the required documents are:
- The Certificate of Activity of the legal entity designated as the shareholder issued by the relevant authority in the investor’s country. The certificate must bear information regarding the current status and signatories of the company.
- Resolution(s) of the shareholders of the competent corporate organ of legal entity shareholder(s) authorizing the establishment; if there is any specific condition for the prospective company to be incorporated (name of the company, field of activity, etc.) it must be stated in the resolution for the sake of clarity.
- In case a legal entity is going to be appointed as a member of the board of directors of the prospective company to be incorporated, the name of the real person who will act in the name of the legal entity and the legal entity’s board member’s appointment must be stated within the same or with a separate resolution for the sake of clarity.
- Notarized signature declarations (two copies)
- Notarized identity cards of the company managers (one copy)
It should be noted that, except the first item above, all necessary documents that will be issued and executed outside of Turkey must be notarized and apostilled or alternatively ratified by the Turkish Consulate located in the country of transaction. The original executed, notarized, and apostilled documents must be officially translated and notarized by a Turkish notary.
The company must obtain potential tax identity numbers for non-Turkish shareholders, and non-Turkish board members of the company from the relevant tax office. This potential tax identity number is necessary for opening a bank account in order to deposit the capital of the company to be incorporated.
The documents required by the tax office are as follows:
- Petition requesting registration
- Articles of association (one original)
- Copy of the tenancy contract showing the registered address for the company
- If the process is going to be followed by proxy, a power of attorney must be issued specifically showing the authority to act on behalf of the company before the tax authority in order to obtain a tax identity number or potential tax identity number.
0.04 percent of the company’s capital must be paid to the account of the Competition Authority via Trade Registry Directorate pay office.
25 percent of the subscribed share capital must be paid prior to the new company registration. The remaining 75 percent must be paid within two years. Alternatively, the capital may be fully paid prior to registration.
However, the requirement for paying 25 percent of the capital during establishment before the registration of the company is not applicable to limited companies. Subscribed capital for limited companies may be paid within the 24 months following the establishment of the company.
The founders may apply for registration after gathering the following documents:
- Petition requesting registration
- Four copies of the incorporation notification form
- Articles of incorporation signed by all the founders before Trade Registry Directorate’s authorized personnel or a Notary Public (four copies, one original)
- Payment made to the bank account of the Competition Authority (0.04 percent of the company's capital)
- Two copies of the signature declarations for each person authorized to represent the founders of the limited liability company
- Founders' declaration (one original)
- Chamber of Commerce registration form (two different forms for two different shareholder types: real person shareholder or legal entity shareholder)
- The written statement of non-shareholder members of board of directors that states acknowledgement of this duty
- Bank certificate of the paid-in minimum capital deposit (at least 25 percent of subscribed capital). If there will be any capital contribution in kind:
- The expert report regarding the capital in kind
- The statement of the relevant registry office indicating there is no limitation on the capital in kind
- The document indicating the annotations have been done to relevant registries regarding the capital in kind
- The written agreements between founders, other persons, and the founding company regarding the foundation of the company
Following completion of the registration phase before the Trade Registry Directorate, the Trade Registry Directorate notifies the relevant tax office and the Social Security Institution ex-officio regarding the incorporation of the company. The Trade Registry Directorate arranges an announcement in the Commercial Registry Gazette within approximately 10 days after the company registration. A tax registration certificate must be obtained from the local tax office soon after the Trade Registry Directorate notifies the local tax office.
A social security number for the company must be obtained from the relevant Social Security Institution. For the employees, a separate application has to be made following the registration of the company with the Social Security Institution.
The Trade Registry Directorate’s authorized personnel will certify the following books during the establishment process.
- Manager's meeting minutes book
- General assembly meeting minutes book
The Trade Registry Directorate notifies the tax office and the Social Security Institution of the company’s incorporation. A tax officer comes to the company headquarters to prepare a determination report. There must be at least one authorized signature in the determination report. The Trade Registry Directorate sends the company establishment form, which includes the tax number notification, to the tax office.
On the day the company is registered at the Trade Registry Directorate, the signatories of the company shall issue a signature circular before authorized Trade Registry Directorate personnel.
The following documents that were previously submitted in printed form to the General Directorate of Incentive Implementation and Foreign Investment (GDIIFI) by companies and branches established in Turkey by foreign investors may now be received electronically.
- Activity Information Form for FDI
- FDI Share Transfer Data Form
The information in these forms will only be received electronically via a web-based application called E-TUYS that was developed to expand the data system about FDI and help obtain up-to-date information faster, and is managed by the GDIIFI. Therefore, these forms will no longer be received in printed format.
- A joint venture is generally considered an ordinary partnership (Adi Ortaklık), which is not a legal entity under the Turkish law but shareholders usually choose to establish a commercial company.
- The preferred option is joint stock companies due to the ability to establish groups of shares and the limited aspect of shareholder liability in comparison to those of limited liability companies.
- There is no specific legislation governing joint ventures in Turkey which are governed by the laws applicable to the type of company established. It is a common practice to enter into a shareholders’ agreement to govern the relationship between the joint venture parties and the maintenance of the joint venture.
- There are no restrictions on the nationality of shareholders and those holding management rights except for specific sectors such as TV broadcasting, maritime and civil aviation.
- 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.
An application with the following documents must be submitted to the relevant Trade Registry Directorate for the registration of a branch:
- Petition (must be signed either by an authorized signatory under the company seal or by proxy; if signed by the latter, then the original or the notarized copy of the power of attorney must be attached to the petition)
- The resolution of the competent organ of the parent company to open a branch
- A certified original copy of the parent company’s articles of association
- Certificate of Activity of the parent company or any equivalent documentation that sets forth registration and current status of the parent company
- A power of attorney granted by the parent company in favor of its resident representative, assigning full representation and accountability
- Five copies of the Establishment Declaration Form (the related fields must be filled and signed by the authorized person)
- Two copies of the power of attorney stating the representative in Turkey
- If the branch representative is a Turkish national, a notarized copy of his/her ID card. If not, a notarized copy of the authorized representative’s passport translated into Turkish
- Two copies of the signature declarations of the branch representative under the branch title
- A letter of commitment (must be signed by authorized person)
- A Chamber Registry Declaration Form Statement to be obtained from the Trade Registry Directorate (including photographs of the branch representatives)
It should be noted that all the necessary documents that will be issued and executed outside Turkey must be notarized and apostilled or alternatively ratified by the Turkish consulate where they are issued. The original executed, notarized, and apostilled documents must be officially translated and notarized by a Turkish notary.
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
*May be obtained from the Ministry of Industry and Technology
In the event of the original documents are submitted to GDIIFI, copies of these documents shall be approved by GDIIFI. The originals shall be returned to the applicant.
During the initial application for liaison offices, licenses are granted for a maximum of three years within the scope of the declared activities. Liaison offices willing to extend their term of operation shall apply to GDIIFI before the expiration of their terms of operation. GDIIFI may conclude applications for the extension of their tenure based on the nature of activities of the office over the previous year, business plan, the company's future objectives in Turkey, existing and anticipated amount of expenditure and the number of employees. The tenure of operation of offices licensed to conduct market research or promotion of foreign company products or services shall not be extended.
Applications for establishment and tenure extension shall be concluded in fifteen working days from the date of application provided that the requested information/documents is/are complete and accurate.
Applications submitted by foreign companies to set up a liaison office to conduct financial activities subject to special legislation such as money and capital markets or insurance shall be evaluated by competent agencies such as the Capital Markets Board of Turkey and the Banking Regulation and Supervision Agency – both being the duly authorized bodies pursuant to special legislations. The ministry may conclude foreign companies’ applications to set up liaison offices in other industries that require licenses for operations or similar authorizations, if necessary, upon consulting competent bodies that are duly authorized to issue such permits or licenses.
Copies of tax registration and tenancy agreement for the liaison office shall be submitted to GDIIFI within a maximum of one month. Liaison offices shall notify GDIIFI of any changes with regard to the office representative(s) or foreign company title within a maximum of one month following the change. Liaison offices shall produce a new tenancy agreement comprising the new address, the certificate of authorization of the newly appointed representative or the document(s) related with the change of title of the foreign company.
In the event that a liaison office terminates its operations, it shall furnish GDIIFI with a statement of termination obtained from the relevant tax office. Offices may not claim transfers of funds except for balances that remain outstanding upon termination and liquidation thereof.