Company Formation and Management: A Guide for Foreign Investors in Turkey

Turkey has become an attractive destination for foreign investors due to its strategic location, growing economy, and favorable business environment. Understanding the legal framework for company formation and management in Turkey is essential for foreign investors who want to establish and run a business efficiently. This guide covers the key steps involved in forming a company in Turkey and the essential management processes required to ensure compliance with local regulations.

Foreign investors in Turkey can choose from several types of legal entities. The most common company structures are:

1. Limited Liability Company (LLC) – “Limited Şirket” (Ltd. Şti.): This is the most popular type of company for foreign investors. It requires a minimum capital of TRY 10,000 and can have between 1 and 50 shareholders. Shareholders are only liable for the company’s debts up to the value of their shareholding.
2. Joint Stock Company (JSC) – “Anonim Şirket” (A.Ş.): This is ideal for larger businesses and companies intending to go public. The minimum capital requirement is TRY 50,000, and there is no limit on the number of shareholders.
3. Branch Office: A branch office allows a foreign company to operate in Turkey without forming a separate legal entity. However, the branch does not have separate legal status from the parent company and is subject to Turkish law.
4. Liaison Office: A liaison office can be established to represent the parent company in Turkey without conducting commercial activities. It’s ideal for market research or promoting the parent company’s products.

1. Prepare and Notarize Articles of Association: The company’s articles of association must be prepared and notarized in Turkish. These documents outline the company’s structure, purpose, and capital.
2. Register with the Trade Registry: The company must be registered with the local Trade Registry Office. This process includes submitting notarized articles of association, proof of payment of the initial capital, and identification documents for shareholders and directors.
3. Obtain a Tax Identification Number: Every company must apply for a tax identification number at the local tax office. This number is required for tax filings and conducting official business in Turkey.
4. Open a Bank Account: Companies must open a local bank account in Turkey, where the initial share capital is deposited.
5. Register for Social Security: Companies employing staff must register with the Social Security Institution (SGK) to comply with labor laws and social security contributions.
6. Notify Relevant Authorities: After registration, the company must notify relevant authorities such as the tax office and the Chamber of Commerce.

Turkey offers several incentives to encourage foreign investment, particularly in certain sectors and regions:

1. Free Zones: Companies operating in Turkey’s free zones are exempt from corporate income tax, VAT, and customs duties. These zones are designed to promote export-oriented investments.
2. R&D Incentives: Businesses engaged in research and development activities benefit from tax deductions on R&D expenditures, with certain conditions allowing up to 100% tax deductions.
3. Investment Incentive Programs: Turkey offers incentive schemes that provide tax exemptions, reduced VAT, and customs duty exemptions for investors in priority sectors such as technology, renewable energy, and manufacturing.
4. Tax Treaties: Turkey has signed numerous double taxation treaties with other countries, reducing or eliminating withholding taxes on dividends, interest, and royalties for foreign investors.

Turkey offers several incentives to foreign investors to encourage business formation, especially in key sectors such as technology, renewable energy, and manufacturing. These include:

1. Investment Incentive Programs: These programs provide tax exemptions, VAT reductions, and customs duty exemptions for qualifying investments.
2. Free Zones: Companies operating in Turkey’s free zones are exempt from corporate taxes and VAT, making these zones attractive for export-oriented businesses.
3. R&D Incentives: Foreign companies engaged in research and development can benefit from tax deductions on R&D expenses and grants from the Turkish government.

Forming and managing a company in Turkey can be a straightforward process if investors understand the local requirements and regulations. With the right legal and accounting support, foreign investors can take advantage of Turkey’s growing economy and favorable business environment. It is crucial to stay compliant with Turkish law to avoid penalties and ensure smooth operations.