Turkey: Investing To Turkey

Last Updated: 16 May 2017
Article by Ziya Ugur and Ebru Ceyhan

Turkey as a developing country has shown remarkable performance with its steady growth over the last years. Although the economic and social crisis, Turkey keeps to be attractive for foreign and domestic investors for some strong reasons such as government promotions, qualified workforce and transportation network.

For the make business in Turkey with legal entity, the companies could be listed as:

  • Joint stock company
  • Limited liability company
  • Cooperative company
  • Collective company
  • Commandite company

1- Establishment of a Joint Stock Company and Limited Liability Company

The limited liability company and joint stock company is the most popular company types in Turkey.

Requirements for establishing limited liability company are,

  • At least one shareholder to form this type of company
  • A minimum share capital in amount of TRY 10.000

The liability of shareholders is limited to the amount of share capital invested in the company.

Requirements for establishing joint stock company are;

  • A minimum share capital in amount of TRY 50.000.
  • This type of company has different rules regarding the company management process: it must have at least one shareholder and a mandatory board of directors.

The liability of the members is limited to the amount of invested capital. The capital is divided into stocks which can be made public when the company is listed on the Stock Market. Joint stock company would be better choice to make and organize large size business.

Joint Stock Company and Limited Liability Company share the same formal requirements for establishment. Although the LLC and JSC have differences on the amount of founding capital, organization of administrative etc. their differences are not too much.

In Turkey, Establishment of a joint stock company does not required many formal steps. The Joint Stock Company and Limited Liability Company may established in 2 or 3 days if the documents listed below has been prepared already. Mainly the steps mentioned below shall be followed to establish the company in Turkey.

  1. A petition signed by authority of the Company shall be submitted.
  2. Organization information form shall be filled (3 copies for non foreign establishments, in case of foreign establishment 4 copies must be filled)
  3. Notarized passport translation copies of foreign real person, tax number or residence permit.
  4. Articles of association and memorandum are submitted online at MERSİS which is a central information system for carrying out commercial registry processes and storing commercial registry data electronically on a regular basis.
  5. Signature Statement of company's authorized person under the company name.
  6. Bank receipt for competition authority fee.
  7. Bank letter shown that the share price had been paid by the shareholders at least the minimum amount indicated by articles of association or articles of law. (It is generally one in four)
  8. Chamber registration declaration.
  9. The declaration that accepts the duty of being a member of the board of directors for someone who is not a shareholder. For foreign, tax number or ID number for foreign, notarized passport translation and notarized permit of residence if there is.
  10. If legal entity is chosen to be a member of board of direction, a notarized decision of the legal entity with name-surname of the person who act with and on behalf of legal entity, ID number (If the person is foreign, the tax number is required)

Above mentioned documents shall be given to İstanbul Chamber of Commerce for registration and announcement. Most probably, documents shall be registered after they are delivered to İstanbul Chamber of Commerce.

2- The Stimulus Means For Foreign Investors

Turkey being a developing country is open market to investors for many sectors. Investors prefer Turkey to invest for some reasons such as;

  1. Qualified and competitive labor force,
  2. Liberal and reformist investment environment,
  3. Infrastructure,
  4. Centrally located,
  5. Energy corridor and terminal of Europe,
  6. Low taxes and incentives,
  7. Customs union with the EU since 1996,
  8. Large domestic market
  9. Successful economy

According to data of Turkish Statistical Institute (TSI) Gross Domestic Product (GDP) has increased from USD 213,000,000,000 up to USD 800,000,000,000 within the last 12 years. In still the same period, annual average of GDP has risen %4,7.

In consequence of the crises, government give rights and exemptions to domestic and foreign investors by means of stimulus in order to encourage them. The foremost and striking means of stimulus accorded by the government are indicated below:

a- Turkish citizenship

Republic of Turkey provides Turkish citizenship for foreign investors meet at least one of the requirement mentioned below.

  • Made a min. fixed capital investment of USD 2,000,000
  • Acquired real estate worth a minimum of USD 1,000,000 with a title deed restriction on its resale for at least three years,
  • Employed at least 100 people,
  • Deposited at least USD 3,000,000 in banks operating in Turkey with the condition of not to withdraw for at least three years,
  • Bought at least USD 3,000,000 worth of government bonds with the condition that they cannot be sold for at least 3 years

b- Tax Immunity

Having made an investment of 1,000,000 -TL in capital provinces and of 500,000 - TL in other provinces of Turkey, domestic and foreign investors shall be granted exemption from tax tariff and VAT. Tax tariff include importation of machine and equipment. However, we would like to remind that some type of investments cannot take benefit from this investment promotion.

Investors are also provided with;

  • Corporate tax cut,
  • Income tax reduction,
  • Counselor support,
  • Turnkey operation,
  • Investment area allowance,
  • Investment credit,
  • Working capital loan,
  • Assurance of credit guarantee fund

Within the context of investment incentive certificate, payment of VAT for domestic or imported machine and equipment shall not be required.

Income and corporate tax is calculated over discount rates until the rate of total tax abatement reaches up to the rate of contribution to investment. The rate of contribution to investment would predicate the rate of total fixed investment amount which subjects to tax reduction.

From current news, the most striking investments are from a German company and from Abu Dabi Investment Group that are to invest EUR 100,000,000 and USD 100,000,000,000 respectively in Turkey.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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