Turkey

Key benefits

Turkey is strategically located between Europe, the Middle East and Central Asia and offers significant opportunities for foreign investors.

There are several types of company in Turkey; Joint Stock Companies, Limited Liability Companies, Collective Companies, Partnerships Limited by Shares and Cooperative Associations. The difference between these companies concerns the allocation of liability and the legal form of the entity. The most commonly used company for international business companies is the Limited Liability Company.

Key benefits of Turkey:

  • Turkey is ranked as the 15th most attractive destination for foreign direct investment (FDI) in the world (UNCTAD World Investment Prospects Survey, 2008-2010)
  • Customs union with the EU
  • Large high quality, cost-effective labour force.
  • Flexible exchange rate and liberal import regulations
  • Turkey has a large number of double taxation agreements and tax incentives
  • Turkey has a large consumer base with substantial purchasing power

Establishing a company branch or subsidiary in Turkey

Foreign Companies can open branches in Turkey and the removal of pre-setup approval by the Turkish Authorities has made it easier to open a Turkish Branch of a Foreign Company. The establishment of a branch office in Turkey is subject to the approval from the Ministry of Commerce and Industry.

Legally a branch office is considered the same as a Limited or Joint Stock Company in Turkey. The only difference is that Branch Offices are bound to the mother company and there are more procedures required to establish the branch office.

Tax and accounting regulations

Summary of Requirements for a Limited Liability Company (Ltd Si):

General Information
Type of CompanyLimited Liability Company
Timescale to incorporateApprox. 14 working days
TaxationProgressive Taxation System. Corporate Tax Rates vary between 15% and 35%, the standard rate being 20%.
Double Tax Treaty Access:Yes, over 70 DTT’s in place
Directors
Minimum No. Required1, Foreign Director permitted however it is advisable to have a local director
Local Director RequiredNo, but advisable
Publicly accessible informationYes
Location of MeetingsAnywhere
Shareholders
Minimum No. Required2
Publicly accessible informationYes
Location of MeetingsAnywhere
Company Secretary
RequiredNo
Local Secretary RequiredN/A
Registered Office RequiredYes
Share Capital
Standard CurrencyTL, Turkish Lira (1 TL = €0.45)
Minimum Authorised5,000 TL (approx. €2,260.00 )
Minimum Paid Up Capital25% of Authorised Share Capital must be paid-up within the incorporation period and the balance of the subscribed capital paid within 3 years.
Accounting & Compliance
Requirements to prepare AccountsYes. A foreign owned company is required to appoint a local accountant before the incorporation process is completed.
Requirement for AuditA company can be exempt from audit if it meets the following criteria:

 

  • Annual turnover less than 4,264,000 TL (approx. €2 million )
  • Balance sheet total is less than 8,528,000 TL (approx. €3.8 million )
Local Auditor RequiredYes
Requirement to File AccountsYes
Requirement to file Annual ReturnYes
Additional Information
VATVAT is imposed on goods delivered and services rendered including imported goods and services. General rate of VAT is 18%. Returns are filed monthly.
Bank Account OpeningThe beneficial owner must visit the bank in order to open an account.

Taxation:

Individual Tax Rate:
  • 15% – 35%
Corporate Income Tax Rate:
  • 20%. Companies are required to pay advanced corporation tax based on their quarterly balance sheets and income statements. Advanced corporate tax paid during the year is offset against the corporate tax liability calculated over the annual corporate tax return. The balance of advance tax can be refunded or used to offset against other tax liabilities.
  • Deductions of ‘all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on trade or business’ are allowed
  • Corporate losses may be carried forward for 5 years but not carried back.
Capital Gains Tax Rate:
  • Capital gains are subject to 20% corporation tax.
Withholding Tax:
  • Dividends distributions to individuals and non-resident corporate shareholders are subject to withholding tax at a rate of 15%. Reduction however can be achieved through utilization of a Tax Treaty.
Royalties:
  • 20%
Taxable Income:
  • According to Turkish Tax Legislation, income taxation differs significantly based on where the taxpayer is resident.
  • If both the legal and business headquarters of a company are located outside of Turkey then the company is regarded as a non-resident entity
  • If only one of the headquarters are located within Turkey the company is regarded as a resident entity
  • Resident entities are subject to tax on worldwide income whereas non-resident entities are taxed solely on the income from activities in Turkey.

  

Summary of Turkish Branch Characteristics:

Legal Status:
Governing LawTurkish Commercial Code
Legal StatusForeign Entity
ApprovalMinistry of Industry and Commerce, Turkey
Timescale for Establishment
  • Approximately 15-20 working days.
  • Special permission is required from the Ministry of Commerce and the time taken for this does vary and timescale cannot be guaranteed.
Structure & Management:
Founding ShareholdersNot Permitted
Founders NationalityAny
Capital RequirementsCapital dividends into shares
Branch CapitalNot Required
LiabilityLiability of the Parent Company
Issuing StocksNot Permitted
DividendsPermitted
ManagementAt least 1 Branch Director
GovernanceBranch Directors Power of Attorney
Deposit AccountPermitted
Transfer of SharesPermitted
Foreign CurrencyForeign Currency usage permitted
Taxation:
Taxation LiabilitiesNon-resident status – liability only on Turkish sourced income
Dividend withholding taxApplicable only if profits are transferred to the parent company
Billing
  • In Turkish Lira only to Turkish entities.
  • Indexation of TL amount on the invoice to foreign currency allowed.

 

Procedure of company registration

The procedure to register an Ltd Si company in Turkey is quite straightforward. We require the following in order to proceed:

  • Completed application form
  • A certified copy of the beneficial owner and each director and shareholders passport
  • A utility bill, under 3 months old

Upon receipt of the above the following is completed:

  • Obtain company name approval
  • Once name approval is obtained the share capital is transferred. A Bank Deposit Certificate will then be received.
  • Registration documentation will be submitted to the Trade Registry Office
  • Application submitted to the Ministry of Industry and Trade
  • Registration at the Tax Office. A Tax Identification Certificate will be received.
  • The company is registrated.

The whole process of registration takes approximately 14 working days; Eltoma Corporate Services will ensure that this process is expedited as much as possible.

Opening a Bank Account in Turkey:

It is mandatory to have a bank account in Turkey as it is required to deposit the minimum capital during the registration process. This can be done using a legal representative in order to initially deposit the capital for the incorporation process to be completed. However the Beneficial Owner is required to visit the bank in order to complete the account opening process, this can be done after company formation.

Branch Office Registration Procedures:

Opening a branch office in Turkey is subject to approval from the Ministry of Commerce and Industry. The resolution of the board of directors of the parent company concerning the establishment of a branch office is required to be submitted to the Ministry of Industry and Commerce.

Before opening a branch in Turkey, a foreign company has to assign a fully authorized company representative who is a resident in Turkey.

1. Registration to the Trade Registry:

The following documents are required to be submitted to the Trade Registry Office:

  • Director’s resolution concerning the establishment of a branch office in Turkey
  • Passport copy of the person authorized to represent and bind the branch (copy of the identity and residence certificate for Turkish citizens)
  • A notary certified signature of the persons authorized to represent the branch
  • Proxy that will function as a signature circular granted to the authorized representative in Turkey.
  • Document from the Chamber of Commerce of the Parent Company

2. Tax Office – Registration

  • Registration procedure for a branch is the same as for companies.
  • Branch offices are not considered as separate legal entities and are closely associated with their parent companies in respect of internal management.

3. Branch Opening Procedure:

The Ministry of Industry and Trade is the permit issuing authority for opening a branch. An application to open a branch must be submitted to the Ministry signed by the director of the Company.

The application to the Ministry Directorate must include:

  • Company’s title, nationality, date of establishment, address and capital
  • Name, nationality and address of the authorized representative residing in Turkey
  • Business activities of the branch
  • Letter of Commitment in accordance with Article 29 of the Trade Registry Regulation
  • All the documents listed in the section below Turkish translations of documents prepared in a foreign language

4. Trade Registry Office Procedure

Certain documents, including the branch opening permit from the Ministry of Industry and Trade must be submitted to the Trade Registry Office.

Documents required for Ministry of Industry and Trade permit:

  • Company’s written confirmation of the decision to open a Branch
  • An original copy of the company’s Articles of Association
  • Establishment and Current Status Documents showing the registration and current legal status of the Company
  • A Power of Attorney drawn by the Company in favour of its resident representative, assigning full representation and accountability. These documents must be apostilled.

Documents required by the Trade Registry Office:

  • An application in the Turkish language signed by an authorized person
  • Branch opening permit obtained from the Ministry of Industry and Trade
  • Two notarized and legalized copies of the Power of Attorney
  • Turkish document ‘Müzeyyel Beyanname ve ilani’
  • If the branch representative is a Turkish national, a notarized copy of his ID card, if not, a notarized copy of the passport of the foreign authorized representative.
  • Company signature authority showing the representative’s signature specimen and title.
  • Letter of Commitment in accordance with Article 29 of the Trade Registry Regulation.
  • A Chamber Registry Declaration Form, obtained from Trade Registry Office.

Document and forms required by the Trade Registry Office should be submitted to the Trade Registry Office for the place of the Branch.

Foreign companies whose capital is divided into shares and which are based abroad can open a branch (or branches) in Turkey provided that they get permission from the Ministry of Commerce and Industry.

The following transactions are subject to the approval of the Ministry of Commerce and Industry:

  • Opening a branch
  • Opening secondary branches linked to the main branch
  • Substitution of the company representative based in Turkey
  • Changing title, business type, or address of the main branch
  • Increasing the branch’ s capital

Before starting all transactions a foreign company has to assign a fully authorized company representative who is a resident in Turkey.

The following documents are to be submitted to the Directorate General of Domestic Trade of the MoCI:

The petition has to be stamped by the company or signed by the authorized representative and is to include the following information:

  • Title of the company
  • Date of establishment of the company
  • Nationality of the company
  • Amount of Capital of the company
  • Name, nationality and address of the authorized representative residing in Turkey
  • A letter of commitment which pledges that the authorized representative shall obey all relevant regulations and laws for activities in Turkey
  • Address of the branch
  • Field(s) of activity of the branch

This document is to prove that the decision with regard to the opening of a branch in Turkey has been made by the authorized organ(s) of the company. Both an original copy of the document and its Turkish translation are attached to the petition.

An original copy of the company’s Articles of Association and its Turkish translation are to be attached to the petition.

An Establishment Document which shows where the company was established, when it was established and on which country’s law system it was based, and a Current Status Document showing that the company is still active are to be prepared. One original copy and a Turkish translation of each document have to be attached to the petition.

A Power of Attorney assigning the company’s fully authorized representative who resides in Turkey has to be prepared and should show that:

  • The representative shall carry out the activities defined in the company’s Articles of Association.
  • The representative shall represent the company.
  • The representative shall represent the company in all possible cases which may stem from the Branch’s future activities to take place in Turkey’s courts as a defendant, claimant or third party.
  • The representative shall assign someone else to his/her post equipped with the same power he/she had before in case he/she is to temporarily stay abroad.
  • The representative shall be authorized to assign new representatives in case any subordinates are opened in the future.

An original copy and a translated version of the Power of Attorney are to be attached to the petition. The documents are to be

  • Ratified by a Notary Public and then to be legalized by the Turkish Consulate General in the country where the company is based or
  • The petition in Turkish language has to be prepared and signed by an authorized person.

In case a representative is used, the original copy of the power of attorney in Turkish language (or a legalized copy of the Power of Attorney) is also to be attached.

Five copies of the Establishment Petition and Notice Form (‘Kurulus Dilekçesi ve Bildirim Formu’ in Turkish) are prepared and signed by the authorized person.

Two legalized/notarized copies of the Power of Attorney which assigns the company representative based in Turkey are to be submitted.

The MoCI’s letter that approves the opening of the branch is also to be attached to the Petition.

The MoCI is supposed to hand over special documents called ‘Müzeyyel Beyanname veilani’ to the company. These documents are also to be attached to the petition.

If the authorized person in charge of the branch is a Turkish national, a notarized copy of his ID card is to be attached to the petition. Otherwise, a notarized copy of the passport of the authorized person is needed.

The authorized person’s notarized signature circulars which also show the title of the person at the branch has to be attached to the petition.

A letter of commitment which emphasised that all the information conveyed is true is prepared and signed by the authorised persons.

A Chamber Registry Declaration Form (Oda Kayit Beyannamesi) can be obtained from the relevant Trade Registry Office. The form has to be completed and the passport photos of the person(s) in charge of the branch should be affixed to that form.

5. Branch Office

A branch’s obligations are not limited to the branch’s capital, but it is limited to its parent company’s assets. Branch offices are managed by a fully authorized commercial representative residing in Turkey.