Foreign Capital & Investment in Turkey

Foreign Investor, who makes foreign investment in Turkey , is defined as real persons, who possess foreign nationality and Turkish nationals resident abroad, and foreign legal entities established under the laws of foreign countries and international institutions

Within this scope, these people and institutions defined as foreign investor according to the Foreign Direct Investment Law (FDI), can invest in Turkey by establishing a new company or branch of a foreign company with cash or non-cash or share acquisitions not by means of capital markets or share acquisitions through capital markets where the foreign investor owns 10 percent or more of the shares or voting power.

Foreign Capital

  • Any imported;
    • Cash capital which is purchased and sold by Central Bank Of The Republic
    • Marketable securities (except public bond)
    • Machinery and equipments
    • Industrial and mental ownership rights
  • Any obtained in Turkey ;
    • Profit, revenue, receivables which is used in investment
    • Rights about to look for and to get national origins

Principle of foreign investor

  • Foreign investor can establish or participate to a new company which is in Turkish Trade Law.
  • Establishment of the companies and branches do not depend on any permission. Nevertheless, the information concerning capital and activities must be declared annually until the end of May and the information concerning the capital payments and share transfer in one month to Turkish Treasury Foreign Investment Head Office.
  • Companies may freely acquire real estate or limited rights through a legal entity in Turkey established or with participation by foreign investors, provided such acquisitions are permitted for Turkish citizens.
  • Foreign direct investments shall not be expropriated or nationalized, except for a public purpose and upon compensation in accordance with due process of law.
  • Foreign investors can freely transfer the amounts payable to abroad banks or private financial institutions regarding to their net profit, dividends, sale income, purification, compensation, license, installment, interest and other agreements revenues regarding to their operations in Turkey.

Establishing a company

  • For a public stock company, at least five founding members are necessary. The overall share capital must be the foreign exchange equivalent of a minimum of 50 billion TRL.
  • A private limited company requires at least two partners. The overall share capital must be the foreign exchange equivalent of a minimum of 5 billion TRL.
  • The branches of foreign corporations, based abroad, can only be registrated like the local companies when the branch uses the same corporate identity and can be considered as a branch of the foreign corporation by the Turkish authorities.
  • There is no need for a permission to establish a company except special circumstances, and is to be registrated in 15 days after the draft Articles of association of the company is certified by a Notary Public.
  • The branches of foreign corporations, based abroad, can only be registrated like the local companies when the branch uses the same corporate identity and can be considered as a branch of the foreign corporation by the Turkish authorities.
  • Additional documents are required for the foreign partner during the incorporation process of a new company or branch;
    • For real persons residing abroad; Passport or copy of passport which is certified by Notary Public.
    • For legal entities residing abroad; Certificate of activity, Activity Report for previous year (including balance sheet and field of activity for the previous year. Certificate of Activity shall be certified by either the related Turkish Consulate or in accordance with the provisions of the Convention on the Abolishing the Requirement of legalisation for Foreign Official Documents Approval Obligation, prepared on the basis of the Hague Conference on International Private Law.

Corporate Income Tax

The mainstream corporate income tax rate is 20%.The income obtained during a financial year which is declared quarterly is subject to 20% corporation tax is netted off at the end of the year with the calculated corporation tax. Furthermore, dividend withholding tax at the rate of 15% is applicable to dividends distributed to individual and foreign corporate shareholders (dividend distributions to the resident entities and branches of non-resident entities are not subject to withholding tax.)
For non-resident entities operating in Turkey (i.e. branches, permanent establishments) withholding tax will only be applicable on the portion of the branch profit that is transferred to the headquarter.

Branches and Liaison Offices

Foreign companies may also operate through liaison offices or branches providing they are established in accordance with the relevant legislation. The permissions supplied to Liaison offices could be extended three more years in each applications considering the past and future plans.
In Liaison Offices employees’ wages has to be subject for income tax unless it has been transferred from abroad in foreign currency.

Foreign Personnel Employed

Work permit shall be issued for foreign nationals to be employed in Turkey, and for the foreign representatives of branch offices which are being established in Turkey. Work permits are issued for a specific fixed-term and can be extended accordingly.

If a foreign national resided at least 8 years legally and uninterruptedly in Turkey or worked legally at least 6 years in Turkey, a permanent work permission can be obtained.

Assessment for foreign nationals is the same as the assessment for Turkish employees. Employers, while paying the earnings and benefits in cash or through the banks, have to pay 15 percent to 35 percent income tax to Turkish Tax Office.

Except the foreign nationals sent by the establishments in foreign countries for business and the ones who declare their social security relations, the foreign nationals who work for an establishment in Turkey are covered by all branches of the social security system (Including industrial accident and illness, illness, maternity, disability, senility and death insurance).

Within this scope, LEGAL provides the below mentioned services for foreign investors;

  • Feasibility work of the planned investment
  • Consultancy about the legal eligibility and incorporation of the new company to be established in Turkey
  • Analyses and consultancy on the risk and return balance of the investments
  • Incorporation process of a new company or a branch in Turkey
  • Independent audit of the potential partners in Turkey according to the IAS
  • Legal process (permission) to open liaison office
  • Consultancy on the working permits of the personnel to be employed in the companies, branches and entities established
  • Consultancy on the taxation issues of these companies according to the Turkish Legislation