Setting up a Business in Turkey

By Nese Yahya, Managing Director of Expatia

The Legal Framework

Starting a business in a new country is challenging, as it is everywhere. As a foreigner if you intend to set up a business in Turkey, you first have to look at and get familiarized with the Foreign Direct Investment Law (No: 4875), which was introduced in Turkey in 2003. The most important principles introduced by this law are those of non-discrimination and equal treatment, as they set the legal framework of the liberal investment environment in Turkey.

According to the Foreign Direct Investment Law, the prerequisites and obligations for establishing a company with foreign capital will be equal to those for local companies. Consequently, the various compulsory permits in the past in founding a company with foreign capital are now eliminated. Companies that are founded with foreign capital as considered by the rules of the Turkish Commercial Code are considered Turkish companies. Therefore, all duties and responsibilities are identical despite the nature of the company’s capital creation.

Additionally, within the new FDI law, there are no rules requiring Turkish participation in the capital or management of a company with foreign capital. A company may be established with 100% foreign capital, and almost all sectors are open to foreign capital. The company establishment procedures have also been simplified to a great extent. Now, with the efficient procedures, a company’s registration and establishment of a company in Turkey can be completed in as little as one day. Companies must submit a standard form at one location and will not need to submit applications to many authorities for approvals. Also, the law provides that it is no longer mandatory to establish either a limited liability company or joint stock company. These all are important points to be taken into consideration by foreign investors who plan to do business in Turkey.

In practice

If you are opening a company in Turkey, you basically have a couple of options. For instance you can open a liaison office. To undertake this route however, it is important to keep in mind that there should not be any commercial activities on behalf of this company; basically, it is not possible to issue invoices from a liaison office. Another alternative is to open a branch of a foreign company. To pursue this alternative, you need to get permission form the Ministry of Industry and Trade in Ankara and it is possible to undertake commercial activities. Otherwise, you can set up a limited company or set-up a joint stock company. For the former, you need a minimum capital of 5.000 YTL and minimum two shareholders, all of whom can be foreigners, if necessary. For the latter, a minimum capital of YTL 50.000 is required and the number of founding shareholders should be at least five. For both options, the shareholder liability is limited to the capital paid by each shareholder. It is also feasible to transfer shares from an already established company, and thus become a shareholder.

With regard to the employment of foreign personnel in any entity in Turkey — it is possible to do so. But, foreigners who plan to live and work in Turkey must obtain a work permit from the Ministry of Labour and Social Security and at the same time receive a residence permit from the Ministry of Internal Affairs / Local Police Headquarters. However, the process of obtaining a work permit is quite complicated and difficult to acquire.

Invest in Turkey

“Invest in Turkey”, is a governmental agency, which aims to assist foreign investors in their business ventures in Turkey and provide data and information on the business climate in our country. If you are planning considerable investment in Turkey, it is advised to get in touch with the agency established under the Undersecretariat of Treasury and be active in this environment for several years.

According to the data provided by the agency, around 15.000 companies with foreign capital are in operation in Turkey, as of end of 2006. The majority of them are in wholesale and retail trade, as well as manufacturing. Half of these companies are set up by nationals or entities of the EU Member countries; while Germany, UK and Netherlands are the leading countries in the group of foreign investors.

Below are some useful links worth exploring, if you are really into setting up business in Turkey.

Unions and Organizations

• Foreign Investors’ Association www.yased.org.tr
• Foreign Economic Relations Board www.deik.org.tr
• Turkish Industrialists and Businessmen Association www.tusiad.org

Governmental Bodies

• Invest in Turkey www.investinturkey.gov.tr
• Investor Relations Office www.hazine.gov.tr/iro.htm
• Undersecretariat of the Prime Ministry for Foreign Trade www.dtm.gov.tr
• Republic of Turkey Prime Ministry Undersecretariat of Customs www.gumruk.gov.tr

Contributing Company:
Expatia Consultancy. Istanbul, Turkey. www.expatia.net
Contact: Nese Yahya. [email protected]