Capital Investment In Turkey – Corporate and Company Law – Turkey

1. OVERVIEW

Over the past few years, several different developments, both
transnational and domestic, have had effect of making capital
investment in Turkey a more desirable and approachable prospect for
foreign investors. These developments range from global
socio-political changes to internal economical issues Turkey has
been experiencing these past several years, making it an affordable
and attractive place for foreign investors to make capital
investments, mainly due to the low initial investment costs and the
geographical location of Turkey.

2. FOREIGN CAPITAL INVESTMENT IN TURKEY

There are relatively few capital restrictions imposed upon
capital investment in Turkey, and Turkey has also taken steps to
ease the complexities and procedures the foreigners need to go
through in order to incorporate and/or relocate into Turkey. It is
important to note that foreigners are allowed to freely make
capital investment in Turkey and are even allowed to have full/sole
ownership of a capital company.

Although the procedures for incorporation have been simplified
over the years, foreign investors may still find it difficult to
understand and navigate the rules, procedures and the bureaucratic
red tapes that they may come across when trying to bring their
capital investments in Turkey. The summary below should shed some
light on what potential investors should expect when investing in
Turkey.

a) Choosing the Right Company Type

Although the legislation does allow for the incorporation of
“personal companies” (where company owners are fully
liable with their personal assets for any and all company debts),
capital companies are the most common form of business entities in
Turkey utilized by both local and foreign investors. The Joint
Stock Companies (JSC) and Limited Liability Companies (similar to
‘LLC’ or ‘LLP’s around the world) are the two most
common types of capital investments in Turkey. The two main
differences between these company types is as follows:

b) Capital Investment in Turkey – What to
Expect?

Although Turkey has been taking steps to simplify the
incorporation procedures since 2018, it can still seem complex to
the uninitiated. The below image provides a brief visual summary of
the main steps required to incorporate a company in Turkey:

• Step 1 – Drafting: This
  stage is the initial preparation stage where the investor needs to
  decide on the type of investment (the company). It is important for
  the investor decide on the correct company type that suits the
  needs and requirements of the planned investment. Making an
  informed decision here will be crucial for the investor to save
  valuable time and costs.

• Step 2 – Bank Account: As
  shown above, there is a crucial difference between the two company
  types, which is the requirement to deposit the initial company
  capital before incorporation. For LTD’s, no initial payment of
  company capital is required, and therefore this step 2 and the
  following step 3 can be skipped entirely to be handled after
  incorporation. However, for JSC incorporations, a capital blockade
  account will need to be opened at a local bank following the
  initial submission of documents. This is can be the most
  problematic step depending on the nationality of the investor as
  well as the person(s) who will be appointed as directors / managers
  to the company to be incorporated in Turkey.

• Step 3 – Depositing
  Capital:  As noted in detail in step 2, this
  step will only be required for JSC incorporations. Accordingly, at
  least ¼ of the committed company capital needs to be
  deposited to the capital blockade account of the company before the
  final submission step.

• Step 4 – Final
  Submission:  Once all documents are ready, all
  documents needs to be physically submitted to the relevant Trade Registry, where the
  shareholders of the company will also be required to sign the newly
  incorporated company’s Articles of Association (this can also
  be handled remotely with designated power of attorneys). The Trade
  Registry will review the application and will approved the
  incorporation if all documents are in order. Once the trade
  registry approves, the company will be formally incorporated.

• Step 5 – Tax
  Submissions: This is another crucial step and
  one missed by many first-time foreign investors. Following the
  approval of the trade registry and incorporation of the company, it
  is crucial for the company to submit the relevant tax office and
  social security registration applications as soon as possible, to
  avoid paying monetary fines to these institutions.

3. WHY INVEST IN TURKEY?

Turkey’s unique geographic location coupled with low
investment costs make it an attractive place for foreign capital
investment. It’s customs union with the EU allows direct access
to the EU market.

Due to its unique geographic location, Turkey can also act as a
hub, offering easy access to 1.3 billion people in Europe, MENA and
central Asia within a 4-hour flight radius.

Turkey has a wide global market access at the crossroads between
Europe, Africa and Asia, making it an efficient hub to access
international markets around the world. Turkey also has a strong
manufacturing infrastructure, ranging from the automotive sector to
machinery & electronic equipment, defense, and agriculture
& fresh produce. Turkey’s exports grew to $225 Billion in
2021, according to the Turkey
Investment Office, which further highlights its production
capacity.

4. CONCLUSION

Although this article aims to summarize the rules and procedures
governing capital investment in Turkey, it should by no means
treated as a full and complete guide to company incorporation.
There are numerous issues that needs consideration when deciding
which options suits best for the planned invest, and any wrong
handling of the preparation or the submission processes can cause
the investors to lose valuable time and money. To avoid such a
drastic outcomes it highly advised that foreigner investors seek
professional assistance for their capital investment in Turkey.
Further information regarding corporate tax and tax cycles can be
accessed here.

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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