Notes on Turkish Corporate Laws and Regulations
Version: May 2009
Company Establishment:
Corporations established by foreign joint venture partners with or without a Turkish partner
are treated as Turkish corporations and are entitled to all rights pertaining to Turkish firms
under the Turkish Commercial Code. The law does not put any restriction on the type of
enterprise that will be established by foreigners. The first step in establishing a business in
Turkey is to fill out the business registration form at the local trade registry office located at
the local chamber of commerce.
The process is as follows:
• Submit the notarized articles of association.
• Deposit 0.04% of the capital into either a state bank or the Central Bank of the Republic of
Turkey.
• Complete the company establishment form and register with the trade registry office.
International companies may start their activities in Turkey in various forms depending on the
investors' development strategies. The most common types of legal entities in Turkey are:
• Limited Liability Company (Ltd. Sit.)
• Joint-stock company (A.S.)
• Branch office
• Liaison office
Source of information: www.invest.gov.tr
Limited Liability Company (Ltd. Sit)
Limited liability companies may be composed of real persons or legal entities and must
consist of at least two and no more than fifty partners. The overall share of capital must be a
minimum of 5.000 YTL. All partners are personally liable for the debts of the company up to
the whole amount of their capital contribution, however, partners are not held liable for the
unpaid portions of others’ contributions. The partners are also directly exposed to the tax
liabilities of the company, limited however to their own shares. Shares of a limited company
can only be transferred to third parties with the consent of other partners.
According to the current Turkish Commercial Code, banks, private finance institutions,
insurance companies, financial leasing companies, factoring companies, holding companies,
companies operating as foreign currency exchange offices, companies dealing with public
warehousing, publicly held companies subject to the Capital Markets Law, companies that are
founders and operators of free zones should be established as Joint Stock Companies and
these companies are still subject to permit from Ministry of Industry and Trade for their
foundations.
Source of information: http://www.tr-ito.com/ITOPortal/Dokuman/Company_Establishment.doc.html
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Joint - Stock Company (A.S.)
Minimum of 5 shareholders, who may be either real or legal entities, can establish a jointstock company. Capital Market Board regulations apply to this type of companies, whose
shareholders’ number is at least 250, or to those which have issued securities. The minimum
capital requirement for establishing a joint-company is 50.000 YTL. Joint-Stock companies
are also subject to regulation by the Turkish Commercial Code. However, the law permits
significant flexibility in drafting the articles of the association. General Assembly, Board of
Directors, Auditors and Executives are the four administrative components of a joint—stock
company. The General Assembly consisting of shareholders has the entire control over the
company, whereas Board of Directors is the executive board of a joint-stock company. The
board members do not have to be Turkish citizens or resident in Turkey, but each must hold
qualification shares with a minimum total nominal value of 5.000 YTL. The board of directors
represents the company in its dealings with third parties and is responsible for all aspects of
managing the business. Auditors check the accounts and transactions related with joint-stock
company. The number of auditors can not be more than five and the majority of them must be
Turkish citizens.
Branch office:
Foreign companies may also operate through branches providing that they are established in
accordance with relevant legislation. The income of a branch derived in Turkey is taxed in the
same way as resident corporations. There is no special reporting and audit requirement
imposed on branches of foreign companies, they are subject to the same regulations with
resident companies. The officials of the Undersecretariat of Treasury and Istanbul Tax
Administration Office, whom I have contacted, comment that there is no practical advantage
of establishing a branch instead of a corporation. For establishing a branch in Turkey, a permit
from the Undersecretariat of Treasury Foreign Investment Department (FID) must be obtained
before the registration to the Commercial Registry Office. Alternatively, foreign companies
can also establish liaison offices in Turkey via a permit from FID and these liaison offices can
only be involved with non-commercial activities in Turkey.
Liaison office:
Countries established in accordance with laws of foreign countries can open liaison offices in
Turkey provided that those offices do not carry out any commercial activities in Turkey. So as
to open a liaison office in Turkey, the relevant company has to apply to the Directorate
General of Foreign Investments of the Undersecretariat of Treasury. Applications for
establishment and extension are to be finalized within 5 days following the application
provided that the necessary documents are complete and proper. Applicants of foreign
companies to establish liaison offices so as to operate in sectors subject to special legislation
such as money and capital markets, insurance, etc. are assessed by the relevant regulatory and
supervisory authorities. After an establishment permit is granted by the Directorate General of
Foreign Investments, the relevant Liaison office is supposed to register to the local tax office
and to send a copy of the tax office registration document to the Directorate General latest
within 1 month. Liaison offices are granted operation permits for 3 months at most.
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For extensions, successive extensions of maximum 3 years each may be granted betaking into
consideration the activities of previous years and plans and objectives for the future.
Foreign Direct Investment Law
Law No: 4875
Date of Passage: 5 June 2003
Date and Official Gazette: 17 June, 2003
In order to establish a new corporation, both nationals and non-nationals of Turkey need to
apply to the Commercial Registry Office (Ticaret Sicil Memurlugu) of the city, where they
would like to start their commercial and industrial activities. It takes one or two days to
register a new firm on average. For their application, the establishing partners should present
three copies of the starting company’s main contract, their certificates of birth if they are
nationals, otherwise their passports and a copy of their passports’ first page, which must be
endorsed by the civil notary. Two other documents, a letter of commitment (taahhutname) and
an attestation (tasdikname) are supplemented by the Commercial Registry Office at the time
of application. Following their application to the commercial registry office, tax
administration office (vergi dairesi) assigns a tax number to the company within ten days. On
the other hand, individuals also need a tax number for all kinds of commercial and banking
transactions, regardless of their nationality. Partners and directors of firms definitely need a
tax number if they want to do business in Turkey. Foreign nationals need to apply to the tax
administration offices with their passports in order to obtain a tax number.
Please note that a number of other licenses/permits need to be received from various
ministries, after the trade registration is completed. These are namely,
- Environmental Impact Assessment Report (Cevre Etki Degerlendirme Raporu) from the
Ministry of Environment
- Non-healthy Firm License (Gayri-Sihhi Muessese Ruhsati) from the Ministry of Health
- Employee & Employer Safety Control Certificate (Is ve Isci Guvenligi Ruhsati) from the
Ministry of Labor (also the Ministry of Health is involved in this procedure)
- If there are line ministries involved, then operations license from the involving ministry (i.e.:
for hotel business from the Ministry of Tourism, for energy from the Ministry of Energy)
A 3 months or a 6 months term is officially given for the issuance of each above-mentioned
document.
For detailed instructions in English on how to establish a company, please refer to Istanbul
Chamber of Commerce website, www.ito.org.tr.
An investment promotion agency under the prime ministry was established very recently. The
main duties of the investment promotion agency include formulation and implementation of
national strategy on promoting international investments in Turkey, coordinating related
activities with other institutions, informing potential international investors about general
investment climate and incentives available, giving support in obtaining required licenses and
permits, assisting international investors when they are confronted with obstacles and
problems and public relations regarding international investment in Turkey. Although the
agency is aiming to operate under ‘one stop shop’ principle, other institutions related to
foreign direct investment issues will continue their work.
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Taxes:
Corporate tax rate is currently at 20%. Aside from corporate tax, when dividends are paid out,
the company is required to make a withholding from the dividends under the Turkish Tax
Legislation. The rate of withholding tax is 15%. However, dividends paid to a resident
corporation or a branch office established in Turkey is not subject to the withholding tax at
source.
Tax brackets and rates applicable on personal income are as follows.
Income Scale (YTL)
Up to 7,500
7,501 - 19,000
19,001 – 43,000
43,001 and above
Rate (%)
15
20
27
35
Source of Information: www.invest.gov.tr/documents/investorguide_eng.pdf
Value added tax is in general (for a large part of the goods) 18%, in others 1% or 8%. The
generally applied VAT rate varies between 1%, 8%, and 18%. Commercial, industrial,
agricultural, and independent professional goods and services, goods and services imported
into the country, and deliveries of goods and services caused by other activities are all subject
to VAT. Special consumption tax on many goods range between 20 to 30 percent, there are
also proportionate rates for certain goods (i.e.: fuel). There are four main product groups that
are subject to special consumption tax at different tax rates:
• Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
• Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
• Tobacco and tobacco products, alcoholic beverages
• Luxury products Unlike VAT, which is applied on each delivery, special consumption tax is
charged only once.
Transfer of Profits:
According to the Foreign Direct Investment Law numbered 4875, which was ratified and put
in effect on June 17, 2003, Article 3, Item c:
“Foreign Investors can freely transfer profits abroad: profits, dividends, proceeds from the
sale or liquidation of all or any part of an investment, compensation payments, amounts
arising license, management and similar agreements, and reimbursements and interest
payments arising from foreign banks or special financial institutions.”
Investment Encouragement System:
The Undersecretariat of Treasury issues encouragement certificates to new investments. The
minimum amount of investments for obtaining investment encouragement certificates is YTL
200.000 for small and medium sized enterprises and YTL 1.000.000 for larger companies.
Incentives granted in investment encouragement certificate system are,
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- 100 % customs duty and VAT exemption on imported machinery and equipment
- Interest rate reductions on loans; 5 points and 2 points for YTL and foreign currency
denominated investment loans from banks, respectively.
New businesses established in less developed 39 provinces are granted tax incentives given
that they generate new employment for at least 10 people. Such investments are held exempt
from withholding tax and employer’s social security contribution up to 100%. Provision of
land as well as 20% relief on electricity costs for certain sectors in least developed regions is
another incentive program of the treasury (www.treasury.gov.tr).
Incentive type
Income tax relief
Compensation for the
employers social security
contribution
Energy support
Free land allocation
For companies in OIZs
and industrial zones
100%
100%
Others
Varies: min. 20% – 50%
Available
Varies: min. 20% – 40%
Available
80%
80%
Source of information: www.invest.gov.tr/documents/investorguide_eng.pdf
Other than these above mentioned investment incentive programs, advantages of operating in
free trade zones and technology development zones are worth mentioning.
Free trade zones (FTZ) are outside customs territory and hence, neither tariffs nor duties apply
to goods that are imported into FTZ. Companies registered at FTZs can stock their goods for
unlimited period of time at FTZ. Manufacturing companies operating in FTZs enjoy
exemption from corporate tax until Turkey becomes an EU-member. Sales from FTZ to the
domestic market are permitted. FTZs provide infrastructure, open and covered warehousing
and ready-to-use factory sites to investors. Legal and administrative regulations in
commercial, financial and economic fields that are applicable within the customs area are
either not implemented or partially implemented in the free zones. There are 20 free zones in
Turkey operating close to the EU and Middle East markets adjacent to major Turkish ports on
the Mediterranean, Aegean and Black Seas, with easy access to international trade routes.
Moreover, they also offer utility services such as electricity, water, telecom and waste
management.
Technology development zones (TDZ) is a recent initiative for stimulating technology
intensive investments, software development and private sector-university cooperation.
Hence, most TDZs are located either inside or in the vicinity of university campuses. There
are 30 TDZs of which 18 are operational, whereas 12 have been approved and are currently
under construction. Ankara has six TDZs, Istanbul has three, Kocaeli has three, and other
provinces listed in the pop-up table have one each. TDZs provide corporate and income tax
exemption for R&D and software development activities to registered companies until
31.12.2013. Registered companies are also exempt from value added tax for the procurement
of system management, data management, business applications, internet, mobile and defense
technology products. There is an exemption from customs duties as well as fund levies.
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Academic staff is encouraged to establish companies, participate in a recognized company or
join its executive boards as well as to conduct research in the zones.
Organized Industrial Zones (OIZs) are designed to allow companies providing goods and
services to operate within approved boundaries with the necessary infrastructure, techno
parks, and social facilities. The infrastructure provided in the zones includes roads, water,
natural gas, electricity, communications, waste treatment, and other services. There are 251
OIZs in 81 provinces, 127 of which are currently operational, while the remaining 124 OIZs
are being constructed throughout Turkey. 100% exemption from income tax for employed
workers. 100% exemption from the employer's share of social security costs. Up to 50%
support for electricity costs. There is an exemption from real estate tax, waste water charges,
building construction duties, and the use-of-building.
Source of information: www.invest.gov.tr/documents/investorguide_eng.pdf
Please note that there are certain financial and technical assistance programs such as PSOM
(Programma Samenweking Opkomende Markten) and PESP (Programma Economische
Samenwerking Projecten) made available by the Dutch government for projects in Turkey
(www.evd.nl/info/programmas/)
Working Permit for Foreigners:
Foreign nationals need to apply for a working permit to The Ministry of Labor. The official
processing time is 3 months. However, it is definitely needed that, you start the procedures
already months before you settle in Turkey and originally from the Turkish Embassy in
Hague. See www.turkishembassy.nl for further information.
Minimum Wages & Compensation:
The Turkish Labor Law sets a minimum wage, which is checked against inflation once or
twice a year. As of 01.01.2008, the gross monthly minimum wage is YTL 623.55
(approximately, € 294.12). After deducting worker’s share of social security premium, income
and stamp tax, unemployment security fund payment, the net wage stands at YTL 464.55
(approximately, € 219.12). The employer has to pay social security premium (19.5 percent)
and unemployment social security fund payment (2 percent) on the gross wage, therefore, the
cost of hiring additional worker with minimum wage for the employer is actually YTL 848.55
(approximately, € 400.26).1
Source of Information: www.calisma.gov.tr , www.invest.gov.tr /investors guide_eng.pdf
Companies include certain fringe benefits in their compensation schemes. Health insurance,
lunch tickets, shuttle bus service or commuting allowances are quite common. High skilled
workers’ pay depends on sector and also personal skills and experience, which is often at
comparable levels with EU countries depending on the position. However, wages of lessskilled workers and fresh university graduates are relatively low. For instance, an average
accountant at a small-sized company makes YTL 950 (approximately, € 522) net and a fresh
college graduate earns around YTL 1350 (approximately, € 742) net a month.
1
1 Euro is roughly equal to 2.12 YTL, December 2008
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Working time is 45 hours a week. The workers’ consent should be obtained for overtime and
overtime work must not exceed 270 hours in a year.
References:
1) Istanbul Ticaret Sicil Memurlugu (Istanbul Commercial Registry Office)
Tel: +90 212 210 17 90
2) Istanbul Vergi Dairesi, Usul Gelir Mudurlugu (Istanbul Tax Administration Office)
Tel: +90 212 635 84 03 - 1058
3) The Ministry of Labor (Calisma Bakanligi)
Web: www.calisma.gov.tr
4)Istanbul Metropolitan Municipality (Istanbul Buyuksehir Belediyesi)
Mehmet Nesih Ozmen Mh. Kasim Sk. No. 62 34010 Merter / Gungoren
Tel: +90 212 449 40 00
Fax: +90 212 449 41 58
E-Mail: info@ibb.gov.tr
Web: www.ibb.gov.tr
6) The Undersecretariat of Treasury, The Department for Investment Promotion (Yatirim
Tesvik Uygulama Departmani)
Tel: (0312) 212 87 22
Web site: www.treasury.gov.tr
7) The Undersecretariat of Treasury, International Relations and Legislations Department
(Uluslararasi Iliskiler ve Mevzuat Dairesi)
Tel: +90 312 213 23 61 / 204 68 01
8) The Capital Market Board (Sermaye Piyasalari Kurulu)
Web: www.spk.gov.tr
9) Prime Ministry, Investment Support and Promotion Agency of Turkey (Turkiye Yatirim
Destek ve Promosyon Ajansi)
Tel: +90 312 4191157 (Ankara)
Tel: +90 212 3104000 (Istanbul)
Web: www.investinturkey.gov.tr / ww.invest.gov.tr
http://www.invest.gov.tr
10) Yearly average exchange rates of the Central Bank of the Republic of Turkey are used as
of December 2008.
Web: www. tcmb.gov.tr
http://www.tcmb.gov.tr/yeni/eng/
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Ref: IST-HA / MB & CE, May 2009
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Whereas every effort has been made to ensure that the information given herein is accurate, we accept
no responsibility for any errors, omissions or misleading statements in that information and no
responsibility is accepted as to the standing of any firm, company or individual.
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