Overview
Foreign Direct Investment (FDI) Law of Turkey is based on the principle of equal treatment, makes it possible for international investors to have the same rights and obligations as domestic investors.
The conditions for setting up a business and share transfer are the same as those applied to local investors. Accordingly, international investors may establish any form of company set out in the Turkish Commercial Code (TCC). TCC offers a corporate governance approach that meets international standards, fosters private equity and public offering activities, creates transparency in managing operations and aligns the Turkish business environment with EU legislation as well as with the EU accession process. Turkey has introduced reforms with a view to making it easier to do business in order to enhance the investment environment, eliminating red tape in setting up a business and minimizing costs and procedures. To this end, establishing a company is now only carried out at Trade Registry Offices located in Chambers of Commerce and designed to be a ‘one-stop shop’. The process is completed within the same day.
Company Types under TCC and Alternative Forms
There are corporate and non-corporate forms for companies under the TCC, which states that companies may be established under the following types:
a. Corporate Forms
Although some financial thresholds (i.e., minimum capital) and organs differ from each other, the procedures to be followed for establishing a joint stock company or a limited liability company are the same.
b. Non-corporate Forms
Although companies may be established according to these five different types, joint stock company or a limited liability company are the most common types preferred both in the global economy and Turkey. When establishing a company in Turkey, one needs to adhere to the following rules and regulations:
c. Submit the memorandum and articles of association online to MERSIS
Pursuant to the Trade Registry Regulation, trade registration transactions must be fulfilled through MERSIS (Central Registry Record System). MERSIS is a central information system for carrying out commercial registry processes and storing commercial registry data electronically on a regular basis. A unique number is given to legal entities that are actively involved in business. Online establishment of new companies is possible on MERSIS, and already-established companies may operate through the system after registry.
d. Execute and notarize company documents
The following documents are required for registry application at the relevant Trade Registry Office:
o For each real person shareholder, two copies of their passports.
o The Certificate of Activity of the legal entity designated as the shareholder issued by the relevant authority in the investor's country. The certificate must bear information regarding the current status and signatories of the company.
o Resolution(s) of competent corporate organ of legal entity shareholder(s) authorizing the establishment; if there will be any specific condition for the prospective company to be incorporated (name of the company, field of activity, etc.) it must be stated in the resolution clearly.
o In case a legal entity is going to be appointed as a member in the board of directors of the prospective company to be incorporated, the name of the real person who will act in the name of the legal entity and the legal entity board member's appointment must be stated within the same or with a separate resolution clearly.
o If the process is going to be followed by proxy, a notarized copy of a power of attorney authorizing the attorneys who will follow up the application before the competent Trade Registry Office and other official authorities in order to proceed with the application (where necessary).
It should be noted that, except the first item above, all the necessary documents that will be issued and executed outside Turkey must be notarized and apostilled or alternatively ratified by the Turkish consulate where they are issued. The original executed, notarized, and apostilled documents must be officially translated and notarized by a Turkish notary.
e. Obtain potential tax identity number
The company must obtain potential tax identity numbers for non-Turkish Citizen shareholders, and non-Turkish Citizen board members of the company from the relevant tax office. This potential tax identity number is necessary for opening a bank account in order to deposit the capital of the company to be incorporated. The documents required by the tax office are as follows:
f. Deposit a percentage of capital to the account of the Competition Authority
0.04% of the company's capital must be paid to the account of the Competition Authority via Trade Registry Office pay office.
g. Deposit at least 25 % of the startup capital in a bank and obtain proof
25% of the subscribed share capital must be paid prior to the new company registration. The remaining 75% must be paid within two years. Alternatively, the capital may be fully paid prior to registration. However, the requirement to pay 25% of the capital during establishment before the registration of the company is not applicable to limited companies. Subscribed capital for limited companies may be paid in during the 24 months following the establishment of the company.
h. Apply for registration at the Trade Registry Office
The founders may apply for registration after gathering the following documents:
o The expert report regarding the capital in kind
o The statement of the relevant registry indicating there is no limitation on that capital in kind
o The document indicating the annotations have been done to relevant registries regarding the capital in kind
o The written agreements between founders, other persons, and the founding company regarding the foundation of the company Following completion of the registration phase before the Trade Registry Office, the Trade Registry Office notifies the relevant tax office and the Social Security Institution ex-officio regarding the incorporation of the company. The Trade Registry Office ensures the announcement of the incorporation information of the company in the Commercial Registry Gazette approximately within 10 days after the company registration. A tax registration certificate must be obtained from the local tax office soon after the Trade Registry Office notifies the local tax office. A social security number for the company must be obtained from the relevant Social Security Institution. For the employees, a separate application has to be made following the registration of the company with the Social Security Institution.
i. Certify the legal books
The Trade Registry Office authorized personnel will certify the following books during the establishment process.
j. Following up the company establishment notification to be made by the Trade Registry Office, from the tax office
The Trade Registry Office notifies the tax office and the Social Security Institution of the company's incorporation. A tax officer comes to the company headquarters to prepare a determination report. There must be at least one authorized signature in the determination report. Trade Registry Officers send the company establishment form, which includes the tax number notification, to the tax office.
k. Issuance of signature circular
On the day the company is registered at the Trade Registry Office, the signatories of the company must issue a signature circular before the Trade Registry Office authorized personnel.
Branch Office
Registration to Trade Registry Office
It should be noted that all the necessary documents that will be issued and executed outside Turkey must be notarized and apostilled or alternatively ratified by the Turkish consulate where they are issued. The original executed, notarized, and apostilled documents must be officially translated and notarized by a Turkish notary.
Contact Office
Any company incorporated under the laws of a foreign country may establish a contact office in Turkey upon obtaining a license from the Ministry of Industry and Technology, provided that the company does not engage in any commercial activities in Turkey. In order to open a contact office, it is necessary to apply to to Ministry of Industry and Technology General Directorate of Incentive Implementation and Foreign Capital with the following documents.
In the event that the original documents are submitted to General Directorate, copies of the same shall be approved by General Directorate.
The originals shall be returned to the applicant. During the initial application for liaison offices, licenses are granted for a maximum of three years within the scope of the declared activities. Liaison offices willing to extend their term of operation shall apply to General Directorate before the expiration of their terms of operation. General Directorate may conclude applications for the extension of their tenure based on the nature of activities of the office over the previous year, business plan, the company's future objectives in Turkey, existing and anticipated amount of expenditure and the number of employees. The tenure of operation of offices licensed to conduct market research or promotion of foreign company products or services shall not be extended.
Applications for establishment and tenure extension shall be concluded in fifteen working days from the date of application provided that the requested information/documents is/are complete and accurate.
Applications submitted by foreign companies to set up a liaison office to conduct financial activities subject to special legislation such as money and capital markets or insurance shall be evaluated by competent agencies such as the Capital Markets Board of Turkey and the Banking Regulation and Supervision Agency – both being the duly authorized bodies pursuant to special legislations. The ministry may conclude foreign companies’ applications to set up liaison offices in other industries that require licenses for operations or similar authorizations, if necessary, upon consulting competent bodies that are duly authorized to issue such permits or licenses.
Copies of tax registration and tenancy agreement for the liaison office shall be submitted to General Directorate within a maximum of one month. Liaison offices shall notify General Directorate of any changes with regard to the office representative(s) or foreign company title within a maximum of one month following the change, with a new tenancy agreement comprising the new address, the certificate of authorization of the newly appointed representative or the document(s) related with the change of title of the foreign company.
In the event that a liaison office terminates its operations, it shall furnish General Directorate with a statement of termination to be obtained from the relevant tax office. Offices may not claim transfers of funds except for balances that remain outstanding upon termination and liquidation thereof.
Move certain documents to electronic format / E-TUYS system
The following documents that were previously submitted in printed form to the General Directorate of Incentive Implementation and Foreign Investment by companies and branches established in Turkey by foreign investors may now be received electronically.
The information in these forms will only be received electronically via a web-based application called E-TUYS that was developed to expand the data system about Foreign Direct Investments and help obtain up-to-date information faster, and is managed by the General Directorate of Incentive Implementation and Foreign Investment. Therefore, these forms will no longer be received in printed format.
