Türkiye has grown more appealing to both domestic and foreign investors in recent years. In fact, foreign investors can take advantage of the country’s strategic position, substantial domestic market volume, young population, and qualified labor. Foreigners must form a company in Türkiye before investing, and their incorporation and commercial activities are governed by Foreign Direct Investment Law no. 4875.
Foreigners’ commercial activities in Türkiye are also subject to Turkish Commercial Code no. 6102, Turkish Code of Obligations no. 6098, Law no. 4817 on Work Permits for Foreigners, and the regulation on the implementation of Law no. 4875. Therefore, knowledge of the rights and duties of foreign investors as well as the legal procedures they must adhere to while establishing a company in Türkiye is essential for a successful process.
Advantages of Forming a Company in Türkiye for Foreigners
In Türkiye, Law no. 4875 seeks to attract international investments, protect foreign investors’ rights, treat them equally with domestic investors, and implement the freedom of investment principle.
The Law eliminates various legal constraints and paperwork for foreign investors, with transition from a permission-approval system to an “information” system. There are no restrictions in the Law regarding the types of companies that foreign natural and legal persons may form; hence, they are permitted to establish any type of business stated in the legislation. As a result, the Law entitles foreign investors to set up any company that Turkish citizens can establish.
As per article 3 of the Law:
- Expropriation of foreign direct investments is restricted.
- Foreign investors are allowed to transfer their profits and some other revenues earned in Türkiye to other countries.
- Obtaining a work permit for foreign personnel to work in businesses, branches, and organizations incorporated under the Law will become easier.
- Foreign investors will also benefit from certain tax concessions.
- The Undersecretariat will be authorized to enable companies incorporated under foreign laws to open liaison offices in Türkiye, provided that those do not engage in commercial operations in Türkiye.
- The assessments of international institutions performing valuations will be used as a reference in the valuation of non-cash capital.
- In the event of a legal dispute, foreign investors forming a company in Türkiye may resort to national or international arbitration or other dispute resolution methods if the parties agree.
Thus, as is evident from the legislation, foreign investors can take advantage of a variety of legal and financial rights if they set up a business in Türkiye.
How Can Foreigners Form a Company in Türkiye?
Foreigners must go through a number of formalities to form a company in Türkiye. These formalities are as follows:
1) First, they must determine the type of company to be established, based on which they should draft the articles of association.
2) They must submit the incorporation minutes and the articles of association prepared for the company to the Trade Registry via MERSIS (Central Registration System).
3) They must prepare the relevant documents and get them notarized. They must acquire apostille annotations for documents issued outside of Türkiye, which must be approved by the consulate or the notary.
4) They must obtain their company’s potential tax number from the relevant tax office, which is required for non-Turkish partners and board members.
5) They must deposit a portion of their company’s total capital into the bank account of the Competition Authority through the pay desk of the Trade Registry Office.
6) They must also deposit a portion of that capital into their company’s bank account and document this transaction.
7) They must apply to the Trade Registry Office for registration procedures after obtaining the necessary documents.
8) They must have some of the company’s legal books certified. These books are journal, ledger, book inventory, stock register, and meeting minutes for the board of directors and general assemblies. Officials of the Trade Registry Office certify these books during the incorporation process.
9) The tax officer assigned by the tax office visits the corporate headquarters to create the findings report, which must contain the signatures of at least two authorized officers of the company.
10) The company’s authorized signatories must issue a circular of signature in front of the personnel authorized by the Trade Registry Directorate on the day of the company’s registration.
Foreigners can form a company in Türkiye if they accomplish all these stages and file the relevant papers.
Obtaining a Work Permit for Foreigners
A work permit is an official document issued by the Ministry of Labor and Social Security that allows a foreigner to work and reside in Türkiye during the permit’s validity term.
Regarding incorporation, the work permits for foreigners are regulated in International Labor Force Law no. 6735. Accordingly, non-resident board members of joint stock companies and other foreign partners of limited companies who are not officials of the company are no longer obliged to get a work permit. Other foreign company partners, however, must still obtain a work permit.
Applications for work permits can be submitted to the Ministry of Labor and Social Security if the company partner lives in Türkiye, or, in other circumstances, to the Foreign Representative of the Republic of Türkiye in the applicant’s place of citizenship or permanent residence. In addition, the foreign company partner who will submit an application within the country must have a residence permit valid for at least six months in Türkiye.
Foreign investors establishing a company in Türkiye will benefit from equal treatment with domestic companies as well as various commercial and legal rights. They should seek advice from specialists experienced in this field to make the most of these rights and to act on a sound legal basis. Since the relevant documents must be submitted for any type of company, certain procedural errors will make the process take longer.
Moreover, a company should get professional advice on matters such as compliance with the Personal Data Protection Law and the completion of VERBIS records to avoid serious penalties following incorporation. Therefore, legal counsel will be essential both during and after incorporation.
Finally, it is important to know that foreign natural or legal persons are not obligated to submit their applications in person to form a company in Türkiye; rather, they may do so through an attorney to whom they have delegated power of attorney.
