Turkey, with its unique geographical location bridging Europe and Asia, offers a dynamic and growing economy, making it a prime destination for foreign investment and business ventures. As the country continues to modernize and align with global trade regulations, many foreigners are exploring opportunities to establish businesses in Turkey. But, one common question arises: Can foreigners establish a company in Turkey? And if so, what are the administrative requirements and processes involved? This article aims to answer these questions and provide guidance for those interested in setting up a business in Turkey.
Can Foreigners Start a Business in Turkey?
Yes, foreigners are legally allowed to establish companies in Turkey. In fact, Turkey actively encourages foreign investment and has made significant strides in simplifying the process of business establishment. Whether you are looking to set up a small business, start a corporation, or invest in a joint venture, the Turkish government offers various incentives to attract foreign investors.
Foreigners can establish businesses in Turkey as individuals or as legal entities, including Limited Liability Companies (LLCs), Joint-Stock Companies, or Branch Offices of foreign companies. The most common structure for foreign entrepreneurs is the Limited Liability Company (LLC), as it offers flexibility, minimal capital requirements, and limited liability.
Key Advantages of Starting a Business in Turkey
- Strategic Location: Turkey’s strategic location makes it an ideal hub for businesses looking to operate in both European and Asian markets. It is a gateway to the Middle East, Eastern Europe, and Central Asia, allowing businesses to access a wide range of markets.
- Tax Incentives and Benefits: Turkey offers a competitive tax regime for businesses, with incentives for foreign investors, including tax exemptions in certain regions and sectors, as well as reduced corporate tax rates for certain industries.
- Skilled Workforce: Turkey boasts a young, educated, and highly skilled workforce, making it an attractive location for labor-intensive industries and technology startups alike.
- Modern Infrastructure: Turkey offers state-of-the-art infrastructure, including transportation networks, technology hubs, and well-established financial systems, which support business operations and expansion.
Administrative Requirements for Establishing a Company in Turkey
While Turkey provides a relatively easy process for foreigners to set up a business, there are certain administrative requirements and legal procedures that need to be followed. Here are the key steps involved:
1. Choose the Type of Company Structure
The first step in setting up a business in Turkey is choosing the appropriate company structure. As mentioned, the most common options for foreign investors are:
- Limited Liability Company (LLC): This is the most popular choice for foreign entrepreneurs. It requires a minimum capital of 10,000 Turkish Lira (approximately 500 USD), and the liability of shareholders is limited to the capital they invest.
- Joint-Stock Company: Typically used for larger enterprises, requiring a higher minimum capital (at least 50,000 Turkish Lira).
- Branch of a Foreign Company: Foreign companies can open a branch office in Turkey, but they must meet specific requirements, including the registration of the parent company and compliance with Turkish tax regulations.
2. Register with the Turkish Trade Registry
Once the company type is selected, the next step is to register with the Turkish Trade Registry (Ticaret Sicili). This step includes submitting the following documents:
- A completed application form (which can be obtained from the Trade Registry)
- The company’s charter (an official document that outlines the company’s purpose, ownership, and structure)
- Proof of the company’s address in Turkey (such as a lease agreement or utility bill)
- Identification documents of the shareholders, directors, and authorized signatories
- Capital deposit (proof of capital deposit in a Turkish bank)
The Trade Registry will provide an official certificate of incorporation upon successful registration.
3. Obtain a Tax Identification Number (TIN)
After registering the company, it is mandatory for the business to obtain a Tax Identification Number (TIN) from the Turkish tax office. The TIN is required for all tax-related matters, including VAT registration, tax payments, and employee social security contributions.
4. Register for VAT (Value Added Tax)
If the company’s annual turnover exceeds a certain threshold, it must register for Value Added Tax (VAT), which is typically 18%. VAT registration is mandatory for companies involved in the sale of goods or services.
5. Open a Corporate Bank Account
A corporate bank account must be opened with a Turkish bank. This is essential for the company to handle transactions, receive payments, and make payments to employees and suppliers. In Turkey, several local and international banks offer services to foreign companies, and you will need to present your business registration documents and other relevant papers to open an account.
6. Social Security and Insurance Registration
Employers must register their employees with the Social Security Institution (SGK) to ensure compliance with Turkey’s labor laws. The employer is responsible for deducting and remitting social security contributions on behalf of their employees. These contributions are used to fund health insurance, pensions, and other benefits.
7. Obtain Other Licenses and Permits (If Applicable)
Depending on the nature of the business, additional licenses or permits may be required. For example, businesses involved in the food and beverage industry, pharmaceuticals, or financial services may need to obtain specific licenses from relevant government authorities.
8. Comply with Employment and Labor Regulations
Foreign investors must ensure that they comply with Turkey’s labor laws, which include regulations related to working hours, employee rights, minimum wage, and workplace health and safety standards. Understanding these regulations will help avoid legal issues and create a positive work environment for employees.
Do Foreigners Need a Local Partner to Start a Business in Turkey?
No, foreigners do not need a local partner to establish a business in Turkey. However, in some cases, having a Turkish partner may be beneficial for networking purposes or to facilitate certain aspects of the business, such as securing local government permits or navigating local regulations. The Turkish government is supportive of foreign ownership, and foreign investors can fully own their businesses.
Conclusion
Starting a business in Turkey as a foreigner is relatively straightforward, with clear guidelines and a supportive legal framework. From selecting the right company structure to navigating tax requirements and registering with the necessary authorities, Turkey offers numerous opportunities for foreign entrepreneurs. While there are legal and administrative procedures to follow, the process is well-defined, and the country’s strategic location, competitive tax system, and skilled workforce make it a promising destination for investment.
Before proceeding with setting up a business, it is important to seek professional advice and ensure compliance with all legal requirements. By doing so, foreign investors can unlock the full potential of Turkey’s vibrant economy.
M. Rami Maki,
Business Consultant