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Doing Business in Turkey

Contributed by Göksu Safi Isik Attorney Partnership

Doing Business in Turkey graphic

Why to do business in Turkey

a- Basic Country Facts

Turkey is a democratic, secular and constitutional republic. The capital of Turkey is Ankara, whereas Istanbul is the city where most of the corporate transactions take place in. The official language is Turkish and the currency is Turkish Lira. Turkey has slightly over 80 million citizens, with a significant young population aged between 15-24.

b- Key attractions for Investment
  • Turkey is geographically located between Europe and Asia and it connects the two continents not only in terms of logistics or transportation but also serves as an energy corridor between the two continents and as such an energy hub for both regions.
  • This unique geopolitics allows Turkey to be seated in and integrated with various international and regional security systems and economic cooperations at the same time. It is therefore a member of NATO, OECD and G20 summit and part of European Council as the candidate country for EU and part of OSCE on the one hand. On the other hand, he is among the founders of regional cooperations such as Black Sea Economic Cooperation or ECO. He has also very strong partnership with the Muslim world through OIC, Islamic Cooperation and Economic Corporation Organisation and D8. It is a pioneer in economic relations with Turkic speaking countries via The Cooperation Council of Turkic Speaking States.
  • One of the fastest growing economy in the world and the first within G20 member states by the end of 2017, Turkey has a very dynamic market which obviously presents multiple opportunities for both domestic and foreign investors.
  • Turkey offers an accessible, skilled, cost-effective and globally competitive and young workforce.
  • The Turkish government provides various substantial tax and non-tax incentives, especially foreign investors, in line with those provided to domestic companies

2- How to do business in Turkey

a- Business Entities

Business entities established by foreign investors in Turkey either on their own or with Turkish partners are regarded as Turkish companies and entitled to all the rights granted to companies founded by Turkish citizens under the provisions of the Turkish Commercial Cod (TCC).

TCC presents 2 different frames for the companies under the forms of corporate and non-corporate. These companies may be established under the following types:

Corporate Forms

  • Joint Stock Company (“JSC”)
  • Limited Liability Company (“LLC”)
  • Cooperative Company
  • Non- Corporate Forms
  • Collective Company
  • Commandite Company

The most common choice for establishing a company in Turkey are the JSC and the LLC, both of which require same procedures, despite the fact that there are different financial thresholds and organs for each,. On the other hand, the branches and the liaison offices may also be alternative to set up a business in Turkey; however neither of them has a legal entity.

b- Employment

Employment contracts may be drafted for a definite and indefinite period. It is of course possible for both parties to terminate employment contract, however, an employer is required to submit a valid reason to terminate the indefinite employment contract which has lasted more than 6 months, given there are at least 30 employees in the related workplace. Failing to do so might result in some compensation.

There are several public holidays in Turkey and the employees who have worked minimum for a year are entitled to paid annual vacation. A foreign employee shall obtain a work permit in order to work in Turkey. Applications for a work permit may be followed either via Turkish missions abroad or within the country.

c- Taxation

The foreign investors will be obligated to pay the taxes as the Turkish citizens and the most common ones are as follows; income tax which is calculated based on the income of the real persons and corporate tax that is levied on the profits of legal entities. Furthermore, there are other types of taxes that such as value added tax, special consumption tax, banking and insurance transaction tax, stamp tax and etc. In order to secure the collection of the taxes, certain taxes are collected by withholding payments from taxpayers as withholding tax. The tax rates vary according to its type and whether the taxpayer is a corporation or a real person and mostly, the taxes have various methods of payment to provide instruments to the tax payers.

3- Foreign Direct Investment Policy

Since the globalization affects the business life across the world, Turkey has developed new policies in order to increase the inflow of the foreign direct investment in its economy in consideration of the benefits such as creation of new employment opportunities and integration of the market with international trade.

As a result, Turkey has attracted the highest inflow of the foreign direct investment among the countries in West Asia since 2015. According to the World Investment Report, Turkey has attracted 43% of the investments in the region.

a. Industries

The leading industries for foreign investments in Turkey can be divided into 2 main branches as manufacturing industries and service industries, and both types have numerous sub-branches. Pursuant to the Industrial Division of International Direct Investment Inflow Chart created by Central Bank of the Republic of Turkey, the following industries, attracted the most of the international direct investment in 2016 are: Manufacturing, finance and insurance, energy, wholesale and retail trade, transportation and storage. Turkey’s consumer and labour potential introduces the Turkey as a market which offers remarkable opportunities on various sectors.

b. Legal Framework

According to the article 3 of The Foreign Direct Investment Law, the foreign investors are subject to the same treatment as Turkish investors. Moreover, foreign investors are also entitled to freely transfer profits, dividends, proceeds of sale and liquidation, licence, know-how, technical assistance fees, amounts for repayment of loans and interest arising from foreign loans through banks or special financial institutions.

In case there is a dispute; foreign investors may apply either to authorized courts or to national or international arbitration as well as other means of dispute settlement provided that requirements to apply for a dispute resolution are fulfilled.

c. Organizations

There are many organizations to support foreign direct investment in Turkey; however, Investment Support and Promotion Agency of Turkey and International Investors Association of Turkey are the most significant among them.

d. International Agreements

Turkey is a party in numerous agreements on reciprocal promotion and protection of investments with 76 countries such as U.S.A, China, Israel and Saudi Arabia. Additionally, there are other agreements that are signed but yet to be approved by the Grand National Assembly of Turkey with 28 more countries that may encourage the international business transactions.

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