How to set up a business in Turkey
For many years Turkey has attracted foreign investment due to its unique trading location between Asia, Europe and the Middle East. Turkey is recognised globally as a country of significant importance, with many public and international companies opening offices in and around Turkeys’ major cities. The vast majority of these larger companies base themselves in Istanbul and Ankara.
Why set up a business in Turkey?
Recent legislation to promote foreign investment means it's easier than ever before to set up a business in Turkey. It's easy to see why Turkey appeals as a destination for new companies: half its 70-million strong population is aged under 30, and they're increasingly educated and solvent, with cash to spend. Banking and communications infrastructure has improved vastly, and trade links with Europe and the Middle East have strengthened significantly.
Recent government incentives for investors and new businesses include:
- The right for foreign companies to hold "Turkish Company" status, giving new business owners the same rights and obligations as existing Turkish companies;
- Guarantee of existing investment rights;
- Conformity with international standards;
- Changing the definition of a foreign investor to include companies registered outside the country, non-Turkish nationals and Turkish nationals living outside the country;
- Imports of certain machinery and equipment are now exempt from customs duties, levies and VAT;
- Certain exemptions from income tax and social insurance contributions;
- Energy subsidies;
- Incentives available in Turkey's free trade zones, including exemptions from a number of taxes and customs duties;
- Better protections for foreign investors.
- As of 2016, the government looks set to offer people who buy property in Turkey the right to work in the country - skip to the bottom of the page to read more.
So, how do you set up a business in Turkey?
If you are considering setting up any business in Turkey there are a number of options available. First, you will need to seek some solid legal advice and do your research with the relevant authorities. Collective companies, joint stock companies, commandite companies (business set up to run under a trade name), liaison offices and the set up of a branch of an existing foreign company are all options foreigners can consider. However, in this article we are focusing on the relatively easy and more manageable - and therefore, most popular - set up of a private limited company.
Can foreigners open a private limited company in Turkey?
Yes. A private limited company is the most popular form of business for foreigners and can be set up by two or more non Turkish nationals. At least one shareholder is required to form this type of company, with a minimum share capital of 10,000TL.
Where can I seek advice on setting up a business in Turkey?
The first port of call for many is their lawyer. Be sure to employ the services of a good legal advisor that knows company laws in Turkey and has previously helped expats set up successful businesses. In addition, the following all have current and up to date information and are the basis of much of this articles information:
- The Turkish Embassy
- British Chamber of Commerce Turkey (BCCT)
- The Turkish British chamber of Commerce and Industry (TBCCI)
Should I use a company formation agent?
Similarly to the UK, there are a growing number of company formation agents advertising services in the local press and found in most towns and cities. Many expats choose to go down this route as it can save time and hassle if you find a good agent. If you are considering using one then research them first and find out what other expat companies they have helped set up. As with everything, some of these companies are far better than others.
What kind of business can a foreigner set up in Turkey?
Most expats tend to set up businesses that are in some way connected to tourism or servicing the needs of other foreigners. Bars, restaurants, hotels, holiday letting companies, estate agencies, shops and maintenance companies seem to be the norm and are generally easy for foreigners to organise and run. There are a number of businesses that foreigners cannot open in Turkey without prior approval from the Ministry of Commerce and Industry. These include banks, factoring, private finance institutions, foreign currency exchange offices, companies subject to Capital Markets Law, public warehousing and operators of free-trade zones. Check with your lawyer and authorities in advance if in doubt.
What does the set-up of a Turkish limited liability company cost?
Legalities and costs of business set-ups in Turkey differ from the UK and most other countries. A private limited company costs a total of 10,000TL, which will need to be deposited during the initial phase of the incorporation.The liability of the shareholders is limited to the share capital invested in the company.
What is the set-up process?
The company incorporation process in Turkey is relatively straightforward, and the investor will be able to begin trading within a week, as long as they have everything in order.
The first task is drafting the articles of association, which need to be signed by the company directors. The articles of association must be drawn up legally and conform to article 279 of the Turkish Commercial Code. The document needs incorporate the phrase “limited” in the companies trading name. Founders need to state their nationality, full names, surnames, addresses, and trading address. The document is then taken to be officially notarised and translated where necessary.
The minimum share capital must be deposited in a bank account in the company name. After this, investors can begin the registration process, paying a fee to the Turkish Commercial Registry Office, with the necessary documents. The Registry Office will issue a registration certificate and the company's incorporation is published in the Turkish Gazette. The company must then register for VAT with the relevant tax authority.
Turkish laws regarding trading names
Your trading name must be original and not registered by anyone previously. It should not mislead third parties and the words “Turkiye; Turk; Cumhuriyet; Milli” cannot be used without the specific approval of the Turkish Council of Ministers. Foreign words and titles can only be used in the trading name if they do not contradict any government or cultural laws or policies.
How to register your Turkish company with the Trade Registry Office
The Turkish Chamber of Commerce has offices throughout Turkey in all major cities and most towns. Having filled out your Articles of Association and had them officially notarised, contact them within 15 days to organise the official trade registry. On registry you will need your filled in company registration application form, your written request for application, suitable identification proving you are the founding members, a letter of commitment in line with Article 29 of the Trade Registry Regulations, and a receipt of payment of the deposit necessary to the Customers Fund Account (normally 1/1000 of the company’s capital). This perhaps sounds more daunting than it actually is but to avoid lengthy waits and unnecessary confusion, be sure you have adequate legal knowledge or assistance and speak, read and write sufficient Turkish. In most cases it is best to take a native speaker with you. Once registered, your business can start trading.
Ongoing Trading and Taxes
A private limited company set up and resident in Turkey will have to pay full tax on profits earned and declared. In addition you will need to employ the services of an accountant and keep in mind that accountants do operate differently here in Turkey than in the UK and normally charge a monthly fee that, in some cases, can seem costly for doing relatively little some of the time. Laws and taxes do change regularly so please seek the advice of a good accountant before setting up your company.
Overall Tips and Advice
Do your homework. Before thinking of setting up any company in Turkey make sure that you have done your research. Speak to other expats in business, your lawyer and an accountant to assess if it really is a viable option or if you are better off investing elsewhere. You hear many horror stories from expats that have opened shops, restaurants and companies that have failed and ended up with a company that is difficult to wind up as a result. Be sure that your idea is a winner!
Draw up your business plan. Have your goals and expectations clearly set out before establishing your company. Research the set-up and ongoing costs of running the business (accountant fees, marketing, taxes etc.) You are unlikely to be asked to show a business plan in Turkey but it will make you thoroughly review and consider your venture.
Language Barriers. The process and paperwork needed to set up a business in Turkey will be in Turkish so be sure you understand the language sufficiently, or have the services of a trusted Turkish speaker on hand every step of the way, to help you.
Watch this space
With the aim of boosting Turkish real estate sales, the Turkish government is planning to offer work permits to people buying Turkish property over a value. This measure is a follow-up to 2013’s year-long residence permit offered to those buying their first property in Turkey, and, like this incentive, aims to increase home ownership amongst foreign buyers.
The golden visa scheme - residency awarded to property buyers - has been successful in Turkey and in other countries throughout Europe. Now, the government has added the bonus of a work permit to the mix. We'll update when we know more, but in the meantime, you can read more here.
Please Note: Although we have researched and tried to give you accurate advice, please remember that this information should not be taken as legal advice and is intended for guidance purposes only.