Turkey is nation located in Eurasia, as majority of its geographical area is located in Asia, while some are in Europe. This strategic location makes it an ideal jurisdiction for foreign investors to establish a company. 

Whether you are a private or institutional investor looking to do business in Turkey, there are important things that you must know. To date, Turkey ranks 43rd in terms of ease of doing business. 

Turkey enforces an open economy heavily influenced by Europe. It is a member nation of NATO and various other economic organizations such as the G-20. It has signed various agreements and double tax treaties with other European and non-European countries, including Luxembourg, France, Germany, China, the United States, Canada, and many more. Agreements include terms for cross-border trading where negotiations on tariffs and taxation are clearly delineated, benefitting countries involved. 

Being a multi-goods producer, Turkey’s economic growth can be attributed to its many exports in various European countries. Due to its strategic location, it’s also an attractive tourist attraction that further boost its economy. The agricultural sector also contributes to as much as 35% of its economic growth. 

The country follows a mix of traditional and modern business strategies that contribute to its continuous economic growth and development. 

Business Structures in Turkey 

Joint Stock Company

• In this structure, the stock capital is divided into shares, with the liability of shareholders limited to their share capital contributions. 
• There should be at least one shareholder, either a natural person or legal entity, with a minimum capital share of TRY 50,000. 
• The company must have a general meeting and a board of directors. 

Limited Liability Company 

• A company established as a limited liability company must have at least one shareholder.
• The liability of a shareholder will be limited to the subscribed capital paid. 
• Minimum share capital for limited liability companies in Turkey is TRY 10,000. 

Commmandite Company 

• Company meant to operate as a commercial enterprise under its established trade name. 
• Liability of some shareholders is limited to capital subscribed and paid be each shareholder. On the other hand, some shareholders have no limitation of liability. 
• Only legal entities can be commanditer. 
• There is no minimum share capital in a commandite company structure in Turkey. 
• Rights and obligations of shareholders will be determined by its Articles of Association. 

Collective Company 

• A company established to run a commercial enterprise under a trade name.
• The liability of shareholders is limited to the capital share they paid.
• No minimum share capital requirement. 
• Mandatory for shareholders to be actual persons. 
• Rights and obligations of shareholders are determined by the company’s articles of association. 

Mandatory Company Capital in Turkey

According to the laws of company registration in Turkey, minimum capital required is required for certain company structures. Foreign investors must consider the following when choosing a company structure in Turkey:

• There is no need to pay a certain capital amount for sponsoring companies, such as in the case of partnerships and sole proprietorship. 
• A minimum capital of TRY 10,000 must be paid to register a Turkey limited liability company. 
• A minimum capital of TRY 1.2 million is required to set up a public or state-owned joint stock company. 
• No minimum capital requirement for foreign companies when setting up a branch in Turkey. 

If a foreign-owned company decides to register a subsidiary in Turkey must abide by the capital terms of a private or public limited liability company, depending on the specific structure you choose. Given that most investors register a private limited company, they only need to deposit of 0.04% of their capital after incorporation. 

Documents Required to Open a Company in Turkey 

• Company establishment petition and notification form duly filled out and signed by persons authorized by the company. 
• Articles of Association, including notarized signatures of foundations and a notarized certification provide all shares have been subscribed by the founders in the company’s Articles of Association. 
• Signed founders’ statement
• A bank reference letter proving that the subscribed share capital was deposited. 
• Bank receipt indicating 0.04% of company capital was deposited to the account of the Turkey Competition Authority at a state bank. 
• Permit or letter of compliance for companies whose operations is subject to the permit or letter of compliance by the relevant ministry or other involved official offices. 
• Notarized copy of signatures of persons with authority to represent or bind the company. 
• Application number that includes the trade name to be used  has been verified by the Trade Registry Office. 
• Company establishment statement. 
• Certificate of residence of a company’s founding partners. 
• Notarized translation of passport in case the foreign shareholder is a natural person. Apostilled and notarized translation of registry documents issued by a competent authority in case the foreign shareholder is a legal entity. 

The Related Costs of Registering a Company in Turkey 

• Preparation of a company’s founding documents and payment of notary fees.
• Checking and confirmation of brand name of a new company (free of charge). 
• Company registration fees will depend on the business structure or type of company. 
• Publishing cost of a company’s articles of association in the Official newspaper. 
• The cost of registration of a company’s articles of association in the Turkish commercial registration system. 
• Expenses incurred in a company’s signature registration for directors, incorporation notice, annual membership to the Chamber of Commerce. 
• Expenses related to the list of signatories to the site.
• Costs related to obtaining a license and opening an office. 

Other steps in Turkish company registration, such as registering with the Social Security Administration are inexpensive as most can be done online. Foreign investors can choose a representative in processing registration documents, such as obtaining the services of a lawyer. 

Turkey Business Taxation Regime 

Turkey offers the most competitive and liberal taxation policies in the whole OECD. The corporate tax structure is designed to help businesses grow and give enough opportunity to generate more revenue to the government. 

Taxes assessed to businesses include:

• Income Tax
• Tax on Expenditure
• Wealth Tax

There are two types of income taxes in Turkey. Individual income tax and corporate income tax. Individual income tax rate varies between 15% and 35% with a few incentives. People who earn TRY 14,800 are exempt from paying taxes.

Corporate income tax is charged on legal entities. Legal entities that are deemed to pay corporate income tax includes:

• Capital companies
• Joint ventures
• Public economic enterprises
• Cooperatives
• Limited liability companies

Corporate income tax in 2021 is 25%, however it will be reduced to 23% in 2022. For companies located in Turkey must pay on all earnings within the country and overseas, while those not registered in Turkey will only need to pay whatever they amount they earned in Turkey. 

When it comes to taxes on expenditures, Value Added Tax is assessed on companies. Tax slab in Turkey for Value Added Tax is 1%, 8%, and 18%. 

Goods and services are categorized into three tax slabs.  Besides value added tax, there is special consumption tax charged only once and is charged on petroleum products, planes, yachts, automobiles, alcohol, tobacco, and luxury items. 

Foreign-owned companies must pay banking and tax stamp duties in Turkey. Wealth tax is assessed on individuals and legal entities. Property tax, inheritance tax, gift tax, and motor vehicle tax are assessed as well. The government offers tax incentives to taxpayers in certain instances. 

As a foreign business owner, finding a trustworthy and reliable consulting company for a successful company formation in Turkey. Damalion takes pride in its stellar track record of meeting and exceeding the needs of most foreign entrepreneurs through impeccable, effective, and honest services. Our global service network consists of specialists from various fields that help streamline the Turkey company formation process. From bank account opening, taxation, bookkeeping, and accounting solutions, we have the connections and expertise to help optimize your opportunities in Turkey. To learn more, reach out to a Damalion expert today. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.