Market Entry Guide Turkey.

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1. Introduction
2. Modes of Setting up a Business in Turkey
   1. Incorporated Companies
   2. An Office of Foreign Entity
   3. Unincorporated Company
   4. Reforms in the FDI law
   5. Average Time (in days) Required for Setting up a Business
3. Procedures for Immigration
   1. Visa Policy of Turkey
   2. Procedure for Obtaining Residence Permit
   3. Procedures for Work Permit
   4. Work permit for a person Other than Key Personnel
   5. Average Living Costs for Expatriates
   6. Average Rent for Office Space in Turkey
4. Social Security System in Turkey
   1. Overview
   2. Social Security Schemes in Turkey
5. Special Investment Zones in Turkey
   1. Introduction
   2. Technology Development Zones – Techno parks
   3. Organized Industrial Zones (OIZs)
   4. Industrial Zones
   5. Free Zones
6. Overview of Banking Sector
   1. Introduction
   2. Procedure for Opening a Bank Account
7. Recruitment of Local Staff
   1. Major Recruitment Agencies and Websites
   2. Brief Overview of Labour Laws
   3. Average Salary Range
8. Taxation
   1. Tax System in Turkey
   2. Tax Rates
   3. Tax Incentives
   4. Investment Incentive System or Tax Incentives
   5. Double Tax Treaty
9. Appendix
   Appendix I: Useful Links and Addresses
10. Disclaimer

1 Introduction

Turkey is a democratic nation with a total population of 71.5 million as of 31 December 2008. About 75 percent of the population lives in district centres and provinces. As per TurkStat, the official Turkish statistical institute, the country’s GDP (at constant prices) grew 0.9 percent in 2008. Turkey’s total exports in 2008 stood at EUR 90.2 billion. The country’s major export partners are Germany, the United Kingdom (UK) and the United Arab Emirates (UAE), with the major export items including textiles and related items. Turkey’s total imports for the year stood at EUR 138 billion. Its major import partners include Russia, Germany, China, the United States (US) and Italy, with the major import items being machinery and mechanical equipment.

The industrial sector is the largest employer in the country followed by the trade sector.¹ Within the industrial sector, textile and clothing industries provide employment to 30 percent of the total workforce. The private sector has an active and significant participation in Turkey’s economic growth; however, the Turkish government continues to play a vital role with a major ownership stake in the industrial, transportation, banking and communication sectors.²

The country ranked 20th on the (UNCTAD) United Nations Conference on Trade and Development’s list of FDI recipient nations in 2008. The foreign exchange reserve with Turkey’s central bank was recorded at EUR 47.9 billion as of 9 October 2009.³ Turkey’s stable economic and political environment helps it attract FDI. The country reformed its FDI laws in 2003 and streamlined the processes for setting up a new business by removing administrative bottlenecks. Now, it is a country with ‘best practices’ for setting up a business.⁴

Major foreign investments have come through mergers and acquisitions over the last three or four years, and real estate, petrochemicals, refining, construction and trade were the sectors that attracted the most FDI,⁵ with the net FDI inflow reaching EUR 524.1 million in August 2009.⁶

The country’s new research and development (R&D) law, effective from 1 April 2008, encourages foreign investment by providing tax incentives, exempting all R&D expenditure from being taxed. As per the law, R&D personnel, too, become eligible for an 80 percent deduction on their income tax.⁷ Attracted by such taxation policies, the soft drink behemoth Coca Cola is in the final stages of setting up an R&D centre in the country.⁸

The following report aims to discuss the most important issues pertaining to the administrative, legal and financial aspects of setting up businesses and hiring personnel, as well as the living conditions in Turkey.

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2 Modes of Setting up a Business in Turkey

This section discusses the common investment vehicles available to foreign investors, the procedures to be followed in order to establish them and the related regulations for each investment mode.

Table 1 lists the most common modes of setting up business entities in Turkey by foreign investors and the legal particularities involved in each process.

Table 1: Different Modes of Setting up Business in Turkey

MODES OF SETING UP A BUSINESS
Incorporated companies	Merchant/Single proprietorship Commercial partnership (Joint stock company, limited company, collective company, commandite company) Co-operative association
An office of a foreign entity	Liaison office Branch office
Unincorporated companies	Joint venture

Istanbul Chamber of Commerce – Company Establishment and Registration Procedures in Turkey 2007;
Turkish Embassy – London – Setting up a company

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2.1 Incorporated Companies

Turkey has a highly business-friendly environment. The registration and establishment of a company can be done within one day in Turkey.

2.1.1 Different Types of Companies⁹

Merchant/Single proprietorship

• The person who is running the commercial establishment individually is accepted as a firm.

Commercial partnership¹⁰

• Joint Stock Company: The share capital of a Joint Stock Company is divided into shares. The liability of the shareholders is limited to the capital subscribed and paid by them.
  • The following is a list of essentials for a joint stock company in Turkey:
    • The minimum number of shareholders required to set up a joint stock company is five. These can include real and legal persons.
    • The minimum capital required for a joint stock company is EUR 28,125 (YTL 50,000).
    • Company organs including general assembly, board of directors and supervisory board should be present in a joint stock company.
    • Limited Company: The liability of the shareholders in a limited company is limited to the capital subscribed by the shareholder.
  • The following is a list of essentials for setting up a limited company:
    • There must be a minimum of 2 legal or real persons up to a maximum of 50 in a limited company.
    • The minimum capital required to set up a limited company is EUR 2,812 (YTL 5,000).
    • No stock certificate is required to be issued by the limited company.
• Commandite Company: A Commandite Company is established to operate a commercial enterprise under a trade name. The liability of some shareholders is limited to the capital subscribed and paid by the shareholders; for some shareholders there is no limitation of liability. The partner whose liability is unlimited is known as the active partner or commandite.
  • A commandite company has the following characteristics:
    • The commandite can only be a legal entity.
    • There is no minimum capital requirement to set up a commandite company.
    • The rights and duties of the shareholders are defined in the Articles of Association.
• Collective Company: It is a company established for the purpose of engaging in commercial activities under a common trade name, and the liability of none of the shareholders is limited only to the capital subscribed and paid by the shareholder.
  • A collective company has the following characteristics:
    • All the shareholders of a collective company must be natural persons.
    • There is no minimum capital requirement.
    • The rights and duties of the shareholders are defined in the Articles of Association of the company.
• Co-operative Association: This is a business association established by persons who want to jointly supply various needs connected with their professions, craft, and livelihoods. The Co-operative Association is based on a principle of mutual help and suretyship.¹¹

Arrangements related to Co-operative Associations are governed by the Co-operatives Law.

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2.1.2 Steps to Establish a New Company¹²

There are minor differences in the procedures for setting up different types of companies. The following points detail the procedure for establishing an incorporated company in Turkey:

The required documents and statements as detailed in the following sections (Section 2.1.2.1– 2.1.2.5) should be submitted to the Trade Registry Offices (TRO) in the province where the new company is to be established.

The TRO will provide approval only if the documents and statements are in accordance with the legal requirements. The rights of a third person should be duly covered by the documents.

On approval by the TRO, each company is provided with a unique registration number.

The Istanbul TRO maintains computerised copies of all the statements and documents submitted and also files them in the company dossiers.

The TRO in Ankara publishes registrations and participations of the new company in the ‘Turkish Commercial Registration Newspaper’.

Digital copies of the official newspaper published in Turkish are also maintained and filed in the related company dossiers.

The fee for registration formalities is announced on a yearly basis by the Ministry of Finance.

The charges for publishing the registrations and participations in the Turkish Commercial Registration Newspaper are decided by the Union of Chambers, Ankara.

Figure 1 illustrates the major steps followed while establishing a new company.

Figure 1: Steps Followed for Setting up of a Company

Istanbul Chamber of Commerce – Company Establishment and Registration Procedures in Turkey 2007

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2.1.2.1 Documents Required to Set Up a Merchant Organisation

The following documents must be submitted to the TRO of the province where the company is to be established:

A petition duly signed by the merchant

The notary-certified company name – it should also include the following details:

• Home address
• Business address
• Purpose/subject of the business
• Date of commencement of operation
• Nationality of the merchant
• Name of the company

The document should also include three specimen signatures of the merchant.

A translated and notary-certified copy of the merchant’s passport| The Chamber Registration Statement including a photo of the merchant

The letter of commitment bearing the merchant’s signature

If the merchant is a foreign national living and working in Turkey, he/she is also required to submit their notarised copy of residence and work permit to the TRO.

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2.1.2.2 Documents Required to Set Up a Joint Stock Company or a Limited Company

The following documents must be submitted to the TRO of the province where the company is to be established:

A petition (including the name of the Tax Office of Registration) signed by the authorised person or proxy

• The notarised copy of or original Power of Attorney document must be submitted along with the petition

Five copies of the Establishment Statement completely filled in and signed by the authorised person

Three copies of the Articles of Incorporation certified by the notary public

• If the foreign partner is a natural person, he/she should submit two translated copies of his/her passport and certified by the notary public.
• If the foreign partner is a legal entity, the following documents should also be submitted:
  • The Activity Certificate of the foreign entity prepared by the relevant authority in the entity’s home country
    • The Activity Certificate should include information about the signature executives of the company
  • The Power of Attorney, including information regarding the person or the authority or the natural person responsible for the establishment procedure of the company in Turkey. It should include the following details:
    • The title of the company to be established
    • The name of the person who is authorised to represent the company
  • Signatures of the Turkish Consulate in the investor’s country should be present on the Activity Certificate and Power of Attorney
  • The above certificates should also be notarised and translated into Turkish.
  • Two copies of the Signature Declarations of the authorised persons under the company name
  • A copy of the bank receipt from the Ziraat Bank, Bilkent Plaza Branch, proving deposit of 4/10,000 of the company’s capital to the Arbitration Court, or the ETF receipt which is signed and stamped as ‘collected’
  • The Chamber Registration Statement including the photos of natural partners
  • Letter of Commitment bearing signatures of the authorised person

It is mandatory to obtain permission from the Ministry of Trade and Industry for the documents created for establishing the company. The Articles of Incorporation approved by the notary public are to be approved by the Ministry of Trade and Industry Domestic Trade Department.

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2.1.2.3 Documents Required to Set Up a Collective Company

The following documents must be submitted to the TRO of the province where the company is to be established:

A petition (including the name of the Tax Office of Registration) bearing the signature of the authorised person or the proxy

• A notarised copy of or the original Power of Attorney

Five copies of the Establishment Statement completely filled in and signed by the authorised persons

Three copies of the Articles of Incorporation, certified by the notary public and signed by all the partners

Two copies of the declaration with the company officials’ signatures

A document bearing the company’s name

Two copies of the passport approved by the notary public, translated into Turkish

The Chamber Registration Statement including photographs of natural partners in the company

The letter of commitment duly signed by the authorised person

The notarised residence permit (in the case of foreign nationals residing in Turkey)

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2.1.2.4 Documents Required to Set Up a Commandite Company

The documents required for the establishment of a commandite company include all the documents required for the establishment of a collective company. If the limited partner is a legal entity, it is also required to submit the following documents:

The Activity Certificate of the company prepared by the relevant authority in the investor’s country; the certificate should also include the executives’ signatures

The Power of Attorney with information about the authority or the natural person responsible for the establishment of the company in Turkey

• The attorney should mention the title of the company proposed to be set up in the country
• It should also mention the name of the person authorised to represent the company

The documents listed above must bear signatures of the Apostle or the Turkish Consulate in the foreign investor’s country.

The approved certificates should be translated into Turkish.

2.1.2.5 Documents Required to Set Up a Co-operative Organisation

The following documents must be submitted to the TRO of the province where the company is to be established:

A petition bearing the signatures of the authorised persons

Two copies of the Articles of Incorporation approved by the ministry concerned and two copies of its notarised summary

The Letter of Permission issued by the ministry concerned

Name of the co-operative signed by the board members of the proposed co-operative

The Statement of Chamber Registration bearing the partner’s photo

Two copies of the passport translated and certified by the notary public

The notarised residence permit (to be submitted only by foreign nationals living in Turkey)

As per Article No. 56 of the Law for Co-operatives, the executive board members should be citizens of Turkey

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2.2 An Office of Foreign Entity

Foreign nationals are allowed to set up a liaison office or a branch office of their entity in Turkey. The procedure and documents required for setting up a liaison office and a branch office are detailed below:

2.2.1 Liaison Office¹³

Liaison offices are a special type of office the main activity of which is to conduct market research and feasibility studies and accumulate investment opportunities in the Turkish market on behalf of their head offices. They are not allowed to be involved in any commercial activity.

2.2.1.1 Procedure for the Establishment of a Liaison Office

The investors have to obtain permission from the General Directorate of Foreign Investment¹⁴

| The General Directorate of Foreign Investment grants initial permission for three years
| The period permitted could be extended after considering the past operations and future activity plans of the liaison office

2.2.1.2 Documents Required to Set Up a Liaison Office¹⁵

The following documents must be submitted to the General Directorate of Foreign Investment of Turkey:

The ‘Certificate of Activity’ certified by the Turkish Consulate or approved as per the provisions of the ‘Convention Abolishing the Requirement of Legalisation for Foreign Public Documents’, prepared on the basis of the H ague Conference on International Private Law

The balance sheet and income statement or the operational report of the investor’s parent company

The Power of Authority disclosing the name of the person responsible for operating the liaison office in Turkey

A Power of Attorney is also required in case a person other than the authorised person is required to perform duties necessary for establishing the company

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2.2.2 Branch Office¹⁶

Foreign companies whose capital is divided into shares can open a branch in the country on receiving approval from the Ministry of Commerce and Industry (MoCI).

2.2.2.1 Procedure and Documents Required for the Establishment of a Branch Office

First, the investing company appoints a fully authorised company representative who is a resident of Turkey.

The following documents must be submitted to the Directorate General of the Domestic Trade¹⁷ of the MoCI:

A petition bearing signatures of the authorised representative or the investing company’s stamp; the petition should include the following details:

• Date of the setting up of the company
• Country of origin of the investing company
• The capital of the company
• Name, nationality and address of the representative who resides in Turkey
• A letter of commitment stating that the authorised representative will adhere to all relevant regulations and laws required for operating in Turkey
• Branch office address
• Field of activity or activities undertaken by the branch

The following documents should also be attached to the petition:

A document (both the original and a Turkish translation) proving that the decision to set up a branch office in Turkey was made by the company’s authorised organs.

The original copy of the Articles of Association and a translated copy (in Turkish)

The original copy and a Turkish translation of the Establishment Document with information about the following:

• The company’s location
• The legal system followed by the company

The original copy and a Turkish translation of the recent Activity Status of the company

The original and translated copies of the Power of Attorney made in the name of the company representative

The representative should carry out activities as defined by the company’s Article of Association

• The representative will represent the company in all cases resulting from the branch’s operations in the court of law as a defendant, claimant or a third party
• In case a subordinate office is opened by the company, the representative will assign the new representative for the subordinate office
• The newly assigned representative will have powers similar to those enjoyed by the assigning representative.

The above documents, other than the petition, should be ratified by the notary public and approved by the Consulate General of Turkey in the country of the company’s head office or apostilled as per the ‘Convention Abolishing the Requirement of Legislation for Foreign Public Documents’.

After receiving approval from the MoCI, the following documents are to be submitted to the TRO:

Establishment petition and notice form

• The petition has to be in Turkish and bear the signatures of the authorised person.
• Where the company is nominating a representative, a copy of the Power of Attorney translated into Turkish must be attached, too.
• All the attached documents should be listed on the petition that is filed.
• Five copies of the Establishment Petition and Notice Form signed by the authorised person are to be submitted.

Two notarised copies of the Power of Attorney issued in the name of a representative residing in Turkey

Letter of approval issued by the MoCI

Special documents known as ‘Muzeyyel Bayanname ve ilani’, provided by the MoCI to the company if the approval is granted

A notarised copy of the identity proof (in case the authorised person is a Turkish national)

A notarised copy of the passport of the authorised person

The authorised person’s notarised signature circular with information about the title of the person at the branch should also be provided with the petition

A Letter of Commitment proving that all the information provided is true; the letter should bear signatures of the authorised person

A duly filled in Chamber Registry Declaration Form affixed with passport-size photos of the person in charge of the branch; the Chamber Registry Declaration Form can be obtained from the TRO

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2.3 Unincorporated Company

2.3.1 Joint Venture¹⁸

The term Joint Venture was introduced to the Turkish legal system following the enactment of Communiqué number 2009/2 by the Ministry of Industry and Commerce. As per the Communiqué, a joint venture can be registered at the TRO if required, by the founders of the joint venture.

2.3.1.1 Procedure to Set up a Joint Venture¹⁹

The following points provide information about setting up a joint venture:

The agreement made for establishing a joint venture should be in writing and approved by the Turkish notary public. The agreement should include the following information:

Name of the joint venture

Name of the trade to be carried out by the partners

Leading partners in the company

Registered addresses of the joint venture partners

The extent of authorisation regarding the partners’ commitment and representation to the joint venture

A provision to the effect that the joint venture is set up to operate a commercial enterprise

An application for registry is submitted to the TRO of the place where the joint venture will be established

The Joint Venture can be deregistered from the trade registry office where it was registered on submitting a petition regarding the deregistration. The petition should bear the signatures of the partners of the joint venture.

The following documents can be downloaded from this Link:

Chamber Registration Statement for the legal entities

Chamber Registration Statement for merchants

Establishment Statement

Letter of Commitment

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2.4 Reforms in the FDI law²⁰

The Turkish government has introduced reforms to its Foreign Direct Investment Law. The new law removes various restrictions and simplifies the investment procedure. Below are some of the changes introduced to the FDI Law:

The FDI screening and approval procedures required in cases of setting up of a new business and share transfers have been removed.

• As per the new law, the foreign investor will not be required to obtain approval from the business set-up and share transfer except in case of some specific sector.
• The conditions for the establishment of a business and share transfers have been made uniform for local and international investors.

Earlier, prior approval was required for certain transactions of foreign investment companies; this requirement has been waived.

The earlier requirement regarding minimum capital investment of EUR 33,430 (USD 50,000) by each foreign shareholder has also been removed.

Previously, foreign investors could only set up a joint stock company or a limited company. Now, any form of company existing as per the Turkish Commercial Code, including partnerships, can be established by foreign investors.

The valuations done by the international credit agencies and courts or competent authorities of the investor’s country will also be accepted while determining the share value for marketable securities contributed as capital in kind.

The new foreign investment legislation is based on the principle of equal treatment for both domestic and foreign investors.

Both foreign capital companies located in Turkey and domestic investors now have similar rights with respect to the acquisition of real estate.

The legal entities of a foreign country can hire foreign personnel in Turkey if the personnel have work permits granted by the Ministry of Labour and Social Security.

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2.4.1 Turkish FDI Law Based on Equal Treatment Principle²¹

The Turkish law is based on equal treatment of national and foreign business investors. Some principles of the Foreign Direct Investment Law 4875 of Turkey are outlined below:

Unless there is an international agreement or a special law, foreign investors in Turkey have an equal right to make investments and participate in all types of companies and sectors which are open for investment to the domestic investors.²²

There will be no expropriation or nationalisation of FDI, except in the following cases:

• If it is required for the interest of the general public
• If payment has to be made for compensation as per the law

Investors are free to transfer their net profits, dividends, licence fee, fees received for management or other similar arrangement, etc. to other countries.

Foreign investors can approach the authorised local courts, national or international arbitration, or any other means for settlement of disputes arising from investment agreements, public concession contracts and other conditions concluded with the foreign investors. However, the related regulations must be fulfilled and parties to the arbitration should have mutually agreed to the settlement procedure.

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2.5 Average Time Required for Setting up a Business

It is necessary to meet certain regulations such as registration of the business before actually starting off with the operations of a new business. The fewer the procedural hurdles, the less time is required to set up a new business.

Table 2 gives an overview of the time and cost involved in starting a new business in Turkey:

Table 2: Starting a Business in Turkey

DATA RELATED TO STARTING A BUSINESS	YEAR - 2010
Rank	18th (in the world)
Procedures (number)	6
Duration (number of days)	6
Cost (percent GNI per capita)	14.2
Minimum Capital Required (percent GNI per capita)	9.5

The World Bank Group - Doing Business Turkey

Turkey follows a pro-business approach to attract FDI .The country has very few investment-related procedures for starting a new business. The Turkish government made reforms to its FDI law in 2003 and removed the requirements for pre-entry screening and the minimum capital investment.²³

Figure 2 shows a comparison between the time and procedures required for setting up a business in Turkey with that in some other countries:

Figure 2: Obstacles in Starting Businesses in Various Countries (2009)

World Bank – Doing Business 2010 –Turkey

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3 Procedures for Immigration

Foreign nationals visiting Turkey should carry their visa and passport while entering the country. The visa and work permit regulations of the country are discussed in this section.

3.1 Visa Policy of Turkey²⁴

The consul in the diplomatic or consular mission of Turkey makes decisions regarding the granting of visas. Foreign nationals looking to visit Turkey must obtain a visa from the Turkish embassy in their country.

Foreigners who wish to work in Turkey need to obtain a work visa.

On entering Turkey, foreigners have 90 days to apply for and secure the residence permit. Before obtaining the residence permit, foreigners should carry documents such as a driving licence and national passport for identification purposes.

The visa and passport requirements for each country can be accessed through this link.

Here is an overview of the different types of visas and the issuing authority depending on the duration of stay:

Foreigners who wish to stay in Turkey for less than 30 days can obtain the visa at the foreign port of entry, including Turkish airports.

Foreign nationals who wish to stay in Turkey for more than 30 days can obtain a visa from the Turkish Embassy in their country. A visa granted for more than 30 days is known as a special visa.

• A person with a special visa has to obtain a residence permit from the Turkish Security Directory.

3.1.1 Overview of the Turkish Visa Policy

Some of the points regarding visa requirements in Turkey are given below:²⁵

The visa application must be completed and submitted to the Visa Officer. The visa form can be downloaded from the Turkish Consulate website.

• The form can also be downloaded from this link or
• The form can be obtained from the Consulate General by sending a letter of request along with a self-addressed and stamped envelope.

The passport of foreign nationals should be valid for at least six months when they reach Turkey.

The travel document holders should ensure that their travel documents are valid for a minimum of one year from the date of entry into Turkey.

All payments for the visa and other administrative fees should be paid in cash, by postal order or company cheque payable to ‘Turkish Consulate General’.

• Other modes of payment such as credit cards, debit cards and personal cheques are not accepted.
• The visa fee varies depending on the nationality and type of visa.
• The visa fee is non-refundable on refusal.

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3.1.2 Types of Visas Issued by the Turkish Authorities²⁶

The visas issued by Turkish authorities are divided into entry visa and transit visa.

Table 3 shows different types of visas and the duration of stay permitted by them:

Table 3: Type of Visa and Length of Stay Permitted

VISA TYPE	DURATION	DOCUMENTS REQUIRED
Single Entry Visa	3 months (maximum period)	Original signed passport valid for 6 months One blank visa page for visa stamp A 2x2 inch passport size photo
Multiple Entry Visa	3–6 months in the same year (no limit on the number of entries)	Original passport valid for 6 months beyond the period of intended stay One blank visa page for visa stamp A 2x2 inch passport size photo

Source: Expat Forum.com – Article: Turkey visa, permit and immigration

Single Transit Visa – This visa allows for only one transit through Turkey.

Double Transit Visa – This visa allows for two transits through Turkey.

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3.1.3 Visa Extension Policy²⁷

If a foreign national wishes to stay in Turkey for a period longer than what is permitted by the visa, he/she needs to apply to the Ministry of Interior for an extension. Turkish law does not have provisions for extending visa duration, but foreign nationals can obtain a residence permit to stay longer in the country. The residence permit is also approved by the Ministry of Interior.

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3.2 Procedure for Obtaining a Residence Permit²⁸

Foreign nationals who wish to stay in the country for more than 30 days are required to obtain a residence permit. The residence permit can be granted for a maximum period of one year. The following points describe the procedure to be followed for obtaining a residence permit in Turkey:

The foreigner should file an application to the Turkish consulate and embassy for a residence permit.

The visa application of foreign nationals must include information regarding the desired duration of stay.

The visa must be obtained before entering Turkey.

If the government has denied a visa to a person, he/she also becomes ineligible for the residence permit.

If a foreign national wishes to extend the duration of his/her residence permit, he/she should approach the local security authorities with a valid reason for extending their stay.

3.2.1.1 Documents Required for Obtaining the Residence Permit

Educational certificate

Five passport size photos

A copy of the passport with the visa

Residence permit fee

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3.3 Procedures for Work Permit²⁹

The work permit of foreign personnel employed in companies, branches or liaison offices is governed by the Department of Work Permit. The Turkish law regarding work permits differentiates between the special direct foreign investment and nondirect foreign investment and the key personnel.

As per the law, a company or branch will be treated as ‘special direct foreign investment’ upon fulfilment of certain conditions, some of which are provided below:

The last recorded annual turnover of the company or branch must be at least EUR 2,792 million (61,04 million Turkish Lira).

The last exports of the company or branch must be at least EUR 0.6 million (USD 1 million).

The branch or company should employ at least 250 personnel registered with the Social Securities Institution.

Foreign shareholders should have a share capital of at least EUR 371,535 million (812,277 million Turkish Lira) in the company.

As per the law, a person shall be treated as key personnel upon fulfilment of certain conditions, some of which are provided below:

The person should be an executive or in senior management.

He/She should be responsible for managing the company or a part of it.

He/She should supervise or check the work done by the company’s auditors, administrative or technical personnel.

He/She should have the right to hire and terminate personnel, or should have rights to make suggestions in this regard.

If a company specifies the conditions for special direct foreign investments and the foreign national specifies the conditions for becoming key personnel, they need to submit documents of proof showing that they meet the necessary requirements.

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3.3.1 Documents to be Submitted by the Foreign National

A work permit application made to the Ministry of Labour and Social Security

Four copies of the application form, bearing recent photographs of the foreign national, duly signed by the employer and the foreign personnel

A copy of the passport and diploma translated in Turkish duly notarised or approved by the consulate of Turkey

A notarised copy of the residence permit – the residence permit, other than for education purposes, has to be valid for six months and the application has to be made within this period.

• If a person fails to comply with these conditions, he/she may be required to apply to the Foreign Representative of Turkey in his/her country.

A copy of the CV prepared in Turkish.

• The CV form can be downloaded from this link.

The status document informing whether the applicant is a partner representative or a key personnel – the status document must be provided by the employer and approved by the competent authority.

If the foreign national wants to apply for work permit within the framework of professional services, he/she should submit the following additional documents:

A Diploma Equality Certificate obtained in as per the Regulations for Equality of Foreign H igher Education Diplomas as per Articles 3 and 7/p of Law 2547 – if the foreign national is pursuing education in a foreign country

A certificate from the professional institution of the foreign country establishing the fact that

• The foreign national is pursuing his/her profession in the country.
• He/She is a member of a professional organisation and has not been forbidden from carrying out his/her profession.

If the foreign national is carrying out consultancy and technical instruction work, he/she should also submit the certificate of work description and copy of agreement between the firms or between the firm and the person.

If the foreign national is an engineer, architect or urban planner providing consultancy and technical instruction of any kind, or has prepared projects for an international tender issued by public institutions and establishments, and worked as authorised signatories, he/she should submit a covenant establishing the fact.

• The covenant should be duly certified by the notary public or consulate.

Information regarding the additional documents required to be submitted by the professional can be accessed through the website Department of Work Permit for Foreigners – Direct Foreign Investment.

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3.3.2 Documents Required to be Submitted by the Employer

A work permit application made to the Ministry of Labour and Social Security.

Documents establishing the fact that the company follows Article 4 of Regulations on ‘The Employment of Personnel of Foreign Nationality in Direct Foreign Investment’.

Last year’s balance sheet and statement of profit and loss duly certified by the tax administration or a chartered accountant.

If the institution applying for a work permit is a company with foreign capital, it should submit the Turkish Trade Registry Gazette or an approved copy of the same including information about the last capital and the partnership structure.

If the foreign national is covered by the country’s social security system, he should submit a document to the effect issued by the public authorities of the foreign country – the document should be translated into Turkish and duly notarised.

The list of last month’s insured service provided to the Turkish and foreign staff should also be submitted.

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3.4 Work permit for a person Other than Key Personnel

The type of work permit issued to a person other than key personnel and the terms and conditions pertaining to the same are given below:

3.4.1 Work Permit for a Definite Period of Time

It is issued for a maximum of one year (except in cases where differing terms are provided by bilateral or multi-lateral agreements signed by Turkey).

The visa may be extended for a duration of three years on application.

• The extension is subject to the condition that the person will continue to work in the same workplace, job or enterprise.

3.4.2 Work Permit for an Indefinite Period of Time

Foreign nationals who have been lawfully residing in Turkey for the past eight years or have been working in the country for the past six years can be granted a visa for an indefinite period of time.

The eight-year residence in Turkey does not include the period of education for the applicant.

• The person applying for a work permit has to submit a certificate and required documents to the Ministry.
• The certificate is issued by the police authorities. This certificate establishes the fact that the person had a legal and uninterrupted residence in the country.

If the applicant has been working in the country for the past six years, he has to submit a certificate and the required documents to the Ministry of Labour and Social Security.

• The certificate establishes the fact that the person has worked in Turkey for the past six years. It is issued by the relevant authorities.

The duration of the residence permit for nationals who are issued a work permit for an indefinite period is determined by the Ministry of Internal Affairs as per the rules relating to the foreigner’s residence and travel in Turkey.

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3.4.3 Independent Work Permit

The independent work permit is issued to the following foreign nationals:

• Who will work independently
• Who have been residing in Turkey lawfully for the last five years
• The period of five years does not include the applicant’s duration of education.
• The work of the applicant shall help increase the employment and economic development of the country.

The applicant has to submit a certificate along with the required documents to the Ministry.

• The certificate establishes the fact that the applicant had stayed in the country lawfully for the last five years.
• The certificate is issued by the police authorities.
• The duration of the residence permit for nationals who are issued an independent work permit is determined by the Ministry of Internal Affairs as per the rules relating to the foreigner’s residence and travel in Turkey.

The exceptions to the above conditions regarding work permit can be accessed through the website Department of Work Permit for Foreigners.

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3.5 Average Living Costs for Expatriates³⁰

The cost of living is reasonable in Turkey compared with other European nations such as Germany and France. Property owners in the country have to pay a ‘council tax’ normally about EUR 25.2 (50 YTL) a year. The average electricity and water bill is about EUR 251.5 per year. Most families in Turkey spend an average of EUR 10.1 per week on food items, while eating out costs about EUR 18.8 per person per day. The country’s retail sector is characterized by both small local shops and big national and international superstores, giving plenty of choice for consumers.

Turkey’s purchasing power index in July 2009 was 73.3. The consumer price index rose by10.1 percent in 2008, with the biggest rise seen in the price of food and non-alcoholic beverages. Prices in this category rose by 11.9 percent in 2008.³¹

3.6 Average Rent for Office Space in Turkey³²

According to a report published by Jones Lang LaSalle, the average rental price for prime office space in Turkey was EUR 360 per square metre per year in the second quarter of 2009, down from EUR 480 in the last quarter of 2008. The 25 percent decline in the prime rates was mainly due to the global economic crisis, as companies have started moving from high-rent to low-rent areas, especially near the Asian side of Istanbul. Recently, Ümraniye, a district in Turkey, has experienced strong growth in the demand for office space, due to its suitable location and good quality of office space.

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4 Social Security System in Turkey

4.1 Overview³³

As per Article 60 of the Turkish Constitution, everyone in Turkey has the right to social security. The social security system in the country is composed of the following three major organisations:

Social Insurance Institution (SSK)

Pension Fund for Civil Servants (Emekli Sandigi)

Social Security Institution for the Self-Employed (Bag-Kur)

The following is an overview of the organisations involved in the social security system of Turkey:

4.1.1 Social Insurance Institution

SSK is responsible for the welfare of workers in the private sector and blue-collar workers employed in the public sector.

The organisation provides social insurance and healthcare insurance to all workers operating under the service contract.

The members of SSK are insured for work injuries, professional job diseases, medical care, illness, disability and maternity care.

For healthcare security, the payment scheme for drugs is based on a co-payment system. For instance, an outpatient buying drugs would pay 10 percent of the cost if he/she is retired and 20 percent of the cost if he/she is employed.

Members are entitled to the old age pension when they reach a specified age and have paid their regular contributions.

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4.1.2 Pension Fund for Civil Servants (Emekli Sandigi)

Emekli Sandigi is a government-operated retirement fund for retired civil servants. It also provides benefits for members’ health insurance. The benefits of the fund are as follows:

If a retired civil servant purchases drugs, he/she has to pay 10 percent of the cost of the drug and the remainder is paid by the fund.

The civil servants are not supposed to pay health insurance premiums; the entire expenditure is funded by the government.

Other privileges include retirement pension, retirement bonus and a death grant payable to the survivors of a pensioner.

4.1.3 Social Security Institution for the Self-employed (Bag-Kur)

Bag-Kur covers self-employed people not covered by the Social Insurance Institution. The members include craftsmen, artisans, technical and professional workers (affiliated to a chamber or professional association), shareholders of companies other than co-operatives and joint stock companies, and those selfemployed in agricultural activities. The members of Bag-Kur have to make varied contributions to the healthcare fund (on a scale of 1 to 24, 1 being the lowest contribution) depending on their financial health.

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4.2 Social Security Schemes in Turkey³⁴

Turkey has the following social security schemes:

Old age

Invalidity

Survivorship

Work accident and occupational diseases

Healthcare

Unemployment

Non-contributory payments

Table 4 shows the contribution made by individuals, their employers and the Turkish government to the schemes:

Table 4: Overview of the Various Categories of Insurance

BRANCH OF INSURANCE	PERCENTAGE CONTRIBUTION BY THE EMPLOYED	PERCENTAGE CONTRIBUTION BY THE EMPLOYER	PERCENTAGE OF TOTAL CONTRIBUTION	CONTRIBUTION BY THE GOVERNMENT
Invalidity Old age Survivorship	9	11	20	One-fourth of the total annual contribution
Short-term insurance (covers employment injuries, occupational diseases, sickness, maternity)	No contribution	1-6.5	1-6.5
Universal health insurance	5	7.5	12.5
Unemployment	1	2	3	1

Council of Europe – Social Security System in Turkey

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Table 5 provides an overview of the categories of people covered by the schemes and the benefits availed by them:³⁵

Table 5: Overview of the various Categories of People Covered by the Schemes

NAME OF THE SCHEME	PERSON COVERED BY THE SCHEME	PERIOD OF CONTRIBUTION	BENIFIT
Old-age pension	People aged 65 years or above	Civil servants and selfemployed – 9,000 days Workers – 7,200 days	Old age pension Lump sum Payment
Invalidity	People who lost at least 60 percent of the working and earning capacity after being insured	At least 10 years of employment being insured with 1,800 premium days Exception: If a person needs regular care of others, then the law does not require him to serve 10 years of employment. The self-employed should not have any insurance premium debts.	Invalidity pension
Duty invalidity	Civil servants	A person working in the public sector is treated as duty invalid in the following cases: Invalidity occurred while protecting his/her institution Invalidity occurred while travelling to and from the workplace	Duty invalidity pension
Survivorship	Widow Widower Parents of employed Children of employed	Workers, civil servants and selfemployed – 1,800 days The survivors of a worker are eligible for the pension if the deceased was insured for the past five years and had a premium payment period of 900 days, excluding the debt period.	Old age pension Lump sum payment Marriage payment Funeral payment
Healthcare	Citizens of Turkey living in the country People employed in Turkey transferred to a foreign country for business requirement Refugees Stateless people Foreigners residing in Turkey not covered by the insurance scheme of their country	Minimum 30 days of contribution in the preceding year with no debt in the preceding 60 days	Old age pension Lump-sum payment Marriage payment Funeral payment

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5 Special Investment Zones in Turkey³⁶

5.1 Introduction

Turkey has four types of special investment zones classified on the basis of their function, aim, geographical factors, applicable benefits and minimum investment requirement.

Below is a brief description of each of these four zones:

5.2 Technology Development Zones – Techno parks

Technology Development Zones (TDZs) are areas developed to promote R&D activities, fuelling investment in high-technology fields. Currently, there are 31 such TDZs,18 of which are operational and the remaining 13 have been approved and are under construction. Six TDZs are located in Ankara and three each in Istanbul and Kocaeli. More TDZs located in other provinces.

Table 6: TDZs in Turkey*

S.NO.	TDZ	LOCATION	STATUS	WEBSITE
1	METU Technopolis (METUTECH)	Ankara	Operational	www.metutech.metu.edu.tr
2	TUBITAK Marmara Research Centre	Kocaeli	Operational	www.mam.gov.tr
3	Izmir Technology Development Zone	Izmir	Operational	http://iztekgeb.iyte.edu.tr
4	Ankara Cyberpark	Ankara	Operational	www.cyberpark.com.tr/eng
5	GOSB Technopark	Kocaeli	Operational	www.gosbteknopark.com/English
6	ITU Ari Technopolis	Istanbul	Operational	www.ariteknokent.com.tr

Invest In Turkey – Special Investment Zones
*Note: The list is not exhaustive. Please access the entire list of TDZs in Turkey here

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5.2.1 Incentives Offered in TDZs

Offices are immediately available for rent.

The necessary infrastructure is readily arranged on office premises.

Any profit earned through R&D or software is subject to exemption from income and corporate taxes until 31 December 2013.

Exemption from VAT is also valid until 31 December 2013 for deliveries of application software, developed exclusively in TDZs.

This covers software for systems management, data management, business applications, the Internet, mobile phones and military usage.

Researchers including R&D or software personnel employed in the zone are exempted from paying taxes on their salary until 31 December 2013.

For IT-specific sectors, there are provisions for VAT exemption, applicable until 31 December 2013.

5.3 Organized Industrial Zones (OIZs)

OIZs are areas designed with readily available infrastructure and social facilities, creating an investor-friendly environment. Infrastructure facilities in these zones include roads, water, natural gas, electricity, communications, waste treatment, etc. Currently, there are 258 such OIZs in 80 provinces, 134 of which are in operation while the remaining 124 are under construction.

Table 7: OIZs in Turkey*

S.NO.	OIZ	LOCATION	STATUS	WEBSITE
1	Ostim	Ankara	Operational	www.ostim.org.tr
2	Ivedik	Ankara	Operational	www.ivedikosb.org.tr
3	Ikitelli	Istanbul	Operational	www.iosb.org.tr
4	Izmir Ataturk	Izmir	Operational	www.iaosb.org.tr
5	Gebze	Kocaeli	Operational	www.gosb.com.tr
6	Gebze TOSB-Taysad	Kocaeli	Operational	www.tosb.com.tr

Invest In Turkey – Organized Industrial Zones
*Note: The list is not exhaustive. Please access the entire list of OIZs in Turkey here

Municipality tax is waived for construction and usage of the plant. Exemption is also granted on solid waste if the OIZ does not benefit from municipality service.

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5.4 Industrial Zones

Industrial zones are allocated areas suitably designed for largescale and technology-sensitive investments. The investment sites are evaluated by the Ministry of Industry and Trade, after which the Council of Ministers grants approval for industrial zones. The minimum amount of area for an investment site must be 1,500 m2. Investments must also be made in high-technology sectors. All benefits applicable to OIZs are also sanctioned for industrial zones.

5.5 Free Zones

Free zones are special areas within the political borders of Turkey but considered outside the customs area. These areas are allocated with the aim of encouraging export-oriented investment. Any legal or administrative regulations in the commercial, financial or economic fields applicable within a customs area are either completely null and void or partially implemented in such zones. There are currently 20 operational free zones in Turkey, situated close to the EU and Middle East markets, and adjacent to major Turkish ports on the Mediterranean, Aegean and Black seas, providing easy access to international trade routes.

Table 8: Free Zones in Turkey*

S.NO.	FREE ZONE	LOCATION
1	Adana Yumurtalik Free Trade Zone	Ceyhan/Adana
2	Antalya Free Trade Zone	Yeniliman/Antalya
3	European Free Zone	Corlu/Tekirdag
4	Bursa Free Zone	Gemlik/Bursa
5	Denizli Free Zone	Cardak/Denizli
6	Eastern Anatolian Free Zone	Erzurum

Invest In Turkey – Free Zones
*Note: The list is not exhaustive. Please access the entire list of Free Zones in Turkey here

5.5.1 Incentives Offered in Free Zones

The following are the incentives applicable for the free zones in Turkey:

Full waiver of customs duties and other assorted duties

Full waiver of corporate income tax for all manufacturing companies

Full waiver of VAT and special consumption tax

Full waiver of income tax on employees’ salaries (for companies that export a minimum of 85 percent of the FOB value of the goods they produce in such free zones; the goods can remain in free zones for an infinite time period)

Freedom for companies to allocate their profits earned from the operations in Free Zones to Turkey or abroad

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6 Overview of the Banking Sector³⁷

6.1 Introduction

The Turkish financial system is dominated by the banking sector as most transactions or activities involving money and the capital markets are handled by banks. State banks were established mainly to finance particular industries (e.g. Ziraat Bank for agriculture); however, private banks in the country have close ties with large industrial groups and holdings.

In the early 1930s, the Central Bank was founded and given regular bank responsibilities, such as to protect the currency, issue bank notes, and regulate the banking system and credit. It was only after 1983 that the bank reduced its lending and started strengthening its supervisory roles.

In 1980, only four foreign banks were present in Turkey, but their number has increased rapidly to almost 50 after the liberalisation of the economy.

All banks in Turkey come under the jurisdiction of the Banks Act and the provisions of other laws regarding banks. The new laws led to the creation of the Banking Regulation and Supervision Agency (BRSA or Turkish BDDK) to protect the rights and benefits of depositors. The Banks Association of Turkey (BAT, or Turkish TBB) was founded to protect and promote the professional interests of its members and is considered the representative body of banking in the industry.³⁸

A total of 45 banks with 8,798 branches in Turkey and 53 branches abroad are operating as of July 2009.

Table 9: Banking Structure in Turkey

CATEGOTY OF BANK	SUBCATEGORY	NUMBER OF BANKS	NUMBER OF BANKS
Commercial Banks			32
	Banks under the Deposit Insurance Fund	1
	Foreign Banks Foreign banks founded in Turkey – (11) Foreign banks with branches in Turkey – (6)	17
	Privately-owned Commercial Banks	11
	State-owned Commercial Banks	3
Non-depository Banks			13
	Foreign Non-depository Banks	4
	Privately-owned Non-depository Banks	6
	State-owned Non-depository Banks	3
Total Banks			45

All About Turkey

The list of major banks covered under each subcategory and their websites are provided in the Appendix.

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6.2 Procedure for Opening a Bank Account³⁹

The following is the guideline to open a bank account in Turkey:

First, a tax number must be obtained from the local tax office.

While applying for a tax number, a valid passport and local address must be presented. It is advisable to keep photocopies of these documents.

Using the tax number, one may open an account with any bank.

A nominal tax fee is charged for opening an account.

In addition, Turkish residents may possess or purchase foreign currency without limitation from banks, authorised institutions and private financial institutions. Foreign currency can be transferred abroad or deposited in local bank accounts. Turkish residents can obtain operating credit from foreign sources to run a business. Capital may be transferred abroad for commercial activities or investment purposes, subject to a maximum limit in the amount. A higher amount may be transferred on approval by the concerned authorities.

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7 Recruitment of Local Staff

There are various recruitment channels available in Turkey, including online recruitment, headhunting agencies, media advertisements (newspapers, brochures, magazines, TV and broadcasting), on-site recruiting, job fairs, internal references and ‘walk-in’ interviews.

7.1 Major Recruitment Agencies and Websites

The table below shows major recruitment agencies in Turkey and their websites:

Table 10: Major Recruitment Agencies and Websites

TOP THREE INTERNET RECRUITMENT AGENCIES	WEBSITES
Karier.net	www.kariyer.net
Kelly Services Turkey	www.kellyservices.com.tr
Manpower Turkey	www.manpower.com.tr
Randstad Turkey	www.randstad.com.tr
Leading Headhunting agencies	websites
One World Consulting	www.oneworldconsulting.com
Antal International Turkey	www.atlanticresearch.com/regions/turkiye.htm

http://www.newswiretoday.com/news/46907/ ;
http://www.manpower.com.tr/ ;
http://www.oneworldconsulting.com/ ;
http://www.atlanticresearch.com/regions/turkiye.htm ;
http://www.kellyservices.com.tr/

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7.2 Brief Overview of Labour Laws⁴⁰

Turkey has a significant advantage in the form of low labour costs. This factor, coupled with a developing market and investment incentives, make Turkey an attractive destination for foreign investors. The range of labour skills varies widely from the unskilled, through the semi-skilled and up to a highly skilled labour force. The workforce consists of a plethora of unqualified, semi-qualified and qualified workers. The highly qualified workers have a good command of multiple languages.

7.2.1 Labour Law

The Turkish Labour Legislation covers a number of acts such as the Labour Act (effective from 2003), the Maritime Labour Act, the Act Concerning Labour/Management Relations in the Press, the Trade Unions Act, the Collective Agreements, Strikes and Lock- Outs Act, the Social Insurance and Unemployment Insurance Act, the Labour Courts Act, the National H oliday and General Vacations Act, the Weekend H oliday Act, the Employment Services Act, the Labour Office’s Act, the Apprentice, Artisan and Master Workmen Act, the Civil Servants’ Trade Union Act and Employment of Foreign Employees’ Act. The most significant among these is the Labour Act, the application of which covers a majority of the workforce.

7.2.1.1 New Labour Act

This act came into force in June 2003 and covers the relationships between employers and employees. It is completely in line with the regulations specified by the International Labour Organization and the European Union. The act is more protective towards employee interests.

Its salient features are listed below:

7.2.1.1.1 The Principle of Equality

This aspect covers all prohibitions on discrimination based on language, race, gender, political opinion, religion, philosophical viewpoints, etc. It is also inclusive of discrimination based on the employee’s sex or whether the employee is employed full/ part-time.

7.2.1.1.2 Employment Contracts

This section covers matters pertaining to contracts signed between the employer and the employee along with the obligations associated with each. Employment contracts cover three main areas:

Temporary/Permanent work

Definite/Indefinite period

Part-time/Work upon call

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7.2.1.1.3 Principal Employer / Sub-Employer Relation

This section pertains to the conditions required to hire a subemployer. It also has provisions to protect the interests of employees working for the sub-employer, holding both the principal employer and sub-employer accountable.

7.2.1.1.4 Probationary Period

This section pertains to details regarding an employee’s probationary period, the maximum duration of the probation and the maximum extension available under different contract types along with the terms and conditions of termination.

7.2.1.1.5 Termination of Employment Contract

Under this section, different conditions of termination of contracts followed by obligations on each party are specified in detail. The main categories for termination of employment contracts are listed below:

Termination of Employment Contracts for Definite Period

Termination of Employment Contracts for Indefinite Period

• Termination of Contract with Notification
• Termination of Contract without Notification on Justifiable Grounds

Severance Pay

Collective Dismissal of Employees

7.2.1.1.6 Working Conditions

Working conditions pertain to issues regarding wages and salaries, bonuses and other extra payments, working hours, overtime work, compensating work, break hours, annual vacation and maternity leave, among others.

7.2.1.1.7 Obligations to Employ Disabled Persons, Ex-Offenders and Victims of Terrorism

The obligations on employers to hire disabled people and exoffenders are specified. As per the Law, companies employing more than 50 workers have to hire disabled people and ex-offenders. The terms of their employment is considered based on their professional capacity, psychological and physical condition. The number of employees to be hired for each category is also specified.

7.2.2 Employment of Foreigners

This law pertains to the work permits issued to expatriates and came into effect in September 2003. It cites the conditions for a foreign national to be employed in Turkey, covering issues such as work permits, visas and residence permits. Step-by-step procedures for issuing a work permit, obtaining a visa, etc., have been specified along with information on the maximum duration for each type and the regulatory authority concerned.

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7.3 Average Salary Range

The median salary ranges (per year) by job, employer type, years of experience, city and company size in Turkey in 2009, as per PayScale, are presented in Tables 11-15

Table 11: Median Salary by Job in Turkey for 2009

JOB	MEDIAN SALARY (IN EUR)
Software Engineer/Developer/Programmer	20,451
Senior Software Engineer/Developer/ Programmer	30,087
Project Manager – Information Technology (IT)	40,116
Mechanical Engineer	19,710
Country Manager – General Operations	79,785
Marketing Manager	47,303
Finance Manager	34,901

Payscale 2009

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Table 12: Median Salary by Employer Type in Turkey for 2009

EMPLOYER TYPE	MEDIAN SALARY (IN EUR)
Company	25,028
Private Practice/Firm	23,095
College/University	18,272
Government – State and Local	18,855
Other Organisations	23,830
Foundation/Trust	22,064
Non-profit Organisation	14,041
Hospital	12,818
Government – Federal	21,025
Franchise	31,535
Self-employed	16,046
Contract	40,116
Team	16,046
School/School District	14,709

Payscale 2009

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Table 13: Median Salary by Years of Experience in Turkey for 2009

EXPERIENCE	MEDIAN SALARY (IN EUR)
Less than 1 year	15,705
1–4 years	17,143
5–9 years	27,104
10–19 years	45,697
20 years or more	48,282

Payscale 2009

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Table 14: Median Salary by City in Turkey for 2009

CITY	MEDIAN SALARY (IN EUR)
Istanbul	24,749
Adana	23,401
Angora	22,064

Payscale 2009

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Table 15: Median Salary by Company Size in Turkey for 2009

NUMBER OF EMPLOYEES	MEDIAN SALARY (IN EUR)
1–9	14,843
10–49	22,196
50–199	24,910
200–599	26,442
600–1,999	28,640
2,000–4,999	31,419
5,000–19,999	34,762
20,000–49,999	24,141
50,000+	49,460

Payscale 2009

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8 Taxation

8.1 Tax System in Turkey

The tax system in Turkey can be classified into three main categories––income taxes, taxes on expenditure and taxes on wealth. The corporate tax rates in Turkey are the most competitive among the OECD (Organisation for Economic Co-operation and Development) member nations. On 21 June 2006, a new Corporate Tax Law was enacted making significant amendments to the current applications, while simultaneously incorporating new concepts in the tax legislation.⁴¹

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8.2 Tax Rates

8.2.1 Income Tax

All individuals, whether domestic or foreign, along with corporations residing in Turkey, are liable to pay income tax on all income sources. Any non-resident earning an income in Turkey through the channels of employment, ownership of property, business transactions or any other income-generating activity is also liable to pay taxes, but only on that income which is earned in Turkey.

8.2.1.1 Corporate Income Taxes

The basic corporate income tax rate levied on any business profit is 20 percent.

Table 16: Tax Withholdment on Select Payments of Turkish Resident Corporations

CATEGORY	SUBJECT TO (PERCENT)
Dividends	15
Interest on treasury bill and treasury bonds	0
Interest on other bonds and bills	0
Bank deposits	15
Profit shares paid by participation banks in consideration of participation accounts	15
REPO agreements	15

Invest in Turkey

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Table 17: Tax Withholding on Select Payments of Non-Resident Corporations

CATEGORY	SUBJECT TO (PERCENT)
Dividends	15
Interest on treasury bill and treasury bonds	0
Interest on other bonds and bills	0
Bank deposits	15
Profit shares paid by participation banks in consideration of participation accounts	15
REPO agreements	15

Invest in Turkey

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8.2.1.1 Individual Income Taxes

Income tax rate on a personal basis varies from 15 percent to 35 percent. Income tax rates applicable for the year 2009 are as follows:

Table 18: Income Tax Rates

INCOME SALES IN EUR (TRY)	RATE (PERCENT)
Up to 3980 (Up to 8,700)	15
3,981–10,063 (8,701–22,000)	20
10,063–22,870 (22,001–50,000)	27
22,870.4 and above (50,001 and above)	35

Invest in Turkey

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8.2.1.3 Social Security

Social security is viewed not as a tax, but as a payroll cost to the employer. Contributions are made by both the employer and the employee towards a social security system covering areas such as sick pay, work-related accidents, unemployment coverage, pensions and other such programmes.

Table 19: Contribution Rates

CONTRIBUTION ON BEHALF OF	RATE (PERCENT)
Employer	19.5
Employee	14

Invest in Turkey

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8.2.2 Taxes on Expenditure

8.2.2.1 Value Added Tax (VAT)

All commercial, industrial, agricultural, independent professional goods and services, imported goods and services and their deliveries caused by other activities are subject to VAT. The applicable rates are as follows:

Table 20: VAT Rates

CATEGORY	RATE (PERCENT)
General	18
Financial leasing services, etc.	Depends on the VAT on the leased item
Basic foodstuffs, textile products, etc.	8
Certain agricultural products	1

Invest in Turkey

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8.2.2.2 Special Consumption Tax (SCT)⁴²

Different tax rates are applicable on four main product groups under this category:

Petroleum products, natural gas, lubricating oil, solvents and derivatives of solvents: specific tax rates

Automobiles and other vehicles, motorcycles, planes, helicopters, yachts: 1 percent to 84 percent

Tobacco and tobacco products, alcoholic beverages: 25 percent to 275.6 percent

Luxury products: 6.7 percent to 20 percent

SCT is charged only once, unlike VAT which is applicable on each delivery.

8.2.2.3 Banking and Insurance Transaction Tax

This tax is levied on banking and insurance company transactions (which remain exempted from VAT). Income earned by banks, such as on loan interest, is subject to this form of tax.

Table 21: Tax Rates

CATEGORY	RATE (PERCENT)
General	5
Inter-bank deposit transactions	1
Repossessions	1
Money market transactions between banks and brokers	1
Sale of government bonds and T-bills	1
Sale of foreign currency	0.1

Invest in Turkey

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8.2.2.4 Stamp Duty

Stamp duty is applicable on a wide range of documents such as contracts, agreements, notes payable, capital contributions, letters of credit or guarantee, financial statements and payrolls. The duty is levied as a percentage (usually 0.75 percent) of the value of the document. H owever, for rental contracts and salaries it is 0.15 percent and 0.06 percent, respectively.

Taxes on Wealth⁴³

These taxes are classified into three categories:

Inheritance and gift taxes: 1–30 percent

Property taxes

Motor vehicle tax: revised annually

Real estate tax is applicable to buildings and land owned in Turkey at the rates given below:

Buildings: 0.1–0.4 percent

Land: 0.1–0.6 percent

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8.3 Tax Incentives⁴⁴

Tax incentives are offered on a varied basis for separate classes of geographical areas and different sectors of expertise such as R&D, educational corporations, cultural investments and enterprises. Special incentives are offered to the four categories of special investment zones in Turkey, as explained earlier.

Explained below are the VAT exemptions inclusive of, but not limited to the transactions listed below:

Exports pertaining to goods and services

Roaming services offered in Turkey for non-resident clients (i.e. located outside Turkey), on a par with international roaming agreements, with a reciprocity condition duly in place

All petroleum exploration ventures

Global transportation

Any delivery made to a diplomatic representative, consulate or international organisation with a tax exemption status including their employees

Supplies of machinery and equipment, inclusive of imports for people or corporations that have valid investment certificates issued by the authorities concerned and also happening to be VAT payers

All services employed at airports or harbours for aircraft or vessels

Deliveries made to governments or other related organisations for health, cultural, educational and other services (social and other exemptions)

Banking and insurance transactions (subject to the Banking and Insurance Transactions Tax 5 percent and hence exempted from VAT)

Earnings of corporations derived from their branches abroad or both their domestic and foreign ventures, on meeting specified criteria

R&D allowances

Corporations claiming expenditures pertaining to certain donations, aid or sponsorships for sports activities (entitled to deductions from tax)

8.4 Investment Incentive System or Tax Incentives⁴⁵

Turkey’s Investment Incentive System comprises various tax incentive schemes, continuously amended to enhance investments in manufacturing, services, energy, exports, etc. Both local and foreign investors have equal access to the following schemes:

General investment incentive scheme

Incentives for large-scale investments

Regional and sector-based incentives

Incentives on employment

R&D support

Support for SMEs

Industrial Thesis (SANTEZ) programme

Loans for technical development projects

Training support

State aid for exports

8.4.1 General Investment Incentive Scheme

This is mainly a tax benefit programme with some credit possibilities in particular cases. The investments vary depending on factors such as location, scale and subject of investment. The major incentives are:

Waiver of customs duties on imported machinery and equipment for projects possessing an incentive certificate

VAT waiver on local purchase or import of machinery and equipment for projects with an incentive certificate

8.4.2 Incentives for Large-Scale Investments

For investments made before 31 December 2010, the corporate tax rates applicable would be between 2 percent and 10 percent.

For investments made after 31 December 2010, rates applicable would be between 4 percent and 15 percent.

Employers’ contribution towards the social security premium is covered subject to a maximum of seven years.

Allocation of land

Investments are invited in sectors such as chemicals, oil, transit pipeline services, automotive, railways, ports, electronics, pharmaceuticals and medicine, aviation, machinery and mining, among others.

*Note: Further details regarding this topic can be found here

8.4.3 Region- and Sector-based Incentives

For investments made before 31 December 2010, the corporate tax rates applicable would be between 2 percent and 10 percent.

For investments beginning after 31 December 2010, rates applicable would be between 4 percent and 15 percent.

Employers’ contribution towards social security premium is covered subject to a maximum of seven years.

Allocation of land.

Incentives are allotted according to different geographical zones with each zone inviting a specific type of industry.

The industries include electronics, pharmaceuticals, machinery, automotive, medicine, textile, paper, food and beverages, agriculture and agriculture-based manufacturing, plastics, rubber, metal, tourism, health and education, among others.

Some additional sectors are offered incentives irrespective of their geographical location.

• These include investment types covered by Special Organized Industrial Zones which could profit from the region-based incentives, even if they are not among the sectors selected for that region.
• Investments on transportation of cargo and/or passengers by sea/air may benefit in specific zones.

Railway investments made by the private sector for cargo and/or passenger transportation are subject to incentives in all zones.

Heating/Cooling investments on housing by implementation of geothermal and/or power plant waste energy might benefit from zonal incentives.

*Note: Further details regarding this topic can be found here

8.4.4 Incentives on Employment

An employer’s share of social security premiums for newly employed women and unemployed people aged 18–29 years will be reimbursed under Unemployment Insurance Fund for five years, under terms and conditions applicable.

The Treasury will also cover five points worth of the insured person’s disability, old age and death insurance premiums paid by the employer.

For additional employment, an employer’s share of social security premiums, based on the minimum salary, will be borne by the Treasury for six months. The application period will expire at the end of 2009 and only the Council of Ministers’ approval could extend the application period up to another six months.

Premium contribution support offered is applicable to all new hired employees along with the number of personnel as of April 2009.

8.4.5 R&D Support

8.4.5.1 R&D Law

The R&D laws provide for special incentives in R&D investments on the condition of a minimum number of 50 employees in an R&D centre. These incentives are valid up to 2024 and include:

Full tax waiver on R&D expenditure, only if over 500 researchers are employed and half of the increase in expenditure in the current year over the past year is also eligible for exemption.

Exemption of 50 percent of the social security premium for employees for a duration of five years.

8.4.5.2 Technology Development Zones Support

Office space with infrastructure facilities is readily available for rent.

Profits on software and R&D activities are exempt from income and corporate taxes until 31 December 2013. Deliveries of software developed in the TDZs are exempted from VAT for the same period.

Salaries of researchers and employees in software and R&D units in the TDZs need not have tax deducted until 31 December 2013.

8.4.5.3 TUBITAK and TTGV

TUBITAK (Scientific and Technological Research Council of Turkey) and TTGV (Turkish Technology Development Foundation) help sponsor R&D related expenses and provide capital loans for R&D related projects. Some eligible projects for TUBITAK incentives are:

Concept development

Technological research and technical feasibility research

Laboratory studies in the transformation of a concept into a design

Design and sketching studies

Further details regarding TUBITAK and TTGV can be accessed from this Link

8.4.6 Support for SMEs

SMEs operate in industries such as manufacturing, agro-industry, tourism, education, healthcare, mining, and software development. They must have fewer than 250 employees and an upper limit on their annual revenue. Incentives for SMEs include exemption from customs duties and VAT exemption on imported or locally purchased machinery and equipment. The Small and Medium Sized Industry Development Organization (KOSGEB) supports SMEs in Turkey through channels such as finance, R&D, common facilities, market research, investment site, marketing, exports and training.

*Note: Further details regarding SME support can be accessed from this Link

8.4.7 Industrial Thesis (SANTEZ) Programme

This programme provides financial support for quality improvement, environmental modification, new technology adaptation and process development projects with university partnerships.

The support includes the following:

Direct grants could support as much as 75 percent of the project budget.

The project period is a maximum of three years and could be extended further by up to six months.

Laboratory analysis, test materials and equipment are supported

The project supervision committee is independent in function and the application file can be granted approval within four months.

8.4.8 Loans for Technology Development Projects

The Technology Development Foundation of Turkey (TTGV) provides long-term interest-free loans to help in technology development, energy efficiency improvement, renewable energy production and environmental-impact-reducing projects. The supports as per this scheme are provided below:

The maximum contribution per project is 50 percent.

The maximum budget per project is USD 1 million.

The total pay-back period after project execution is four years, including a one-year grace period.

8.4.9 Training Support

The National Recruitment Agency, ISKUR, provides support for vocational training projects subject to a maximum period of six months. It offers the following:

Interns and unemployed candidates registered at ISKUR are provided direct salary support during the pre-employment training period.

All social security premium expenses for occupational accidents or diseases are covered by ISKUR.

Programme expenses such as utility bills and trainers’ fees are partially paid by ISKUR to the employer.

A certain percentage of trainees must be employed after the programme.

In addition, the Ministry of National Education supports the following:

The opening of vocational schools with the desired programmes based on the ministry’s decision

General costs of a trainee team in every such high school for each specific programme

8.4.10 State Aid for Exports

This scheme aims to encourage exports and enhance the competitiveness of organisations on the international front. This mainly covers R&D activities, market research, participation in exhibitions and international fairs along with expenditures for trademarks, patents and industrial design.

8.5 Double Tax Treaty⁴⁶

A Double Taxation Prevention Treaty helps avoid double taxation by offsetting the tax paid in one of the two countries against the tax payable in the other. Turkey is a signatory to such a treaty with many countries around the globe. For more countries, draft agreements are at the discussion stages. A list of such countries with which agreements currently exist is given below (as of April 2008).

Table 22: List of Countries having a Double Tax Treaty With Turkey

NAME OF THE COUNTRIES
Albania	Algeria	Azerbaijan
Austria	Bahrain	Bangladesh
Belarus	Belgium	Bulgaria
China	Croatia	Czech Rep.
Denmark	Egypt	Ethiopia
Finland	France	Germany
Greece	Hungary	India
Indonesia	Iran	Israel
Italy	Japan	Jordan
Kazakhstan	Korea	Kuwait
Kyrgyz Rep.	Latvia	Lebanon
Lithuania	Luxembourg	Macedonia
Malaysia	Moldova	Mongolia
Morocco	Netherlands	Norway
Pakistan	Poland	Portugal
Qatar	Romania	Russia
Serbia	South Africa	Singapore
Slovakia	Slovenia	Spain
Sudan	Syria	Sweden
Tajikistan	Thailand	Tunisia
Turkmenistan	Ukraine	UAE
UK	USA	Uzbekistan

World Wide – Tax Turkey Double Taxation Prevention Treaties

The Double Tax Prevention Treaty also has provisions for exemptions or reduced rates on receipts such as interest, loyalties, dividends, capital gains and others connected by a transaction between parties associated with the treaty. Any income taxable under the Turkish Income Tax Ordinance but exempted or reduced under the Taxation Treaty is taxed according to the provisions of the Taxation Treaty.

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9 Appendix

Appendix I: Useful Links and Addresses

TYPE OF ORGANISATION	ADDRESS	CONTACTS	WEBSITE
MINISTRIES, AGENCIES aND SERVICES IN TURKEY
Embassy of the Grand Duchy of Luxembourg (Austria)		Mrs. Arlette PACCOUD-CONZEMIUS Luxembourg Non-Resident Ambassador for Turkey Tel : +43 1 478 2142 Fax : +43 1 478 2144 e-mail : vienne.amb@mae.etat.lu Mr. François BERG Secrétaire de Légation
Republic of Turkey Prime Ministry Investment Support and Promotion Agency	Ankara (Headquarters) Kavaklidere Mahallesi Akay Caddesi No: 5 Cankaya 06640 Turkey	Email: info@invest.gov.tr Tel: +90 312 413 89 00	http://www.invest.gov.tr/default.aspx
Ministry of Labour and Social Security	Inönü Boulevard No: 42 Emek ANKARA, Turkey	Tel: +90 312 296 60 00	http://www.calisma.gov.tr/en/
Istanbul Stock Exchange	İstanbul Menkul Kıymetler Borsası Reşitpaşa Mah. Tuncay ARTUN Cd. EMİRGAN 34467 İSTANBUL, Turkey	Email: international@imkb.gov.tr Tel: +90 212 298 21 00	http://www.imkb.gov.tr/Home.aspx
Ministry of Foreign Affairs	Balgat, Ankara, Turkey 06100	Tel: +90 312 292 10 00	http://www.mfa.gov.tr/default.en.mfa
Central Bank of The Republic of Turkey	Istiklal Cad. 10 Ulus, 06100 Ankara, Turkey	Email: iletisimbilgi@tcmb.gov.tr Tel: +90 312 310 3646	http://www.tcmb.gov.tr/yeni/eng/
Turkish International Cooperation and Development Agency	Atatürk Bulvarı No:15 Ulus-Ankara Turkey	Email: tika@tika.gov.tr Tel: +90 312 508 10 00	http://www.tika.gov.tr/TR/
Turkish Embassy in Luxembourg	Ambassade de Turquie 49, Rue Siggy vu Lëtzebuerg L-1933 Luxembourg GRAND-DUCHE DE LUXEMBOURG	Email: ambtrlux@pt.lu Tel: +90 352 44 32 81	NA
Under-secretariat of The Prime Ministry of Foreign Trade	T.C. Başbakanlık Dış Ticaret Müsteşarlığı İnönü Bulvarı No:36 06510 Emek, Ankara, Turkey	Email: www@dtm.gov.tr Tel: +90 312 204 75 00	http://www.dtm.gov.tr/dtmweb/indexen.cfm
Istanbul Chamber of Commerce	Istanbul Chamber of Commerce Readiye Cad. 34112 Eminunu, Istanbul	Email: info@us-istanbul.com	http://www.ito.org.tr/wps/portal
Embassy of Turkey in Belgium	Embassy of Turkey in Belgium 4, Rue Montoyer Bruxelles, Belgium	Email: brussels@turk-konsolos.be Tel: +32 2 502 3110 Tel: +32 2 502 5002	NA
Embassy of Belgium in Ankara, Turkey	Mahatma Gandhi Caddesi, 55 Gaziosmanpaşa Ankara Turkey	Email: Ankara@diplobel.fed.be Tel: +90 312 405 6166	http://www.diplomatie.be/ankara/
Ministry of Industry and Trade	NA	Tel: + 90 312 219 65 00 Email: necmettinto@sanayi.gov.tr	http://www.sanayi.gov.tr
Ministry of Finance	NA	NA	http://www.maliye.gov.tr

 

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The list of major banks covered under each subcategory*:

Total Banks (45)

Commercial Banks (32)
Banks Under the Deposit Insurance Fund (1)
NAME	WEB ADDRESS
Birlesik Fon Bankasi A.S.	www.fonbank.com.tr
Foreign Banks (17)
Foreign Banks Founded in Turkey (11)
NAME	WEB ADDRESS
Arap Turk Bankasi A.S.	www.arabturkbank.com
Citibank A.S.	www.citibank.com.tr
Denizbank A.S.	www.denizbank.com
Deutsche Bank A.S.	www.db.com
Eurobank Tekfen A.S.	www.eurobanktekfen.com
Fortis Bank A.S.	www.fortis.com.tr
HSBC Bank A.S.	www.hsbc.com.tr
ING Bank A.S.	www.ingbank.com.tr
Foreign Banks Having Branches in Turkey (6)
NAME	WEB ADDRESS
ABN AMRO Bank N.V.	www.abnamro.com.com.tr
Bank Mellat	www.mellatbank.com
JPMorgan Chase Bank N.A.	www.jpmorganchase.com
Privately-owned Commercial Banks (11)
NAME	WEB ADDRESS
Adabank A.S.	www.adabank.com.tr
Akbank T.A.S.	www.akbank.com.tr
Alternatif Bank A.S.	www.abank.com.tr
Anadolubank A.S.	www.anadolubank.com.tr
Sekerbank T.A.S.	www.sekerbank.com.tr
Foreign Banks Having Branches in Turkey (6)
NAME	WEB ADDRESS
Turkiye Cumhuriyeti Ziraat Bankasi A.S.	www.ziraatbank.com.tr
Turkiye Halk Bankasi A.S.	www.halkbank.com.tr
Turkiye Vakiflar Bankasi T.A.O.	www.vakifbank.com.tr

Non-depository Banks (13)
Foreign Non-depository Banks (4)
NAME	WEB ADDRESS
BankPozitif Kredi ve Kalkinma Bankasi A.S.	www.bankpozitif.com.tr
Calyon Yatirim Bank Turk A.S.	www.calyon.com.tr
Merrill Lynch Yatirim Bank A.S.	www.ml.com.tr
Taib Yatirim Bank A.S.	www.yatirimbank.com.tr
Privately-owned Non-depository Banks (6)
NAME	WEB ADDRESS
Aktif Yatirim Bankasi A.S.	www.aktifbank.com.tr
Diler Yatirim Bankasi A.S.	www.dilerbank.com.tr
GSD Yatirim Bankasi A.S.	www.gsdbank.com.tr
State-owned Non-depository Banks (3)
NAME	WEB ADDRESS
Iller Bankasi	www.ilbank.gov.tr
Turk Eximbank	www.eximbank.gov.tr
Turkiye Kalkinma Bankasi A.S.	www.tkb.com.tr

*The above list is not exhaustive. For a detailed list of banks, kindly refer to the website All About Turkey

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10 Disclaimer

The Government of the Grand Duchy of Luxembourg declines all responsibility regarding the use of information featured in this document. The contents are provided for information purposes only. They contain information which is not necessarily complete, exhaustive, precise or up to date. In the event of discrepancies between the texts of this publication and the original documents, the original documents as officially published shall apply. This publication may refer to external sites over which the Government of the Grand Duchy of Luxembourg has no control and for which it declines all responsibility.

 

February 2010

 

Luxembourg for Business
19-21 Boulevard Royal
L-2914 Luxembourg
Grand Duchy of Luxembourg
info@luxembourgforbusiness.lu
www.luxembourgforbusiness.lu

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