Turkey is a democratic nation with a total population of 74,72 million as of 31 December 2011. About 75 percent of the population lives in district centres and provinces. 1 In 2010, the country’s GDP was at EUR 528,37 billion (USD 736 billion) and GDP per capita was at EUR 7,236 (USD 10,079). The country’s exports and imports value are EUR 81,84 billion (USD 114 billion) and EUR 132,811 billion (USD 185 billion) respectively. The country’s major export partners are Germany (10,1 percent); UK (6,3 percent); Italy (5,7 percent); Iraq (5,3 percent); France (5,3 percent). Its major import partners include Russia (11,6 percent); Germany (9,5 percent); China (9,3 percent); USA (6,6 percent); Italy (5,5 percent). The country’s Trade Agreements includes Customs Union Agreement with the European Union (EU) Free Trade Agreements with Albania, Bosnia Herzegovina, Chile, Croatia, EFTA member countries (Switzerland, Norway, Iceland and Liechtenstein), Egypt, Georgia, Israel, Jordan, Macedonia, Montenegro, Morocco, Palestine, Serbia, Syria, and Tunisia. 2 Turkey remains dependent on § 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. 5
The net international direct investment inflow has been EUR 4.491,90 million (USD 6.257 million) in 2010. The net international direct investment inflow has been EUR 451,556 million (USD 629 million) in November 2010. 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. According to the law, R&D personnel, too, become eligible for an 80 percent deduction on their income tax. 7
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.
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.
Istanbul Chamber of Commerce – Company Establishment and Registration Procedures in Turkey 2007;
Turkish Embassy – London – Setting up a company
Turkey has a highly business-friendly environment. The registration and establishment of a company can be done within one day in Turkey.
Arrangements related to Co-operative Associations are governed by the Co-operatives Law.
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.
Istanbul Chamber of Commerce – Company Establishment and Registration Procedures in Turkey 2007
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:
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.
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
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
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.
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
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)
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 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.
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)
According to Article No. 56 of the Law for Co-operatives, the executive board members should be citizens of Turkey
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:
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.
The investors have to obtain permission from the General Directorate of Foreign Investment 12
| 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
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 according to 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
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).
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 Trade 15 of the MoCI:
A petition bearing signatures of the authorised representative or the investing company’s stamp; the petition should include the following details:
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 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 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 according to 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
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
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. According to the Communiqué, a joint venture can be registered at the TRO if required, by the founders of the joint venture.
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 trade to be carried out by the partners
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
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.
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 stipulated by 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.
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. 20
There will be no expropriation or nationalisation of FDI, except in the following cases:
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.
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:
The World Bank Group – Doing Business Turkey 2012
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. 21
Figure 2 shows a comparison between the time and procedures required for setting up a business in Turkey with that in some other countries:
World Bank – Doing Business June 2011 – Turkey
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.
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.
Some of the points regarding visa requirements in Turkey are given below: 23
The visa application must be completed and submitted to the Visa Officer. The visa form can be downloaded from the Turkish Consulate website.
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’.
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:
Source: Expat Forum.com – Article: Turkey visa, permit and immigration and US Passport Service Guide
Single Transit Visa – This visa allows for only one transit through Turkey.
Double Transit Visa – This visa allows for two transits through Turkey.
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.
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.
A copy of the passport with the visa
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.
According to 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 2.625 million (6.104 million Turkish Lira).
The last exports of the company or branch must be at least EUR 0,515 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 349,279 million (812,277 million Turkish Lira) in the company.
According to 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.
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.
A copy of the CV prepared in Turkish.
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 by the Regulations for Equality of Foreign H igher Education Diplomas according to 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
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.
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.
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.
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:
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.
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.
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 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 according to the rules relating to the foreigner’s residence and travel in Turkey.
The independent work permit is issued to the following foreign nationals:
The applicant has to submit a certificate along with the required documents to the Ministry.
The exceptions to the above conditions regarding work permit can be accessed through the website Department of Work Permit for Foreigners.
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 characterised 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 by 10,1 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. 29
According to a report published by Jones Lang LaSalle, the prime rental levels in 2011 were stable around EUR 4,5-5,0 per square metre per month.
According to 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:
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:
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.
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.
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 self-employed 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.
Turkey has the following social security schemes:
Work accident and occupational diseases
Table 4 shows the contribution made by individuals, their employers and the Turkish government to the schemes:
Council of Europe – Social Security System in Turkey
Table 5 provides an overview of the categories of people covered by the schemes and the benefits availed by them: 33
Civil servants and self-employed
– 9.000 days Workers
– 7.200 days
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.
A person working in the public sector is treated as duty invalid in the following cases:
Turkey has three types of special investment zones – Technology Development Zones – Technoparks, Organized Industrial Zones (OIZs) and Free 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 three zones:
Technology Development Zones (TDZs) are areas developed to promote R&D activities, fuelling investment in high-technology fields. Currently, there are 39 such TDZs, 27 of which are operational and the remaining 12 have been approved and are under construction. Six TDZs are located in Ankara and five in Istanbul and three in Kocaeli. More TDZs located in other provinces.
Invest In Turkey – Special Investment Zones
*Note: The list is not exhaustive. Please access the entire list of TDZs in Turkey here
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 2023.
Exemption from VAT is also valid until 31 December 2023 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 2023.
For IT-specific sectors, there are provisions for VAT exemption, applicable until 31 December 2023.
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 263 such OIZs in 80 provinces, 148 of which are in operation while the remaining 115 are under construction.
Ostim
Ivedik
Polatli
Aso I.
Baskent
Invest In Turkey – Organised Industrial Zones
*Note: The list is not exhaustive. Please acces”