How to Open a Company in Turkey

Starting a business in Turkey can be a rewarding opportunity, but it’s crucial to follow the proper procedures and adhere to legal requirements. In this article, we will brief you on the main topics for opening a company in Turkey, from understanding the Turkish Commercial Code to obtaining the necessary permits.

Key Takeaways

• Understanding the Turkish Commercial Code is crucial for both local and foreign investors, as it governs business laws and compliance in Turkey.
• Choosing the right business structure is vital for operations, tax liabilities, and overall success, with options such as Joint Stock Corporations and Limited Liability Companies.
• Securing the necessary business licenses and permits is essential for legal operation, with specific requirements differing across industries to ensure compliance and avoid penalties. These obligations are connected to import export regulations and have to be examined together.

Understanding the Turkish Commercial Code

A thorough understanding of the Turkish Commercial Code (TCC) is crucial for any successful business venture in Turkey. This comprehensive legal framework governs business law, ensuring orderly and lawful commercial activities. The TCC is essential for both local and foreign investors, offering a level playing field that encourages investment and economic growth.

One of the key advantages of the TCC is its inclusive approach to foreign investment. Foreign investors can establish companies in Turkey under the same legal conditions as local investors, with the ability to own 100% of a Turkish company. Foreign businesses enjoy the same rights and obligations as local companies under Turkish law, fostering confidence among international entrepreneurs looking to enter the Turkish market.

Compliance with local regulations is non-negotiable for successful company registration and operation in Turkey. It’s essential to understand industry-specific regulations from the outset to avoid legal issues. This proactive approach can save time and resources in the long run.

Compliance with local regulations extends beyond the registration process. Ongoing adherence to evolving laws with focus to import, export and tax regulations is vital for continued business success in Turkey. Regularly reviewing and updating business practices to align with current legal requirements helps maintain good standing and operational efficiency.

Overview of Turkish Business Law

Turkish business law is governed by the Turkish Commercial Code (TCC), which provides a comprehensive framework for companies operating in Turkey. The TCC outlines the rules and regulations for company formation, management, and operation, as well as the rights and obligations of shareholders, directors, and employees. The law also covers issues related to corporate governance, mergers and acquisitions, and bankruptcy.

In addition to the TCC, Turkish business law is also influenced by international laws and regulations, such as the Foreign Direct Investment Law, which aims to promote foreign investment in Turkey. The law provides a favorable business environment for foreign investors, offering incentives and protections for their investments.

Overall, Turkish business law provides a solid foundation for companies operating in Turkey, ensuring a stable and predictable business environment that supports economic growth and development.

Selecting the Appropriate Business Structure

Choosing the right business structure is a crucial step in forming a company in Turkey. The most common legal entities are Joint Stock Corporations and Limited Liability Companies, favored by foreign investors and companies in Turkey for their business-friendly features and flexibility, as they operate as a separate legal entity.

A Joint Stock Companies Corporation requires a minimum capital of TRY 250,000, while a Limited Liability Company requires a minimum capital of TRY 50,000. Each business structure has distinct legal and tax implications that must be understood prior to establishment. For instance, Limited Liability Companies may not engage in regulated activities such as banking and insurance, which is a critical consideration for businesses in those sectors.

Another option would be opening branch office; however, it does not constitute a separate legal entity from its parent company, emphasizing the connection and obligations between the branch and the parent firm.

Choosing the right business structure is not just a formality; it impacts operations, tax obligations, and growth potential. An informed decision at this stage paves the way for a successful business venture in Turkey.

Types of Companies in Turkey

Turkey offers certain types of companies that foreign investors can establish (including also the possibility to form a personal company for example), each with its own advantages and characteristics. But for investors who are planning to open a separate company in Turkey, we recommend concentrating on following two:

1. Limited Liability Company (LLC)

   This is the most popular type of company in Turkey, requiring a minimum share capital of 50,000 TRY. One of the shareholders must be also a member of the managing board. In this way LLC is quite perfect for organizations in which the shareholder(s) are actively part of the management and the daily business. LLCs offer limited liability protection for shareholders and are suitable for small and medium-sized businesses. However, shareholders and managing directors are partly or fully liable for debts towards the Turkish government intuitions.

2. Joint Stock Company (JSC)

   JSCs require a minimum share capital of 250,000 TRY and are suitable for larger businesses. They offer limited liability protection for shareholders and are listed on the Istanbul Stock Exchange. In JSC’s the shareholders can but do not have to be active parts of the management or daily business. The members of the board of directors are fully liable for debts towards the Turkish government intuitions. Another important advantage of JSC’s is that shares can be transferred easily and if the transfers are done within certain time limits, the share profits remain tax free.

Alternative business forms for foreign investors to operate in Turkey

If foreign investors do not prefer to open a separate company in Turkey, but would like to be present in Turkey in other forms, opening a branch office or liaison office can be considered:

1. Branch Office

   A branch office can be opened as a legal part of a foreign company for the operations in Turkey. It is not a separate legal entity and therefore still subject to the laws of the parent company’s country. At the same time, all activities of the branch office are subject to Turkish laws and taxation as well.

2. Liaison Office

   A liaison office is a representative office of a foreign company in Turkey. It is not allowed to engage in commercial activities and is subject to the laws of the parent company’s country. At the same time it has to obey to Turkish laws of course, especially in labor laws e.g.

Securing a Tax Identification Number

Securing a Tax Identification Number (TIN) is an essential step in the company registration process in Turkey. The TIN is a unique 10-digit code issued by the Turkish Revenue Administration for tax purposes, and it is mandatory for all official procedures and transactions. Without a TIN, you cannot open a bank account, purchase property, or legally operate your business.

Both residents and non-residents conducting taxable activities in Turkey are required to obtain a TIN. To secure a TIN for your business, you must submit your Articles of Incorporation and business registration form to the relevant tax office. Foreign nationals can apply for a TIN at the local Tax Office or online through the Interactive Tax Office portal, making the process accessible and straightforward.

Obtain your TIN as soon as your company is registered since it is required for subsequent business setup steps. Failure to secure a TIN can lead to penalties, fines, and transaction delays. Prioritizing this step ensures a smooth registration process.

Understanding the importance and process of obtaining a TIN helps avoid complications and sets your business on the path to compliance and success in Turkey.

Company Registration Process

Securing a Tax Identification Number and establishing a legal address, including a signed lease agreement, are mandatory before submitting registration documents. It is crucial to update the company’s registration and comply with legal requirements to ensure compliance with the Trade Registry Office and other authorities.

The registration process requires basic documentation, including passport copies, address proof, and a power of attorney, all of which must be notarized at public notaries in Turkey or Turkish consulates worldwide. Additionally, prepare your required documents, necessary documents, Articles of Association, and a notarized signature circular.

The application for company registration is submitted through the Central Registry Gazette (MERSIS). Additional industry-specific documents may be required based on your business activities. The entire registration process typically takes 1 to 2 weeks, depending on the completeness of your documentation and compliance with legal requirements.

With the publishment of your company in the trade registry gazette, you can get your tax number online and obtain a signature circular at the notary. With these documents and the lease agreement you can complete your tax registration and start VAT and other tax declarations. Adhering to these steps can streamline the process and ensure legal compliance.

Following these steps meticulously helps navigate the company registration process in Turkey with confidence and efficiency, paving the way for a successful business venture.

• Establishing a Legal Address

A legal address is crucial for company registration in Turkey. This can be a physical or virtual office, provided it is a legitimate location. A legal address is necessary for receiving official documents and serves as your company’s registered office.

A virtual office can significantly reduce operational costs compared to a traditional setup. They provide a professional address and mail-handling services, making them attractive for startups and small businesses looking to minimize expenses. Official documents will list the virtual office address if used for registration.

Carefully selecting your legal address ensures compliance with Turkish regulations and maintains a professional presence without excessive costs. This strategic decision offers long-term benefits for business operations and financial health.

• Opening a Corporate Bank Account

Opening a corporate bank account is vital for establishing your business in Turkey. Having a Turkish Tax Identification Number (TIN) and documentation, including proof of company registration and identification for representatives, ensures legal and efficient financial transactions.

Corporate bank accounts in Turkey support multiple currencies, including USD, Euro, GBP, and Turkish Lira, offering flexibility for international transactions. Additionally, there is no minimum balance requirement for foreign businesses, making it easier for new companies to manage their finances without the pressure of maintaining a high account balance.

• Hiring an Accountant

Hiring a local accountant is crucial for navigating the Turkish tax and social security system and ensuring financial compliance. Their specialized knowledge of Turkish tax laws aids in effective compliance and financial management, helping you avoid penalties associated with non-compliance.

Accountants ensure the timely filing of tax returns and social security declarations, vital for maintaining good standing with tax authorities and legal intuitions. They also inform businesses about changes in tax regulations and labor laws, allowing you to adapt strategies accordingly.

Moreover, annual financial statements must comply with Turkish Accounting Standards, showcasing your company’s financial status. Employing a competent accountant ensures accurate and compliant financial records, providing a solid foundation for your business’s financial health.

• Obtaining Business Licenses and Permits

Obtaining necessary business licenses and permits is crucial for legal operations in Turkey. Different industries require specific licenses to comply with regulatory standards. For example, telecommunications businesses need a GSM Operating License, while import/export businesses may need additional customs licenses.

Acquiring these licenses can take between 1 to 3 months, depending on the industry. Carefully preparing the required documentation facilitates an efficient licensing process. Failure to obtain necessary licenses can lead to legal action, penalties, or even business closure.

• Registering for VAT

Value-added tax (VAT) is a consumption tax levied on the value added to goods and services in Turkey. All type of sales of goods and services that are used in Turkey are subject to VAT in Turkey and must be declared by the delivering company. Only certain type of deliveries can be exempt from VAT.

To register for VAT, companies must apply to the local tax office, providing the necessary documents, including:

• Tax identification number: A unique number assigned to the company by the tax office.
• Company registration certificate: A certificate issued by the trade registry office.
• Articles of association: The company’s founding documents.

Once registered, companies must file VAT returns monthly. Failure to register for VAT or file returns can result in penalties and fines.

Navigating Corporate Tax Obligations

Navigating corporate tax obligations is crucial for running a business in Turkey. The standard corporate income tax rate is 25% as of 2024, applying to both local and foreign businesses, ensuring a uniform tax environment. Understanding this rate is fundamental to effective financial planning and compliance.

Corporate taxpayers in Turkey must file their annual tax return by April 25th following the calendar year. Companies also pay provisional tax quarterly based on estimated profits. Provisional tax returns must be filed electronically through the Revenue Administration’s E-Declaration System, ensuring timely compliance.

Understanding and managing corporate tax obligations avoids penalties and ensures compliance with Turkish tax laws. This supports financial planning and enhances your company’s credibility and operational integrity.

Summary

Starting a business in Turkey involves a detailed process, including understanding the Turkish Commercial Code, choosing the right business structure, obtaining a tax identification number, and completing the company registration process. Each step is essential for ensuring legal compliance and operational success.

From hiring an accountant to securing the necessary licenses and managing corporate tax obligations, every aspect of setting up a business needs careful planning and execution. Conducting market research and utilizing digital marketing strategies are also vital for understanding the Turkish market and effectively reaching your target audience.

Partnering with a law firm or consulting company can be extremely helpful in navigating the complexities of Turkish business regulations, ensuring that your company remains compliant and legally protected. By following the proper steps and seeking professional guidance, you can lay the groundwork for a successful business venture in Turkey.

Starting this journey requires determination, expert advice, and a deep understanding of the Turkish business landscape. With the right resources, you’ll be well-positioned to build a thriving business in Turkey.

Frequently Asked Questions

What is the Turkish Commercial Code and why is it important for my business?

The Turkish Commercial Code is essential for your business as it establishes a standardized legal framework that governs commercial activities in Turkey, ensuring fairness for both local and foreign investors. This promotes a stable environment for investment and economic growth.

What are the most common business structures in Turkey?

The most common business structures in Turkey are Joint Stock Corporations and Limited Liability Companies, which are favored for their business-friendly features and flexibility, particularly by foreign investors.

How do I obtain a Tax Identification Number in Turkey?

To obtain a Tax Identification Number (TIN) in Turkey, you should submit your Articles of Incorporation and business registration form to the relevant tax office. Foreign nationals can apply for a TIN either at the local Tax Office or online via the Interactive Tax Office portal.

What documentation is needed for company registration in Turkey?

For company registration in Turkey, you will need to provide passport copies, proof of address, a power of attorney, Articles of Association, and a notarized signature circular. Depending on your industry, additional specific documents may also be necessary. All documents must be notarized at public notaries in Turkey or Turkish consulates worldwide.