Turkey's FDI Law gives equal treatment to foreign and local investors by having the same rights and obligations.
The requirements regarding the establishment of a company and share transfers are the same for international investors and local ones. International investors can establish any type of company defined in the TCC, which recognizes and enforces international norms of corporate governance, encourages private equity and public offerings, ensures transparency, and brings the Turkish business environment into compliance with both European Union legislation and the European Union accession process.
Establishing a Business in Turkey
Turkey has implemented some reforms to make the setup of business easier in order to create an enabling investment climate. The results include reduced bureaucracy and cost and smoother procedures. Today, companies can be established through a 'one-stop shop' at Trade Registry Directorates within Chambers of Commerce, and the whole process can be completed in one day.
Types of Companies Under the TCC and Alternative Forms
The TCC provides for corporate and non-corporate forms of companies. Business organizations may be created as follows:
a. Corporate forms
- Joint Stock Company (JSC)
- Limited Liability Company (LLC)
While financial thresholds, about minimum capital requirements and governance structure, are different between the JSCs and LLCs, the incorporation procedure for both is substantially the same.
b. Non-corporate forms
- General Partnership
- Limited Partnership
- Partnership Limited by Shares
Even though the TCC has five different kinds of company structures, JSC and LLC are the most preferred in Turkey and the global market.
Company Setup
In the setup of a company in Turkey, the applicable rules and regulations have to be followed to the letter.
Joint Ventures
A joint venture in Turkey, from the general perspective, shall be a general partnership - Adi Ortaklık - which shall not be considered as a legal entity for the purposes of Turkish law. In practice, however, shareholders usually prefer to establish a form of commercial company. Generally, joint stock companies are preferred because of the possibility of creating various share groups and of the limited liability of shareholders compared with the limited liability companies.
There is no specific legislation in Turkey concerning joint ventures. Accordingly, joint ventures are regulated by the relevant legislation regarding the type of company formed. Joint venture parties usually enter into a shareholders' agreement which outlines the relationship between the parties to the joint venture and the management of the joint venture. Save for certain sectors such as TV broadcasting, maritime and civil aviation, there are no restrictions on the nationality of shareholders or the individuals who hold managerial positions.
Branch Office
A branch office in Turkey does not have shareholders and is not an independent legal entity since its duration would depend on the duration of the mother company. The minimum capital required for opening a branch office is nonexistent; however, it is advisable that a budget should be available for its business. A branch office may conduct only the types of activity that are included in the purposes of such a company. Dividends can be repatriated and are allowed to be transferred to the parent company, at which time it is subject to a dividend withholding tax of 15 percent that may, depending on the case, be reduced under Double Taxation Prevention Treaties applicable to Turkey.
For the establishment of a branch, the following documents shall be filed with the Trade Registry Directorate:
A petition signed by an authorized representative of the company or a proxy - in cases where the petition is signed by a proxy, notarized power of attorney;.
The resolution to be obtained from the parent company's authorized body approving the opening of a branch. A certified copy of the parent company's statute/articles of association. A certificate of activity or similar document, which will prove the registration and actual status of the parent company. A power of attorney for authorizing a local representative in Turkey. Five copies of the Establishment Declaration Form, which shall be duly filled and signed by the authorized person.
a) Two copies of the power of attorney that appoints the branch representative in Turkey;
b) A notarized copy of the ID card or passport of the representative in Turkey. If the representative is a foreign national, his/her passport shall be translated into Turkish;
c) Two copies of the signature declaration of the branch representative;
d) A letter of commitment signed by an authorized person.
A Chamber Registry Declaration Form obtained from the Trade Registry Directorate, which also contains the pictures of the branch representative.
All documents obtained from outside Turkey must be notarized and apostilled or ratified by the Turkish Consulate where the document was issued. They must also be translated into Turkish and notarized by a Turkish notary.
Liaison Offices
The license provided by the Ministry of Industry and Technology, to foreign investors, allows them to open liaison offices in Turkey on condition that the office will not conduct any commercial activity. The documents needed for establishing a liaison office are an application form and a statement indicating the activities of the office and expressing explicitly that no commercial activity will be carried out.
A certificate of activity obtained from the home country of the company, authenticated by the Turkish Consulate or Apostille Convention.
The balance sheet and income statement or the certificate of activity of the foreign company.
The authorization documents of those representatives who manage the office.
A power of attorney: in the case of another representative handling the establishment procedures on behalf of the representatives.
Licenses for liaison offices are granted for a maximum period of three years. The applications for extension are made based on activities, expenditures, business plans, and number of employees. The applications related to the establishment of liaison offices in financial sectors are considered by the regulatory bodies, Capital Markets Board of Turkey, and Banking Regulation and Supervision Agency. In case of termination, the liaison offices have to inform GDIIFI and also provide a termination declaration from the tax office.
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Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.
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