Business setup in Turkey sounds interesting, right? For entrepreneurs and investors, yes, it does. In fact, it is very lucrative and beneficial for businesspeople to open a company in Istanbul, Turkey. If you are unaware of how to set up a business in this country, this guide is for you. We will be discussing the complete process along with requirements so that you know everything required in order to start a business in Turkey.
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Reasons for Business Setup in Turkey in 2023
Turkey has grown to be an enticing destination for international business visionaries eager to contribute and expand their operations in the country. The main motivations for investing in Turkey include its friendly business environment, its strategic location between Europe and Asia, and its young and well-educated workforce. The number of foreign investments in Turkey increased 8.5 times over the last 10 years compared to the entire “multi-decade,”. Also, this country has developed a thriving commercial sector, comparable to that of BRIC countries which are China, Brazil, India, and Russia.
Istanbul is the capital and largest city of Turkey. The city has attracted significant foreign investment in recent years due to its unique status as the only metropolis in the world to spread over two continents – Europe and Asia, its strategic location, highly skilled labor force, and excellent infrastructure. Furthermore, investors choose Turkey’s three largest and most developed cities—Bursa, Ankara, and Izmir—to establish their businesses.
It’s now very easy to start a business in Turkey thanks to recent regulations designed to attract investment from foreign countries. It is simple to understand why Turkey attracts new businesses as a dream location. Some reasons are that half of its 80 million people are under the age of 30, and they are becoming more educated, skilled, and wealthy to spend money. Then, economic ties with Europe and the Middle East have grown significantly. Also, infrastructure for banking and communications has immensely improved.
Here are a few other major reasons to choose Turkey to establish your new business:
Motivating Forces Granted by the Turkish Government
One of the many benefits of starting a business in Turkey is that the Turkish government is creating a more business-friendly environment and lowering venture-related costs to strengthen remote and local financial experts.
Low Costs of Operation
The low operating cost is also very beneficial for businesspeople. It will cost you a fortune to establish a firm in another country, like the US or the UK, but Turkey offers incredibly affordable business setup opportunities.
Strong Consumer Spending
The amount of spending by Turkey’s young population is another benefit for entrepreneurs and investors. Children enjoy following trends, having favorite brands, and spending money without giving it much thought.
Government Incentives for New Businesses and Investors
- Business owners can now apply for Turkish citizenship as of 2018.
- Foreign investors are now protected in a better way.
- VAT, levies, and customs fees will not be implemented on certain imports of machinery and equipment.
- International businesses can now hold the legal status of “Turkish Company” which allows them to operate with the same obligations and rights as Turkish businesses already in operation in the country.
- Turkey’s free trade zones offer incentives, including exemptions from customs duties and a range of taxes.
- Businesses in Turkey comply with international standards.
- Certain exclusions from paying social security insurance and income taxes.
- Energy subsidies.
- Adding foreign-registered businesses, non-Turkish citizens, and Turkish citizens who reside abroad to the definition of “foreign investor”
- Protection of current investment rights.
Required Set of Documents to Setup a Business in Turkey
From Real Persons
- Power of Attorney for incorporating the company from all shareholders
- 1 passport photo
- 1 translated and notarized passport copy
Bank Account Opening for Your Business
Opening a bank account is also crucial and required for established businesses in Turkey. For the business bank account, banks need the following necessary documents:
- Articles of incorporation for a company.
- Copies of shareholders’ and directors’ passports, as well as proof of their addresses, such as a utility bill, are required.
- Signature circular for the business.
- Each shareholder’s Turkish tax identification number.
- Company stamp.
Steps to Set Up a Business in Turkey
Step 1. Submit the Memorandum and Status Online at MERSIS
A central information system called MERSIS is used to set up business registration procedures and daily store business register data electronically. Legal entities involved in the business are each given a unique number.
Step 2. Get Power of Attorney
After that, you must present a Power of Attorney from the partners to the Notary Public in order to form the firm.
Step 3. Choose and Reserve the Company Name
You must be the first to register your trading name and no one else may have already done so. The phrases “Turkiye; Milli; Turk; Cumhuriyet” cannot be used without the express consent of the Turkish Council of Ministers. Your name should not be utilized in a way that could mislead third parties. The trading name can only contain foreign terms and titles that do not violate any governmental or cultural laws or policies.
Step 4. Sign a Lease Contract
Post that, you need to sign a lease contract to get an address for your company.
Step 5. Complete and Notarize Company Documents
- Four copies of notarized articles
- If a power of attorney follows the procedure, a notarized copy of a power of attorney is required permitting the attorneys who will represent the application before the relevant trade registry office and other official authorities to proceed with the application (if applicable).
- Articles of Association (AoA)
- One copy of managers’ identification cards that have been notarized
- Resolutions made by the shareholder legal entity(ies)’s competent administrative authority approving the incorporation; For the sake of clarity, the resolution should include any specific requirements (such as the company name or area of business) that must be met before the proposed company can be formed.
- Two copies of notarized declarations of signature
- The name of the actual person who will act on behalf of the legal entity and the authorized person, if a legal person will be appointed as a member of the board of directors of the potential company to be established. For the sake of clarity, it must be stated in the same resolution or with a separate statement.
- Submit all the documents at the Istanbul Chamber of Commerce and pay official company registration fees in order to get a company registration certificate from them
- The required paperwork is as follows when a foreign partner is a real person:
- Two copies of each shareholder’s passport for a real individual
- Submit company details at the Istanbul Chamber of Commerce online
- The following paperwork is needed if the foreign partner is a legal person:
- The activity certificate for the legal company designated as the shareholder, issued by the appropriate body in the investor’s country. Information on the company’s signatories and its present state must be included in the certificate.
- Submit Articles of Incorporation of the company online and get them approved
Step 6. Get a Potential Tax Identification Number
The relevant tax authority or office must issue the company, any non-Turkish shareholders, and any non-Turkish board members with a potential tax identification number. Businesses need a tax identification number to open a bank account and deposit the capital for the company that will be incorporated.
Ongoing Trading and Taxes
Private limited companies registered and residing in Turkey are subject to full taxation on all earned and declared profits. Before forming your company, do look for the advice of a reputable accountant as laws and taxes can change frequently in the country.
Additionally, you will need to hire an accountant. Do remember that they work differently here in Turkey and typically charge a monthly fee that, in some cases, can seem expensive for work that they perform only occasionally.
Step 5. Open a Bank Account
Then, you need to open a bank account in a corporate bank for your business transactions.
Step 6. Deposit a Capital’s Percentage in the Competition Authority’s Account
You need to deposit a percentage of capital in the account of the competition authority. Plus, you need to get an original bank statement from the Halk Bank branch in Ankara confirming that 0.04% of the capital has been placed in the account of a state-owned bank or the Competition Authority of the Central Bank of the Republic of Turkey (CBRT). Or you may get an EFT that has been stamped and marked “collected.”
Step 7. Deposit a Minimum of 25% of the Start-up Capital
Before the new business is registered, 25% of the share capital must be paid. Additionally, you must obtain a copy of the deposit proof. Within two years, the remaining 75% of the subscribed share capital must be deposited. A different option is to pay the capital sum in full prior to registering your company.
Step 8. Apply for Entry in the Commercial Register
Once the registration process at the Commercial Registry Office is complete, the Commercial Registry Office informs the tax office and the social security institution ex officio of the establishment of the firm. Within about ten days of the company’s registration, the Commercial Registry Office arranges for an announcement to be published in the Commercial Registry Gazette.
Shortly after the Commercial Registry Office notifies the local tax office, a tax registration certificate must be obtained from the local tax office. The appropriate social security organization provides the company with a social security number. After the business has registered with the social security institution, an individual application must be made for each employee.
Step 9. Certify the Legal Books by a Notary Public
On the day the company is registered with the Trade Registry Office, you must certify the legal books. The tax office must be notified by the notary of the business books’ certification.
Step 10. Wait for Notification from Trade Register Office
Finally, you need to follow up with the tax office for notification from the trade register office that your company has been established.
The tax office and the social security institution are initially notified of the company by the commercial registry office. A determination report is prepared at the corporate headquarters by a tax officer. The determination report must contain one authorized signature at minimum. Trade registrars forward the company’s establishment form to the tax office, along with a notification of the tax number.
How Many Days Needed to Open a Company in Turkey?
If partners are in Turkey, you can register your company, open bank accounts, and access online banking in just 1 to 2 days. The company formation process will also be less expensive and quicker. If you are not in Turkey, you can still form your company, but the setup will take longer and cost more.
Business Entities in Turkey in 2023
The following are the allowed business entities in Turkey:
Limited Liability Company (LLC)
There are several ways of doing business in Turkey, the most common way of doing business in Turkey is the formation of a limited liability company (LLC). An LLC is permitted to carry out any industrial or commercial activity. It must appoint at least one shareholder and one director. There is no need for a resident secretary in Turkey.
It is very easy to incorporate a Turkey LLC. An entrepreneur does not need to travel to Turkey to complete the incorporation of a Turkey LLC; the procedure may be completed online and takes less than a week. An LLC can also be formed with the intention to invest in Turkish free zones. A business in this category will be totally exempt from all customs duties, corporate taxes, VAT, income taxes, and withholding taxes.
An LLC is a good partner for a holding company that is exempted from tax. It is so because it does not pay taxes on earnings got from foreign subsidiaries. Providing the parent company owns at least 10% of the subsidiary, all dividends are tax-free as long as they are held for at least one year. A Turkey LLC must appoint at least one shareholder and one director. There is no need for a resident secretary in Turkey.
Within a week, a limited liability company can be formed with at least one shareholder and one director of any nationality. The minimum paid-up share capital for an LLC is €3,300.
Foreign company branches are subject to regulation in Turkey under the Turkish Companies Act, which also allows for 100% foreign ownership. A branch office in Turkey conducts business within the parameters established by the parent company.
A branch office in Turkey is permitted to collect payments from customers, issue invoices to customers, and engage in local business transactions. The required licensing for a Turkey branch company’s industrial sector must also be issued.
When a foreign business does not intend to operate in Turkey, it can open a representative office there. A Turkey representative office is 100% foreign-owned and operated, but it cannot do direct sales to the customers in the country. Such an office will solely carry out tasks like market research and promoting the parent company’s business in Turkey. For selling products and offering services to regional businesses, the parent company must choose a local Turkey agent or distributor.
IP (Şahıs Şirketi)
Both the founder and the owner are the same individual in an IP. However, if the foreign owner wants to later apply for a work permit, the authorized capital must be at least 100,000 Turkish liras. Otherwise, the total authorized capital can be any amount.
JSC (Joint Stock Company)
The minimum number of founders for this type of company is 5, and there is a minimum authorized capital of 50,000 liras. There are an infinite number of founders, who can both be legal entities and individuals.
Tips to Get Started for Company Registration in Turkey
Here are five tips to start a business in Turkey:
Make friends with local business owners and join the Chamber of Commerce or other networking organizations or groups. These organizations can offer beneficial resources, such as guidance on how to launch a successful company in Turkey.
Search for the Ideal Business Opportunities
Since Turkey is a very diverse and young country, it’s critical to find opportunities that match your qualifications and skill set. Reading business opportunity pamphlets or going to websites that focus on particular industries and markets are good places to begin.
Become Familiar with Turkish Culture
Consider the culture you want to establish within your company. You should be ready to learn about traditional Turkish values and cultural conventions that govern the decisions of your business.
Get familiar with Turkish Business Law
Understanding Turkish business legal procedures is essential before setting up a business. This includes being aware of the several types of contracts that can be legal, how to utilize terms like “purchase” and “sale,” and the numerous stages needed to launch a firm.
Once you have a solid grasp of Turkish culture and business law, you can start planning how you’ll structure your business operations. This could include creating marketing plans, establishing financial and marketing systems, and hiring personnel.
Shareholders in a Business in Turkey
The shareholders are precisely, the company’s owners or the company’s founders. These can be individuals or corporations, and they have obligations within the company but also a variety of rights. Both private and public Turkish firms are limited to having a minimum of one shareholder. These can be Turkish residents or citizens of Turkey, but foreigners can also hold sole shareholder status when establishing a business here.
Contributing to the company’s share capital is one of the shareholders’ primary duties. They will be given more or less ownership rights in the company depending on their contributions. In the case of limited liability businesses, the shareholders’ biggest benefit is that their liability to the debts and other liabilities of the business will be constrained to the amount of money they put into the business. In a partnership, the members or partners take on the function of shareholders.
Special Investment Zones in Turkey for Foreign Investors
The following three major special investment zones are the main points of interest for foreign investors:
20 zones are specifically created to increase the number of export investments. Also, they offer a 100% exemption from VAT, customs duties, corporate income tax for manufacturing enterprises, and income tax on personnel salaries for companies that export at least 85% of the goods produced here. You also enjoy the ability to deposit goods free of charge unlimited and the ability to transfer the profits to and abroad from Turkey.
Organized industrial zones
These are 276 with low natural gas, water, and telecommunications costs. Here is a five-year real estate duty exemption, zero VAT on land acquisition, and municipality tax on construction or solid waste (the latter if the zone doesn’t benefit from the municipality service).
Technology development zones
These zones are 50 in total with significant exemptions from VAT on software application sales, income and corporation taxes on software development revenue, and salaries of R&D staff – but not to exceed 10% of the total number of employees – are available until 2024.
Only 34 of the technology development zones are operational at the moment; the rest are still being constructed in Turkey.
Hair transplantation is a highly developed industry in Turkey. Due to the high demand for these kinds of medical aesthetic services, this industry is both fiercely competitive and attracting investors.
There are tons of other incentives that Turkey offers for foreign investors. The double tax treaties exempt foreign investors from paying taxes in both Turkey and their country of residence.
Free Trade Agreements, which allow zero custom taxes, are signed with countries like Liechtenstein, Albania, Switzerland, Chile, Croatia, Egypt, Georgia, Iceland, Palestine, Jordan, Lebanon, Mauritius, South Korea, Macedonia, Montenegro, Bosnia and Herzegovina, Morocco, Norway, Tunisia, Serbia, Syria. They also provide additional incentives to foreign investors.
How much does it cost to set up a business in Turkey?
It will cost around between 1500 and 2000 USD to set up a business in Turkey.
Can a foreigner start a business in Turkey?
Yes, a foreigner can start a business in Turkey.
What type of business is profitable in Turkey?
Turkey’s economy is mostly based on agriculture, therefore growing, packing, and exporting hazelnuts is a lucrative industry there. It’s cheap money, there are some clever ways to build up the infrastructure, and the area is fertile for growing hazelnuts.
Is Turkey good for starting a business?
Yes, Turkey is a fantastic country to start your business.
Please Note: We do not provide any assistance regarding business setup in Turkey. However, If you are looking to start your business in the UAE, get in touch with RIZ & MONA CONSULTANCY.