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In recent years, several different developments, both transnational and domestic, have had the effect of making capital investment in Turkey a more desirable and accessible prospect for foreign investors. These developments range from global socio-political changes to internal economic problems that Turkey has experienced in recent years, making it an affordable and attractive place for foreign investors to make capital investments, mainly due to low initial investment costs. and the geographical location of Turkey.
2. FOREIGN CAPITAL INVESTMENT IN TURKEY
There are relatively few restrictions imposed on capital investment in Turkey, and Turkey has also taken steps to ease the complexities and procedures that foreigners must follow to integrate and/or settle in Turkey. It is important to note that foreigners are allowed to freely make capital investments in Turkey and are even allowed to have full/sole ownership of a capital company.
Although incorporation procedures have been simplified over the years, foreign investors may still find it difficult to understand and navigate the rules, procedures and bureaucratic formalities they may encounter when trying to bring their capital investments in Turkey. The summary below should shed some light on what potential investors should expect when investing in Turkey.
a) Choose the right type of business
Although the law allows the formation of “personal companies” (where the owners of companies are fully liable, together with their personal assets, for all the debts of the company), joint stock companies are the most common form of business entities. in Turkey used by both local and foreign authorities. investors. Joint Stock Companies (JSC) and Limited Liability Companies (similar to “LLC” or “LLP” in the world) are the two most common types of capital investments in Turkey. The two main differences between these types of companies are:
b) Capital investment in Turkey – what to expect?
Although Turkey has taken steps to simplify incorporation procedures since 2018, it may still seem complex to the uninitiated. The image below provides a brief visual summary of the main steps required to incorporate a company in Turkey:
- Step 1 – Writing: This stage is the initial preparation phase where the investor must decide on the type of investment (the company). It is important for the investor to decide on the type of business that suits the needs and requirements of the planned investment. Making an informed decision here will be crucial for the investor to save valuable time and costs.
- Step 2 – Bank account: As stated above, there is a crucial difference between the two types of companies, namely the requirement to deposit initial share capital before incorporation. For LTDs, no initial payment of company capital is required, and therefore this step 2 and the next step 3 can be skipped entirely to be processed after incorporation. However, for JSC incorporations, a capital blockade account will need to be opened in a local bank after the initial submission of documents. This can be the most problematic step depending on the nationality of the investor as well as the person(s) who will be appointed as directors/managers of the company to be incorporated in Turkey.
- Step 3 – Capital Deposit: As detailed in step 2, this step will only be required for JSC embeddings. Accordingly, at least ¼ of the company’s committed capital must be deposited in the company’s capital blockade account before the final submission stage.
- Step 4 – Final Submission: Once all documents are ready, all documents must be physically submitted to the The commercial register, where company shareholders will also be required to sign the newly incorporated company’s articles of association (this can also be handled remotely with appointed proxies). The Commercial Registry will review the application and approve the incorporation if all documents are in order. Once the commercial register has been approved, the company will be officially incorporated.
- Step 5 – Tax submissions: This is another crucial step missed by many new foreign investors. Following the approval of the commercial register and the incorporation of the company, it is crucial that the company submits the registration applications to the tax and social security office as soon as possible, in order to avoid paying fines to these institutions.
3. WHY INVEST IN TURKEY?
Turkey’s unique geographical location, combined with low investment costs, makes it an attractive location for foreign investment. Its customs union with the EU allows direct access to the EU market.
Due to its unique geographical location, Turkey can also act as a hub, providing easy access to 1.3 billion people in Europe, MENA and Central Asia within a 4-hour flight radius.
Turkey has wide global market access at the crossroads between Europe, Africa and Asia, making it an efficient hub to access international markets around the world. Turkey also has a strong manufacturing infrastructure, ranging from the automotive sector to machinery and electronic equipment, defence, agriculture and fresh produce. Turkey’s exports reached $225 billion in 2021, according to the Investment Office in Turkeywhich further highlights its production capacity.
Although this article aims to summarize the rules and procedures governing capital investment in Turkey, it should in no way be considered as a complete and comprehensive guide to company incorporation. There are many issues to consider when deciding which options are best suited for the intended investment, and any mismanagement of the preparation or submission processes can cost investors time and money. To avoid such drastic results, foreign investors are strongly advised to seek professional assistance for their capital investment in Turkey. Further information on corporate tax and tax cycles is available here.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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