Business in Turkey. How to set up your own business in Turkey, particularities of legislation for foreigners
How to set up your own business in Turkey: we tell you what exactly foreign business people need to consider.
We share which business areas appeal to investors most, and how to avoid getting into trouble with the law.
We consider the most popular forms of ownership, give useful tips that help you critically evaluate your prospects.
Business in Turkey. How easy is it for foreigners to do it?
A loyal form of legislation to foreigners in Turkey and a convenient geographical location attract those who are engaged in small, medium-sized or big business.
The country provides such businesses with a simple registration procedure and rule of law. There is no corruption and bribery in the country, which, in general, makes Turkey a good and comfortable place to do business.
But there are some features that are present in Turkish business and have to be taken into account when considering investment prospects.
Which business sectors are often chosen by foreigners?
Foreign investors prefer to invest in the most developed industries in Turkey: tourism, hotel and restaurant business, international trade.
At the same time, the activities like tourism, hotel and restaurant business, as you might guess, are likely to be developed in the resort regions of the country, whereas it is more profitable and more convenient to engage in trade in large port cities, such as Istanbul or Mersin, for example.
In general, quite a lot of useful things have been done in Turkey to attract foreign investment, including the creation of special economic zones.
Companies of the same business direction united in the same territory receive various tax benefits, can be credited at a lower interest rate, and resources are more accessible to them.
In Istanbul, Bursa and Antalya, for example, a technological development zone has been created. The companies working here in the field of software development are exempt from paying taxes (this tax relief may be extended until 2023).
In industrial zones, buyers of land do not pay VAT, and property owners are exempt from paying tax on it during the first five years of ownership.
In free economic zones located near large ports, general customs rules are not applied – companies do not pay VAT, port and customs fees provided that their goods are exported.
How to open a legal entity in Turkey
Businesses of five types of ownership are available to foreigners for entrepreneurial activities in the country, but only three of them are actually the most common:
IP (Şahıs Şirketi). One person is both a founder and an owner. The total amount of the authorized capital can be anything, but if in the future the foreign owner wants to apply for a work permit, the amount of the authorized capital must be at least 100 thousand Turkish liras.
LLC (limited liability company). The founders can be from 1 to 50 individuals and legal entities, the total amount of the authorized capital must be at least 10 thousand Turkish liras. If in the future the foreign owner wants to apply for a work permit, the amount of the authorized capital must be at least 100 thousand Turkish lira.
JSC (joint stock company). The founders in this type of a company are required to be at least 5 but not fewer, and the authorized capital starts from 50 thousand liras. The founders can be both individuals and legal entities, their number is unlimited.
To set up a business legally, you need to complete and fill in all the documents correctly and obtain a work permit, if necessary.
It is important to note: a foreign citizen can own a company in Turkey, but only owning a company does not give them the right to work. For official employment in Turkey, a foreign citizen must obtain a work permit.
If you do not plan to be a director of a company or be actively engaged in working, then you do not need to obtain a work permit.
It can take from 1 to 4 months to obtain a work permit. Only after that you can hire employees and actually get down to work. If you start working without waiting for permission, you can be deported as soon as someone complains and “sets” a check on you. And this is not uncommon here.
Please note: in order to obtain a work permit in Turkey, a company is required to have five Turkish employees per foreigner.
Even if you are going to be an individual entrepreneur and work for yourself, you still have to hire 5 Turkish citizens. The only way to avoid this condition is to buy real estate for 400 thousand dollars (according to cadastral value) and obtain citizenship.
This is the easiest option from the point of view of the law, although it is not cheap.
You can be released from the condition of 5 Turkish citizens per foreigner only in the first year of your company's existence. You can apply for a work permit without this mandatory condition during this year.
However, after the first year has passed, this condition becomes mandatory.
The package of documents for setting up a business includes the company’s Charter, memorandum, decision about founding members, copies of their residence permits and work permits, if there are any.
All documents need to be translated into Turkish.
It is important to remember: you need to conduct all work on setting up your business only with the chosen future financial consultant that is called Mali Müşavir in Turkey.
It is they who will submit documents to the tax inspectorate and the Chamber of Commerce, and who will also be involved in the future filing of all necessary reports.
Choosing such a professional is an extremely important thing that has to be done correctly!
The procedure for starting a business by stages
It is mandatory to register in MERSIS, an electronic system through which you can apply to open and start a company. Here, online, the Charter and memorandum of registration of the company are submitted.
Another mandatory step is obtaining a TIN so that the company can pay taxes and get the right to open a bank account. At the time of filing an application with the tax office, the company is already required to have a legal address, as well as a rented office. A copy of the lease agreement is also required among other documents.
0.04% of the amount of the authorized capital needs to be deposited in the account of the Antimonopoly Committee of the Central Bank of Turkey. This is a mandatory requirement for all new businesses in the country. 25% of the authorized capital is paid to a corporate bank account before the start of the company, the rest can be paid within two years.
The complexity and duration of the company’s registration procedure largely depends on the business direction.
So, in order to be engaged in exporting or importing goods, your company has to be registered with the Chamber of Commerce and Industry and obtain the appropriate licenses.
In this case, the company will be considered registered only after the announcement of the registration is published in the commercial register of the Official Gazette, which is issued once a month.
Useful tips for those who have made a decision to do business in Turkey
Certify all documented agreements only in writing. Despite the fact that the locals are quite scrupulous in money matters, it is still not worth trusting anyone's word.
At the same time, no one will be offended by your request to sign the documents – business is business, nothing personal.
If you decide to take a Turkish citizen as a shareholder (this is a common practice for registering a business), be sure to get recommendations.
The fact is that your business partner will have the right to sign the documents, which means they will be able to take out a loan for the company, conclude a deal. But it is not a fact that you will not be in the red.
