How Foreigners Establish Company in Turkey?

How Foreigners Establish Company in Turkey?

               Turkey, thanks to its strategic location between Europe and Asia, its skilled young population, its growing economy, and government investment incentives, has become a highly advantageous destination for foreign investors. The fact that labor costs are particularly affordable compared to European countries and the abundance of qualified second-language workforce resources are among the primary reasons why many entrepreneurs choose Turkey.

               According to Law No. 4875 on Foreign Direct Investments, foreign investors have the same rights and obligations as Turkish citizens regarding establishing companies and conducting commercial activities. Foreigners can freely establish companies, become partners in companies, become managers, and engage in commercial activities in Turkey in many areas.

               This article explains the basic requirements, legal procedures, legal obligations, and rights for foreigners to establish companies and conduct commercial activities in Türkiye. For clarity, the article is presented in a question-and-answer format.

Foreigners Company Set Up Process in Turkey -  Frequently Asked Questions

1- Can Foreigners Establish Companies in Turkey?

               Foreigners can establish companies in Turkey. With a company established in Turkey, they can conduct business, buy and sell goods, and engage in import and export. The law facilitates the establishment of companies in Turkey. A foreigner can establish a company in Turkey with just their passport, become a company manager, and engage in commercial activities.

               The Turkish government encourages foreign entrepreneurs and investors. There are numerous tax deductions and incentives granted to foreign entrepreneurs and companies. Foreigners have the same rights as Turkish citizens to establish companies and conduct commercial activities in Turkey.

2-What Documents Are Required for Foreigners to Establish Companies in Turkey?

               The documents required to establish a company in Türkiye are a passport, a notarized Turkish translation of the passport, an individual Turkish tax number, a business lease agreement, and three passport-sized photographs.

In short, a foreigner can establish a company in Turkey with their passport. Simply visiting our office with your passport is sufficient for establishing a company in Turkey. Our expert team prepares all incorporation documents. If you don't need a workplace to establish a company in Turkey, our expert team handles the entire process, including renting a virtual office address.

3- What Types of Companies Can Foreigners Establish in Turkey?

               Foreigners can establish a limited liability company or a joint-stock company in Turkey. These companies are capital companies. These types of companies have a separate legal entity from their founder. In other words, the company is a separate legal entity. It can engage in commercial activities, and foreign partners can manage the company.

The main differences between a limited liability company and a joint-stock company in Turkey are as follows:

- A limited liability company is established with a minimum capital of 50,000 TL. There is no requirement for the capital to be deposited into a bank account to establish the company. In other words, the capital is only recorded in the company's articles of association. After incorporating the company, you can open a bank account and deposit the company's capital.

- A joint-stock company, on the other hand, requires a minimum capital of 250,000 TL. A bank account must be opened during the incorporation process to establish the company. At least one-quarter of the capital must be deposited into the opened bank account. A joint stock company cannot be established without a capital deposit.

- A limited liability company can be established with a maximum of 50 partners. There is no limit on the number of partners in a joint stock company.

- A limited liability company cannot be traded on the stock exchange. A joint stock company can be traded on the stock exchange.

4- Do Foreigners Need a Business Premises to Establish a Company in Turkey? Can a Company Be Established at a Virtual Office Address?

               A business address is required to establish a company in Turkey. If you don't need a physical office for your company, you can alternatively rent a virtual business address at a reasonable cost. You can establish your company at a virtual business address.

5- Can Legal Entities Establish Companies in Turkey? 

               Legal entities can establish companies in Turkey and become partners in companies registered in Turkey. Companies operating in foreign countries can also establish companies in Turkey and become partners in these companies.

6 – What is the Total Cost of Establishing a Company in Turkey for Foreigners?

               The cost of establishing a company in Turkey varies depending on many criteria, including the number of partners, field of activity, company capital, number of managers, and the partner's lack of Turkish language proficiency. To give you an idea, the cost of establishing a limited liability company in Turkey for a foreigner with the minimum requirements starts around $650-$700. The cost of establishing a joint-stock company starts around $800 - $850.

               This is the total cost. All establishment expenses are included. Included expenses include the chamber of commerce registration fee, tax office registration fee, notary fees, the company establishment service fee, the sworn translator fee, and the company stamp fees. This is an approximate cost based on minimum requirements. Contact us to receive a detailed cost table specific to your business and inquire about pricing.

7- How Many Days Does It Take for Foreigners to Establish a Company in Turkey?

               Company establishment procedures for foreigners in Turkey are generally completed within a few days. If the foreigner comes to Turkey in person, the limited liability company establishment process is completed within an average of three to four business days. If the company type is a joint-stock company, the establishment process is completed within an average of four to five business days due to bank account and capital blocking procedures.

8- Is it possible to establish a company in Turkey without traveling to Turkey? Is it possible to establish a company with a power of attorney in Turkey?

               It is possible for foreigners to establish a company in Turkey without being present in person. All you need to do is send us a valid power of attorney. We handle company formation procedures using a power of attorney. We handle all the necessary procedures, including company formation, virtual office provision, tax office registration, and accounting and tax procedures.

9- Is a Turkish Partner Required for Foreigners to Establish a Company in Turkey?

               No. Foreigners can establish their own companies in Turkey. They can become managers of the company they establish and manage it. A Turkish citizen is not required to be a partner to establish a company in Turkey. However, operating in some sectors may require special permits, licenses, or permits. In sectors where a special license is required, partnering with a Turkish citizen simplifies the process.

10 – What are the Monthly Expenses for a Company Established by Foreigners in Turkey?

               The fixed monthly expenses for a company registered in Turkey include: a monthly accountant's fee, stamp duty on monthly tax returns, stamp duty on quarterly tax returns, and a monthly virtual office rental fee. These are fixed expenses that companies with no operations must pay. You can estimate the monthly fixed expenses for a company with no operations to be around $180. This is the minimum monthly expense for a company registered in Turkey. Beyond this, monthly expenses are determined by the company's activities and needs.

11- What are the Tax Rates in Turkey? What Taxes Do Foreigners Pay?

               The companies that foreigners can establish in Turkey are limited liability companies and joint-stock companies. These two types of companies are capital companies. These companies have a legal entity separate from their owners. The corporate tax rate for capital companies is 25%. If the company exports, the corporate tax rate is 20%. Corporate tax is calculated on net profit. It is paid on the net profit remaining after expenses are deducted from the company's income.

12- Are Work Permits Required for Foreigners to Establish Companies in Turkey?

               Foreigners are not required to obtain a work permit to establish a company in Turkey. Foreigners can establish a company with their passports. The company has a separate legal entity. The company can conduct commercial activities and business. The foreign partner can be the manager of this company.

13- Are Residence Permits Required for Foreigners to Establish Companies in Turkey?

               A residence permit is not required for foreigners to establish a company in Turkey. A company can be established without a residence permit, only with a passport. On the other hand, obtaining a residence permit is recommended, as it will be beneficial for living and banking in Turkey.

14 – Can Foreigners Establish a Single-Partner Limited Company in Turkey? What is the Minimum Number of Partners Required?

               Foreigners can establish a single-partner limited company in Turkey. As the sole partner, they can be the company's manager. It is not mandatory to employ a partner or employee.

15 - What is the Minimum Capital Requirement for Foreigners to Establish a Company in Turkey?

               The capital requirement varies depending on the type of company. The minimum capital required to establish a limited liability company is 50,000 TL. This capital must be initially written down in the company's articles of association. There is no requirement for the capital to be deposited into a bank account to establish a limited liability company. The minimum capital required to establish a joint-stock company is 250,000 TL. The company's capital is written down in the company's articles of association. At least one-quarter of the capital must be available and deposited into the opening of a bank account to establish a joint-stock company.

16 - Can Foreigners Be Company Managers and Board Members in Turkey?

               Foreigners can be company managers and board members in companies in Turkey. Foreigners have the same rights as Turkish citizens if they establish a company in Turkey. There are no restrictions on foreigners managing the company. This means they can represent the company in Turkey and manage its activities.

17 - Does Turkey have Double Taxation Avoidance Agreements?

               Yes. Turkey has signed agreements with more than 90 countries to prevent double taxation on income already taxed in another country. Double taxation avoidance agreements aim to protect and support entrepreneurs.

18 - Are foreign partner companies subject to MASAK (AML) inspections?

               Yes. Under Law No. 5549 in Turkey, financial transactions and capital transfers must be transparent and traceable. Banks may ask for documentation of fund origins.

19 - Is hiring a lawyer or CPA (certified public accountant) mandatory for company formation in Turkey?

               It is a legal requirement for foreigners to work with a certified public accountant to establish a company in Turkey. A minimum one-year accounting service agreement must be signed with the certified public accountant. Foreigners who do not engage a certified public accountant for accounting services cannot establish a company. A certified public accountant will establish your company soundly, oversee the company's accounting processes, prepare monthly tax returns, establish relations with official authorities, and provide tax advice.

               Working with a lawyer is optional. Working with a lawyer is not mandatory for establishing a company.

20- How is a company registered in Turkey liquidated and closed?

To close a limited liability company or joint-stock company registered in Türkiye:

-The company passes a resolution,

-The company resolution is notarized and registered with the Chamber of Commerce,

-Three notices of call to creditors, one week apart, are published in the Trade Registry Gazette,

-The liquidation period begins after the third announcement. The liquidation period is at least three months.

In short, entering a company into liquidation and closing it completely at the end of liquidation is a process that takes at least four or five months.

21- What are the most preferred cities to establish a company in Türkiye?

               Istanbul: Türkiye's largest city. It is Turkey's financial and commercial center. With its infrastructure, ports, airports, transportation network, and workforce resources, it is a center of attraction for Türkiye. It is the most preferred city for foreign entrepreneurs.

Ankara: Turkey's capital. It is Türkiye's administrative center.

Bursa / Kocaeli / Gaziantep: These are cities with intense industrial and export activity.

Antalya / Muğla / Izmir: These are cities with intense tourism activity.

22 – Are There Tax Reductions and Incentives in Turkey? 

               There are numerous tax reductions and incentives in Turkey. One of these is the corporate tax reduction granted to companies engaged in export activities. While the corporate tax rate is 25% for regular companies, it is 20% for companies engaged in export activities. Another important incentive is service export promotion. 80% of the income generated by a company registered in Turkey from services provided to individuals and companies outside Turkey is exempt from tax. For services such as architecture, engineering, software, IT, data storage, certification, medical reporting, call center, and design, 80% of the income is exempt from tax. For these types of services, after company expenses are deducted from 20% of the income, the remaining amount is considered the tax base.

Example:

ABC Bilişim LTD. ŞTİ., registered in Turkey, provided IT services worth 1,000,000 TL to a company in Germany. The company's expenses amounted to 150,000 TL. Therefore, the corporate tax payable is calculated as follows:

Service export revenue: 1,000,000 TL

80% service export tax exemption: 800,000 TL

20% taxable profit: 200,000 TL

Company expenses: 150,000 TL

Corporate tax base: 50,000 TL (200,000 TL - 150,000 TL)

The corporate tax payable is 25%: 12,500 TL.

               Thanks to the service export tax incentive, Turkey is an attractive destination, especially for companies exporting services.

               In addition, there are numerous tax deductions and incentives available in Turkey. The most important thing for entrepreneurs looking to take advantage of tax deductions and incentives in Turkey is to work with an experienced and dynamic certified public accountant. An experienced accountant will ensure you take advantage of these tax deductions and incentives and will always provide guidance.

23 – Can a Foreign Partner Work in Turkey?

               Establishing a company in Turkey does not mean that the foreign partner can work personally in Turkey. The company is a separate legal entity. The company can engage in commercial activities. The foreign partner, on the other hand, can manage the company. If the foreign partner wishes to work individually in different businesses in Turkey, they must also obtain a work permit.

24- Can Foreigners Establishing Companies in Turkey Obtain a Work Permit?

               Yes. Foreigners can obtain a work permit through a company they establish in Turkey. There are two options for obtaining a work permit as a company partner.

The requirements for the first option are as follows:

-The paid-in capital of the company must be at least 500,000 TL.

-The partner must have a residence permit valid for at least 6 months.

-The company must employ at least 5 Turkish workers.

The requirements for the second option are as follows:

-The paid-in capital of the company must be at least 100,000 USD.

-The partner must have a residence permit valid for at least 6 months.

Foreign partners with a paid-in capital of at least 100,000 USD are not required to employ Turkish workers to obtain a work permit. A higher paid-in capital increases the chances of approval.

25-What are the monthly obligations of a company in Türkiye?

               A company registered in Turkey must complete its accounting procedures every month. Even if the company does not do any business, tax returns must be prepared every month. Companies that fail to submit tax returns face financial penalties of up to $800 per month. These penalties are assessed separately for each month in which a tax return is not submitted.

               Certified accountants are authorized to submit tax returns. Accounting and tax returns cannot be submitted without a certified accountant. Therefore, even if your company conducts no business, it is mandatory to obtain accounting services from a certified accountant.

26 - Can Foreigners Establish an E-Commerce Company in Turkey? Can They Conduct E-Commerce Activities?

               There are no restrictions on establishing an e-commerce company. Foreigners can establish an e-commerce company in Turkey. However, to register on e-commerce platforms and engage in e-commerce activities, the company must be registered with the Ministry of Trade's e-commerce system. To register with the e-commerce system, the company representative must have a Turkish ID number.

               To obtain a Turkish ID number, the foreign partner must obtain a residence permit in Turkey. Foreigners who obtain a residence permit are issued a Turkish identity number. With this identity number, the company can be registered in the e-commerce system. Alternatively, if the foreign partner does not wish to obtain a residence permit, a Turkish citizen can register as a 1% partner and officer of the company and register in the e-commerce system.

27 - Can Foreigners Open a Bank Account for a Company They Will Establish in Turkey?

               A limited liability company registered in Turkey is a legal entity separate from its owner. A bank account can be opened for this legal entity and can conduct banking transactions. Foreigners can open a bank account for the company they will establish in Turkey.

               There are no legal restrictions for foreigners opening bank accounts in Turkey. According to the law, foreigners can open bank accounts for the companies they will establish in Turkey. Furthermore, there are more than fifty banks in Turkey. Banks have their own rules and practices. Some banks may be reluctant to open accounts for citizens of certain countries or may require additional obligations. At this stage, it is beneficial to establish healthy communication with bank officials and clearly explain the company's business activities.

28 – Where Should I Start Establishing a Company in Turkey as a Foreigner?

               If you're looking to establish a company in Turkey, you can contact us first and ask for a quote. We'll prepare an up-to-date and detailed cost plan tailored to your business's specific needs and specifications.

               We organize all the necessary services, including preparing company incorporation documents, preparing the company, accounting, bookkeeping, tax filing, virtual office rental, payroll, trademark registration, residence permit, work permit, and import and export customs procedures.

               In other words, simply come to our office with your passport. We'll handle everything else. We'll have your company ready, turnkey, within a few days.