"How to start a business in Turkey?"

Turkey host many national and international companies due to its unique trading location and significant importance. To start a business in Turkey as a foreigner it is key to understand business environment of the country, types of legal entities, tax obligations, some legal issues, managing employees, bank accounts and accounting system.

Turkey also has free zones which may have some interest for foreign investors. Free zones has some benefits for investors like exemptions for custom duties, corporate income tax for the manufacturing enterprises, VAT, income tax on the personnel’s salary for companies which meet the requirements. Turkey also has organized industrial zones and technology development zones which comes with low cost solutions or some exemptions for investors.

Foreign entrepreneurs who decide to start a business in Turkey should take following steps;

1. Getting a personal tax number in Turkey.
2. Finding an address for your company (also could be a virtual office)
3. Choosing the type of company.
4. Choosing and reserving the Company title.
5. Getting incorporation documents drafted and notarized.
6. Registering for MERSIS system.
7. Appoint the company’s directors or managers
8. Submit the incorporation documents to the Trade Register,
9. Paying relevant fees to Trade Register
10. Open a corporate bank account.
11. Obtain the tax number for your company

All establishment processes explained above can be completed by our law firm. In order to do that, we will need a power of attorney from shareholder/shareholders issued in a notary.

Foreign investors commonly choose to establish Joint Stock or Limited Liability Companies in Turkey. We strongly advise to get legal consultancy before choosing the type of the business.

Cost and duration for establishing a Joint Stock or Limited Liability Company are almost the same. Also, tax ratios for corporate income tax are same for these two company types and both company types can be established with one partner only. However, the required capital for Limited Liability Company is minimum 10.000 TRY, whereas the required capital for Joint Stock Company is minimum 50.000 TRY.

Registration of a new company takes 1 week after investor get required documents ready under normal circumstances.

How to set up a Joint Stock Company in Turkey?"

According to the Turkish Commercial Code; Joint Stock Companies (“JSC”) are companies that have a title, whose basic capital is determined and divided into shares, and liability of shareholders is limited to the amount of their respective subscription to the share capital.

JSCs may be established by minimum one real person or legal entity shareholder. Minimum capital requirement for a JSC is 50,000 TL at the moment.

To set up a Joint Stock Company, first step is to prepare a comprehensive Articles of Associations which contains purpose of the company, the share capital, provisions for mandatory organs and processes required by law.

Process for setting up a Joint Stock Company is basically like below;

1. Getting a personal tax number for shareholders in Turkey.
2. Finding an address for your company (also could be a virtual office)
3. Getting incorporation documents drafted and notarized.
4. Choosing and reserving a company title for the company.
5. Registering for MERSIS system.
6. Deposit ¼ of the capital to bank.
7. Appoint the company’s director or Board of Directors
8. Submit the incorporation documents to the Trade Register,
9. Paying relevant fees to Trade Register
10. Complete the opening of a corporate bank account.
11. Obtain the tax number for your company.

All establishment processes explained above can be completed by our law firm. In order to do that, we will need a power of attorney from shareholder/shareholders issued in a notary.

"How to set up a LTD company in Turkey?"

Limited Liability Companies are the most common entity type when it comes to establishing a company in Turkey. Establishment process is relatively easy and required capital is only 10.000 TRY.

According to the Turkish Commercial Code, the Limited Liability Company is established by one or more natural or legal persons under a trade name and its basic capital is determined and this capital is composed of the sum of basic capital shares.

Limited Liability Companies can also operate in “free zones” which may have some interest for foreign investors. Free zones has some benefits for investors like exemptions for custom duties, corporate income tax for the manufacturing enterprises, VAT, income tax on the personnel’s salary for companies which meet the requirements.

To set up a Limited Liability Company, first step is to prepare a comprehensive Articles of Associations which contains purpose of the company, the share capital, provisions for mandatory organs and processes required by law.

Other steps for registering a Limited Liability Company are as follows;

1. Getting a personal tax number for shareholders in Turkey.
2. Finding an address for your company (also could be a virtual office)
3. Getting incorporation documents drafted and notarized.
4. Choosing and reserving a company title for the company.
5. Registering for MERSIS system.
6. Appoint the company’s director or Board of Directors
7. Submit the incorporation documents to the Trade Register,
8. Paying relevant fees to Trade Register
9. Complete the opening of a corporate bank account.
10. Obtain the tax number for your company.

All establishment processes explained above can be completed by our law firm. In order to do that, we will need a power of attorney from shareholder/shareholders issued in a notary.

"How to open a corporate bank account in Turkey?"

Bank accounts are essential to Companies to operate and properly function on the market. Therefore, opening a corporate bank account is a very important step for foreign investors.

After the establishment of the Company is completed, appointed lawyer of the company or the company representative can apply to bank to open a bank account.

Banks in Turkey, usually require below documents in order to start the process for opening an account;

• Tax number of the Company and tax board
• Certificate of Incorporation
• Articles of Association
• Signatory Circular
• Power of attorney (if lawyer is applying on behalf of the company)
• ID or resident permit for the authorized person
• Proof of business address (like rental agreement)
• Information about company, operations of the company and potential future transactions

Company taxation in Turkey

In general, taxes can be categorized as tax on profit and income, tax on goods and services and other.

Tax on profit and income

• Corporate Income Tax

Companies resident in Turkey are taxed on worldwide income. The corporate tax is levied on the income and earnings derived by corporations and corporate bodies.

Basically, net corporate income is defined as the difference between the net worth of assets owned at the beginning and at the end of the fiscal year. Expenses allowed to be deducted from revenues.

Corporate income tax is applied at 20% rate on the corporate earnings.

The corporate income tax is assessed on the base declared through tax returns filled annually by taxpayers. Tax returns contain the results of related taxation period. The annual tax return is applicable for the reporting of net corporate profits realized in the course of one accounting period. The corporate income tax must be paid by the end of the month that the tax return is submitted.

Tax on goods and services

• Value Added Tax

Turkish taxation system levies value added tax on the supply and the importation of goods and services.

Liability for the tax levies on the person who supplies or imports goods or services, the real VAT burden is on the final consumer. This result is achieved by a tax-credit method where the computation of the VAT liability is based on the difference between the VAT liability of a person on his sales (output VAT) and the amount of VAT that he has already paid on his purchases (input VAT).

• The standard rate of VAT on taxable transactions is 18%.
• For the deliveries and services like agricultural products such as raw cotton, dried hazelnuts rate is 1%
• For the deliveries and services like basic food stuffs, books and similar publications rate is 8%.

OTHER

• Stamp Tax

Stamp tax applies to a wide range of documents, including but not limited to, contracts, agreements, notes payable, letters of credit and letters of guarantee, financial statements and payrolls

• Environmental Tax

Municipalities are authorized to collect an Environmental Tax as a contribution towards the financing of certain services such as garbage collection. This tax is levied at scheduled fixed amounts that vary according to the location of the house or office. This tax is paid thru water bill of the property by the person who lives or occupies that house or office.