Company Formation Process for Foreigners in Türkiye

A Comprehensive Legal Guide for International Investors

Introduction

Türkiye has emerged as one of the most attractive destinations for foreign investors seeking access to regional and global markets. Strategically located at the crossroads of Europe, Asia, and the Middle East, Türkiye offers a dynamic economy, a young and skilled workforce, a liberal investment regime, and extensive free trade agreements. In recent years, the Turkish government has taken significant steps to simplify bureaucratic procedures and encourage foreign direct investment (FDI).

One of the most common questions raised by international entrepreneurs is whether foreigners can establish companies in Türkiye and, if so, how the process works from a legal perspective. The answer is clear: foreign nationals and foreign legal entities enjoy the same rights and obligations as Turkish citizens when establishing companies in Türkiye, subject to limited exceptions.

This article provides a comprehensive, up-to-date, and legally grounded overview of the company formation process for foreigners in Türkiye, covering applicable legislation, company types, procedural steps, tax and residency implications, sectoral restrictions, and compliance requirements. The article is written in accordance with SEO best practices and aims to serve as a reliable legal reference.

1. Legal Framework Governing Foreign Investments in Türkiye

1.1 Foreign Direct Investment Law No. 4875

The cornerstone of foreign investment regulation in Türkiye is the Foreign Direct Investment Law No. 4875 (FDIL). Enacted in 2003, this law introduced a liberal and investor-friendly regime based on international standards.

Key principles of the FDIL include:

• Equal treatment between foreign and domestic investors
• Freedom of investment without prior permission
• Free transfer of profits, dividends, and liquidation proceeds
• Protection against expropriation except for public interest and with compensation
• Access to real estate ownership, subject to statutory limitations

Under this law, foreign investors may establish any type of company recognized under Turkish law.

1.2 Turkish Commercial Code No. 6102

The Turkish Commercial Code (TCC) regulates the formation, structure, governance, and dissolution of companies. Foreign-owned companies are subject to the same provisions as Turkish-owned companies.

1.3 Other Relevant Legislation

• Tax Procedure Law
• Corporate Tax Law
• Labor Law No. 4857
• Social Security Law No. 5510
• Sector-specific regulations (banking, energy, insurance, media)

2. Who Is Considered a Foreign Investor?

Under Turkish law, a foreign investor is defined as:

• A foreign national, or
• A foreign legal entity established under the laws of another country, or
• International organizations investing in Türkiye

Dual citizens are considered foreign investors if they invest using their foreign nationality.

3. Can Foreigners Establish a Company in Türkiye?

Yes. Foreigners can:

• Establish a company alone or with partners
• Own 100% of the company shares
• Act as directors or managers
• Open branches or liaison offices

There is no minimum capital requirement solely based on nationality, except for certain regulated sectors.

4. Types of Companies Available to Foreign Investors

4.1 Limited Liability Company (Limited Şirket – Ltd. Şti.)

The limited liability company (LLC) is the most preferred structure for foreign investors.

Key features:

• Minimum capital: TRY 10,000
• Minimum shareholders: 1
• Maximum shareholders: 50
• Liability limited to subscribed capital
• One or more managers (foreigners allowed)

LLCs are ideal for SMEs and startups.

4.2 Joint Stock Company (Anonim Şirket – A.Ş.)

A joint stock company (JSC) is preferred for larger investments.

Key features:

• Minimum capital: TRY 250,000
• Minimum shareholders: 1
• Board of directors may consist of foreigners
• Shares may be publicly offered

Certain regulated sectors require establishment as a JSC.

4.3 Branch Office

Foreign companies may establish branches in Türkiye. Branches:

• Do not have separate legal personality
• Act on behalf of the parent company
• Require permission from the Ministry of Trade

4.4 Liaison Office

Liaison offices are limited to non-commercial activities, such as:

• Market research
• Promotion
• Representation

They cannot generate income in Türkiye.

5. Step-by-Step Company Formation Process for Foreigners

5.1 Determining the Company Structure

The first step is selecting the appropriate company type based on:

• Investment scale
• Business activity
• Capital requirements
• Regulatory constraints

5.2 Preparing Articles of Association

The Articles of Association (AoA) must be prepared in compliance with the TCC and registered through the Central Registry Record System (MERSİS).

Mandatory content includes:

• Company name
• Registered address
• Field of activity
• Capital structure
• Management and representation authority

5.3 Obtaining a Potential Tax Number

Foreign shareholders and directors must obtain a potential tax identification number from the Turkish tax authorities.

5.4 Notarization and Apostille Requirements

Foreign documents such as:

• Passports
• Certificates of incorporation
• Powers of attorney

Must be apostilled or legalized and translated into Turkish by a sworn translator.

5.5 Capital Deposit

For JSCs, 25% of the capital must be deposited prior to registration. For LLCs, capital may be paid within 24 months.

5.6 Trade Registry Registration

The company is registered with the Trade Registry Office, after which it gains legal personality.

5.7 Signature Declarations

Company directors must issue signature circulars before a notary.

5.8 Tax Office and Social Security Registration

After incorporation:

• Tax registration is completed
• Social Security Institution (SGK) registration is required if employees are hired

6. Residence and Work Permits for Foreign Shareholders and Directors

6.1 Shareholders

Foreign shareholders do not automatically obtain residence or work permits.

6.2 Directors and Managers

Foreign directors actively working in the company must obtain a work permit, which also serves as a residence permit.

Certain exemptions apply to:

• Non-executive board members
• Short-term assignments

7. Taxation of Foreign-Owned Companies in Türkiye

7.1 Corporate Income Tax

• Corporate tax rate: 25% (subject to legislative changes)

7.2 Value Added Tax (VAT)

• Standard rate: 20%
• Reduced rates apply to certain goods and services

7.3 Withholding Taxes

Applicable to:

• Dividends
• Royalties
• Service fees

Double taxation treaties may reduce rates.

8. Sector-Specific Restrictions and Permits

Certain sectors require additional licenses or impose limitations, such as:

• Banking and finance
• Insurance
• Energy
• Media and broadcasting
• Aviation

Foreign ownership caps may apply in regulated industries.

9. Incentives and Advantages for Foreign Investors

Türkiye offers various incentives, including:

• Investment incentive certificates
• Tax reductions and exemptions
• Customs duty exemptions
• Social security premium support
• Free zones with special tax regimes

10. Compliance Obligations After Incorporation

Foreign-owned companies must comply with:

• Accounting and bookkeeping rules
• Annual corporate tax filings
• VAT declarations
• Independent audit requirements (if applicable)

Failure to comply may result in administrative fines.

11. Common Legal Mistakes Made by Foreign Investors

• Choosing an inappropriate company type
• Ignoring work permit requirements
• Improper translation or legalization of documents
• Non-compliance with tax obligations

Legal consultancy is strongly recommended.

12. Dissolution and Exit Options

Foreign investors may exit by:

• Share transfer
• Company liquidation
• Merger or acquisition

Capital and profits may be freely transferred abroad.

Conclusion

Türkiye provides a liberal, transparent, and investor-friendly legal framework for foreign entrepreneurs seeking to establish companies. With equal treatment principles, simplified incorporation procedures, and strategic advantages, Türkiye remains a key destination for foreign direct investment.

However, despite the apparent simplicity of the process, legal, tax, and immigration considerations require careful planning. Foreign investors are advised to seek professional legal support to ensure full compliance and long-term success.