A foreign investor deciding to invest in a Turkish startup or company will eventually face a very practical question:

How should the investment money actually be transferred to Türkiye?

At first glance, the answer may seem simple:

“Send the money to the company’s Turkish bank account.”

Legally, however, the situation is more complicated.

The legal nature of the payment matters.

A foreign investor may transfer money in connection with:

• establishment of a new company;
• payment of subscribed share capital;
• participation in a capital increase;
• acquisition of newly issued shares;
• purchase of existing shares from a founder;
• shareholder financing;
• an intercompany loan;
• an investment round involving both primary and secondary shares; or
• another properly documented transaction.

These transactions do not have the same legal, accounting or tax consequences.

Türkiye’s Foreign Direct Investment Law is based on freedom of investment and equal treatment. Foreign investors may generally establish companies, participate in existing companies and acquire shares without obtaining a general foreign investment approval, subject to special legislation applicable to regulated sectors.

The Central Bank’s Capital Movements Circular similarly provides that foreign investors may, unless special legislation provides otherwise, invest in Türkiye by:

• establishing a company;
• opening a branch;
• participating directly or indirectly in an existing company;
• making a capital increase; or
• acquiring an ownership interest.

The crucial issue is therefore usually not whether foreign capital can enter Türkiye.

It can.

The more important question is:

What is the legal basis on which the money enters the Turkish company?

1. Can Foreign Investors Freely Transfer Capital to Türkiye?

As a general principle, yes.

Law No. 4875 on Foreign Direct Investments provides that foreign investors are free to make direct investments in Türkiye and are generally subject to equal treatment with domestic investors.

The Foreign Direct Investment Law defines foreign investment broadly and specifically recognizes cash capital brought from abroad in convertible currency as a form of foreign direct investment.

Therefore, foreign investment funds may generally be transferred into Türkiye through the banking system.

However, the transaction still needs to comply with:

• Turkish Commercial Code requirements;
• banking procedures;
• foreign exchange legislation;
• MASAK anti-money laundering rules;
• tax legislation;
• corporate resolutions;
• accounting requirements; and
• sector-specific regulations where applicable.

2. The First Question: Is the Money Equity or Debt?

Before initiating the bank transfer, the parties should answer one fundamental question:

Is the investor putting money into the company as equity, or lending money to the company?

This distinction affects almost everything that follows.

Equity

The investor receives or pays for shares.

The money may enter through:

• initial company capital; or
• a capital increase.

Debt

The company becomes legally obliged to repay the investor.

This may be structured as:

• shareholder loan;
• parent-company loan;
• intercompany loan; or
• another foreign financing arrangement.

A transfer should not be made first and legally characterized months later.

The corporate documents, banking declaration and accounting treatment should all tell the same story.

3. Method 1: Paying Capital When Establishing a New Turkish Company

A foreign investor establishing a new Turkish company may transfer the subscribed share capital to Türkiye.

The mechanics depend partly on whether the company is:

• a Joint Stock Company – A.Ş.; or
• a Limited Liability Company – Ltd. Şti.

Foreign shareholders generally obtain a Turkish potential tax identification number during incorporation. Official investment guidance specifically states that this number is necessary for opening the bank account used to deposit incorporation capital.

4. How Is Capital Paid Into a New Turkish A.Ş.?

For a Turkish joint stock company, at least 25% of the nominal value of cash shares subscribed at incorporation must generally be deposited before registration.

The amount is paid into a special account opened in the name of the company being established at a bank in Türkiye.

The Central Bank’s Capital Movements Circular states that the funds are held for the company and that the bank issues documentation showing payment for presentation to the Trade Registry.

After the company acquires legal personality through registration, the relevant Trade Registry evidence is presented to the bank and the funds become available to the company.

The unpaid part of subscribed cash capital must generally be paid within 24 months following registration.

5. What Happens If the A.Ş. Is Never Registered?

The blocked incorporation funds do not simply become the property of an unregistered company.

The Capital Movements Circular provides a mechanism for returning the funds to the investors if the incorporation is not registered within the applicable period and appropriate Trade Registry documentation is provided to the bank.

This is another reason why the payment should clearly be identified as:

company incorporation capital

rather than as a generic transfer.

6. How Does Capital Payment Work for a Turkish Ltd. Şti.?

Limited liability companies are treated differently at incorporation.

The official Invest in Türkiye guidance confirms that the requirement to deposit 25% of the capital before registration does not apply to limited companies.

Subscribed capital may generally be paid within 24 months after establishment.

Therefore, foreign founders establishing an Ltd. Şti. may have greater flexibility regarding the timing of the cash capital payment.

However, once the payment is made, the accounting and banking records should clearly identify it as payment of subscribed capital.

7. Method 2: Investing Through a Capital Increase

For an existing Turkish startup, one of the most common investment methods is a capital increase.

This is particularly common in:

• angel investment;
• seed financing;
• Series A;
• Series B;
• strategic investment; and
• joint venture transactions.

The company issues new shares and the foreign investor contributes new money.

The key economic result is:

the money goes into the Turkish company.

This is very different from purchasing an existing founder’s shares.

8. Example of a Primary Investment

Assume a startup is initially owned:

Founder A – 60%
Founder B – 40%

A foreign VC wants to invest:

EUR 2 million

The company carries out a capital increase.

After the investment:

Founder A – 45%
Founder B – 30%
Foreign VC – 25%

The EUR 2 million goes into the company, not to the founders personally.

The company can then use the investment for:

• hiring;
• software development;
• marketing;
• expansion;
• equipment;
• working capital; and
• other legitimate corporate purposes.

9. How Are Foreign Capital Increase Funds Transferred?

For non-public companies, the Turkish Central Bank’s Capital Movements Circular regulates the banking mechanics of foreign capital increase payments.

For an A.Ş., at least 25% of the nominal amount subscribed in cash is generally deposited into the relevant company bank account before registration of the capital increase.

The bank provides evidence of payment, and following Trade Registry registration, the funds become available to the company.

Existing shareholders may participate through pre-emption rights, or a new foreign investor may enter the company through the capital increase.

10. Do Foreign Capital Increase Funds Have a Deadline?

This is a particularly important practical point.

The Central Bank Circular states that, for non-public companies, foreign currency brought into Türkiye through banks with the declared purpose of a capital increase must generally be:

• added to the company’s capital; and
• the capital increase documented

within three months.

If this is not completed, the incoming funds are generally returned by the bank to the sender, unless the transaction is instead processed under the applicable foreign-loan rules.

Foreign investors should therefore avoid transferring investment money months before the corporate documents are ready.

11. Why the SWIFT Payment Description Matters

The payment description should reflect the real transaction.

For example, where the investor is participating in a capital increase, an appropriate description might identify:

Capital increase contribution – [Company Name]

or the relevant subscription transaction.

The transfer should not casually state:

• loan;
• consultancy fee;
• invoice payment;
• gift; or
• miscellaneous transfer

if the real purpose is equity investment.

The Turkish bank may classify the payment based partly on:

• SWIFT information;
• company declarations;
• corporate resolutions; and
• supporting documentation.

Incorrect wording can significantly delay the transaction.

12. Method 3: Buying Existing Shares From a Founder

A foreign investor may also purchase shares already owned by an existing shareholder.

This is a secondary share sale.

For example:

Founder owns 100%.

Foreign investor purchases 30%.

After closing:

Founder – 70%
Foreign Investor – 30%

In this situation, the investor is purchasing the founder’s existing property.

The purchase price normally belongs to the selling shareholder, not to the company.

13. The Most Important Difference: Who Receives the Money?

Consider two transactions.

Capital Increase

Investor pays EUR 1 million.

Recipient:

Turkish Company

Result:

Company receives EUR 1 million of new funding.

Existing Share Purchase

Investor pays EUR 1 million.

Recipient:

Selling Founder

Result:

Founder receives EUR 1 million.

The company itself may receive nothing.

Foreign investors and startup founders frequently confuse these two transactions.

For fundraising purposes, the difference is critical.

14. Why a Share Purchase Does Not Automatically Finance the Startup

Assume a foreign investor says:

“I invested EUR 3 million in the startup.”

If the EUR 3 million was paid entirely to the founders in exchange for their existing shares, the startup itself may have received zero new working capital.

The transaction was economically an exit for the selling shareholders.

For that reason, venture capital deals often distinguish between:

• Primary Investment – new money into the company; and
• Secondary Sale – money paid to existing shareholders.

15. Can an Investment Round Include Both Primary and Secondary Shares?

Yes.

For example:

Foreign Investor total payment:

EUR 5 million

Structure:

EUR 4 million → capital increase → company

EUR 1 million → purchase of founder shares → founder

This can allow the startup to raise working capital while also providing some liquidity to founders.

However, the transaction documents and payment instructions should clearly separate the two payments.

They should not simply be transferred as a single unexplained EUR 5 million payment.

16. Where Should a Share Purchase Price Be Paid?

The Share Purchase Agreement should clearly identify:

• seller;
• buyer;
• amount;
• currency;
• bank account;
• closing date;
• conditions precedent; and
• payment mechanics.

Where the seller is a foreign or Turkish individual, tax consequences should also be reviewed before closing.

The Turkish company should not automatically receive the purchase price merely because the shares being sold relate to that company.

17. Method 4: Foreign Shareholder Loan

A foreign investor may decide not to increase share capital immediately.

Instead, the investor may lend money to the Turkish company.

For example:

Foreign Parent Company → USD 1 million loan → Turkish Subsidiary

This may provide more flexibility because the funds remain debt rather than permanent equity.

However, shareholder loans are legally very different from capital contributions.

18. A Shareholder Loan Is Not Share Capital

If the foreign investor transfers USD 1 million pursuant to a loan agreement:

• the company owes USD 1 million;
• the investor becomes a creditor;
• repayment obligations arise;
• interest may be payable;
• tax consequences may arise; and
• foreign borrowing rules may apply.

The investor does not obtain additional shares merely because money entered the company.

Equity requires the appropriate corporate process.

19. Are Foreign Shareholder Loans Regulated?

Yes.

A loan obtained by a Turkish-resident company from a foreign shareholder falls within Türkiye’s foreign borrowing and capital movement rules.

The Central Bank’s Capital Movements Circular expressly treats borrowing from overseas shareholders as part of foreign credit regulation and requires banks to examine whether incoming transfers are loans.

Where SWIFT information or the company’s declaration indicates that the payment is a loan, the intermediary bank may request the relevant credit agreement and repayment information.

Therefore, a shareholder should not simply send:

USD 2 million – “loan”

without first checking whether the financing satisfies Turkish foreign exchange legislation.

20. Can a Turkish Company Borrow Foreign Currency From Its Foreign Shareholder?

Potentially, but this requires careful analysis.

Türkiye’s foreign currency borrowing regime contains restrictions based on matters such as:

• whether the borrower has foreign currency income;
• existing foreign currency credit exposure;
• applicable statutory exceptions;
• currency;
• maturity; and
• nature of the borrower.

The Central Bank’s Capital Movements Circular regulates foreign currency loans obtained from abroad and generally requires these loans to be used through banks, subject to statutory exceptions.

For that reason, foreign shareholder loans should be reviewed before the funds are sent.

21. Do Banks Check Whether an Incoming Transfer Is Actually a Loan?

Yes.

The Capital Movements Circular specifically requires banks to check incoming foreign transfers for indications that the payment represents a loan.

It also states that a company’s declaration concerning whether a transfer constitutes credit includes borrowing from foreign shareholders.

The bank may request:

• loan agreement;
• maturity;
• interest rate;
• repayment plan;
• identity of creditor;
• source of funds; and
• corporate approvals.

Trying to disguise a loan as an ordinary transfer can therefore create significant compliance problems.

22. Should a Shareholder Loan Agreement Be Signed Before the Transfer?

Generally, yes.

A properly drafted agreement should address matters including:

• principal amount;
• currency;
• interest rate;
• maturity;
• repayment schedule;
• default;
• prepayment;
• governing law;
• dispute resolution;
• subordination where applicable; and
• tax allocation.

The bank and accountant should be able to reconcile the payment with the loan documentation.

23. Can the Shareholder Loan Be Interest-Free?

This requires careful tax analysis.

Transactions between a Turkish company and a related foreign shareholder may be subject to Turkish transfer pricing principles.

The Turkish tax authorities may examine whether the financial terms are consistent with the arm’s-length principle.

The Revenue Administration has specifically stated in guidance concerning related foreign-party loans that the applicable interest rate should satisfy arm’s-length transfer pricing rules.

Accordingly, an interest-free related-party loan should not be assumed to be tax-neutral merely because both parties agree to it.

24. What Is the Thin Capitalization Risk?

This is another important issue in shareholder financing.

Under Article 12 of the Turkish Corporate Tax Law, debt obtained directly or indirectly from shareholders or related parties and used in the business may be treated as thin capitalization to the extent that it exceeds specified statutory limits.

As a general rule, related-party debt exceeding three times the company’s equity can fall within the thin-capitalization regime.

This can affect the deductibility and tax treatment of:

• interest;
• foreign exchange differences; and
• similar financing expenses.

Therefore:

EUR 5 million equity investment

and

EUR 5 million shareholder loan

can have dramatically different tax consequences.

25. Equity or Shareholder Loan: Which Is Better?

There is no universal answer.

Equity May Be Better Where:

• the company needs a stronger balance sheet;
• no short-term repayment is expected;
• outside investors are entering;
• regulatory capital is relevant;
• the company expects further fundraising; or
• excessive debt would create thin-capitalization risk.

Shareholder Loan May Be Better Where:

• temporary funding is required;
• the parent expects repayment;
• equity restructuring is undesirable;
• bridge financing is needed; or
• the financing structure supports debt.

The decision should be made jointly from:

• corporate;
• banking;
• tax;
• accounting; and
• investment perspectives.

26. Can a Foreign Investor Simply Send “Advance Investment Money”?

This is risky unless the legal basis is clearly documented.

A bank receiving:

EUR 1,500,000 – investment advance

may reasonably ask:

• Investment in what?
• New shares?
• Existing shares?
• Future capital increase?
• Loan?
• Convertible instrument?
• Refundable deposit?

Ambiguous money becomes a legal and accounting problem.

Before transferring funds, the parties should determine exactly what happens if:

• closing does not occur;
• regulatory approval is refused;
• capital increase is not registered; or
• conditions precedent fail.

27. What About SAFE or Convertible Financing?

Foreign startup investors sometimes prefer instruments such as:

• SAFE;
• convertible note;
• convertible loan; or
• advance subscription arrangements.

These instruments are not always transplanted into Turkish law exactly as used in Silicon Valley documentation.

If the investor transfers funds before becoming a shareholder, the parties need to determine the legal characterization of the payment under Turkish law.

The amount may initially be treated as:

• debt;
• advance;
• conditional investment funding; or
• another contractual liability

until the required share issuance and capital increase process is completed.

Foreign exchange, corporate and tax consequences should therefore be reviewed before transfer.

28. Can the Money Be Transferred in EUR or USD?

Foreign investment capital can generally be transferred in internationally convertible currencies through Turkish banks.

The Foreign Direct Investment Law specifically recognizes foreign cash capital in convertible currency as a form of foreign investment.

A Turkish company may also hold foreign-currency bank accounts, subject to the bank’s products and applicable legislation.

However, accounting entries and registered share capital are governed by Turkish corporate and accounting rules.

The investment agreement should therefore address:

• investment currency;
• TRY conversion mechanism;
• applicable exchange rate;
• valuation date; and
• treatment of exchange-rate differences.

29. Which Exchange Rate Should Be Used in a Funding Round?

This should be agreed clearly in advance.

Suppose:

Company valuation:

EUR 10 million

Investment:

EUR 2 million

But the Turkish capital increase must be reflected in TRY-based corporate records.

The parties should define which exchange rate determines:

• subscription amount;
• nominal share amount;
• share premium;
• capitalization table; and
• accounting records.

Failing to define the FX methodology can create disagreements immediately before closing.

30. What Is Share Premium?

In many startup financings, the amount paid by an investor significantly exceeds the nominal value of the newly issued shares.

For example:

Nominal share capital issued:

TRY 1,000,000

Investor payment:

EUR 5 million equivalent

The excess amount may need to be structured and accounted for as an appropriate share premium or similar equity component in accordance with Turkish corporate and accounting rules.

The investment agreement, general assembly documentation and accounting treatment should therefore be coordinated.

Simply increasing nominal capital by the entire investment amount may not always be commercially necessary or desirable.

31. What Documents Should Be Prepared Before an Equity Transfer?

Depending on the transaction, the bank may request documents such as:

• articles of association;
• Trade Registry Gazette;
• shareholder resolution;
• general assembly resolution;
• board resolution;
• capital increase resolution;
• investment agreement;
• share subscription agreement;
• shareholder agreement;
• investor passport or corporate documents;
• UBO documentation;
• capital table;
• payment instructions;
• bank letter;
• source-of-funds documentation; and
• documentation showing registration after closing.

For foreign corporate investors, apostille and Turkish translation requirements may also arise.

Official investment guidance confirms that corporate documents issued abroad generally need appropriate authentication and official Turkish translation for Turkish corporate procedures.

32. What Documents May the Bank Request From the Foreign Investor?

Banks may request:

• passport;
• corporate registry extract;
• shareholder records;
• directors’ information;
• ultimate beneficial ownership information;
• proof of address;
• bank statements;
• investment agreement;
• source-of-funds evidence;
• source-of-wealth explanation; and
• sanctions-related information.

Banks are required to apply customer identification and AML procedures.

MASAK’s risk-based onboarding rules specifically require information concerning the purpose of the relationship, source of assets and funds, expected transaction volume and anticipated transaction frequency in relevant cases.

A foreign investor transferring EUR 10 million should therefore expect more compliance questions than an ordinary domestic customer making a small payment.

33. Why Source of Funds Is Important

Suppose an investor will send:

USD 3 million

The Turkish bank may ask:

Where did this money come from?

Possible evidence could include:

• fund bank statements;
• capital call documentation;
• proceeds from business operations;
• audited accounts;
• share sale proceeds;
• investor subscription documents; or
• other legitimate financial records.

The investment agreement itself proves why the money is being sent.

It does not necessarily prove where the investor obtained the money.

34. Should the Investor Transfer From Their Own Account?

As a practical compliance rule, this is often preferable.

For example:

Investor named in Share Subscription Agreement:

ABC Ventures Ltd.

Sender:

ABC Ventures Ltd. bank account

is straightforward.

But if the agreement says ABC Ventures is investing while the money arrives from:

Mr. X personally

or

an unrelated offshore company,

the bank may ask for an explanation.

Third-party funding is not necessarily unlawful, but it should be documented before transfer.

35. What Is E-TUYS?

Companies with foreign shareholders are subject to certain foreign direct investment information reporting requirements.

Relevant information is submitted electronically through:

E-TUYS – Electronic Incentive Application and Foreign Investment Information System.

Official Invest in Türkiye guidance confirms that E-TUYS is used for foreign direct investment information including:

• FDI activity information;
• FDI capital information; and
• FDI share transfer information.

Accordingly, a capital injection or foreign share acquisition should not be viewed solely as a bank transfer.

The company’s foreign investment reporting obligations should also be reviewed.

36. Does the Bank Also Report Foreign Capital?

Yes.

The Central Bank’s Capital Movements Circular states that information concerning foreign capital entering Türkiye is reported by the banks handling the transaction to the Central Bank’s Statistics General Directorate in accordance with applicable instructions.

Therefore, the transaction may create both:

• banking reporting; and
• company-level foreign investment reporting

obligations.

37. Does Foreign Investment Require Prior Government Approval?

For ordinary investments, there is generally no broad pre-approval system merely because the investor is foreign.

Türkiye’s Foreign Direct Investment Law was specifically designed around a notification-based rather than general screening-and-approval system.

However, special legislation can require approval in regulated sectors.

Examples may include investments involving:

• banking;
• insurance;
• payment services;
• capital markets;
• crypto asset service providers;
• energy;
• civil aviation;
• broadcasting; and
• other regulated businesses.

A foreign investor should therefore confirm sector-specific approval requirements before funds are transferred.

38. What If Regulatory Approval Is Required Before Closing?

The investment documentation should include appropriate:

conditions precedent.

For example:

Investor pays only after:

• SPK approval;
• BDDK approval;
• TCMB approval;
• Competition Board clearance;
• other regulatory permission; or
• required corporate approval

has been obtained.

Sending the purchase or subscription price before these conditions are completed can create unnecessary problems if the transaction later cannot close.

39. Should Investment Funds Be Sent Before the Investment Agreement Is Signed?

Generally, this should be avoided.

A better sequence is usually:

1. Complete legal due diligence.
2. Negotiate investment terms.
3. Sign investment documentation.
4. Complete necessary corporate approvals.
5. Complete regulatory approvals where required.
6. Coordinate with the bank.
7. Transfer funds.
8. Register the capital increase or share transfer.
9. Complete post-closing reporting.

The precise order depends on the transaction structure.

40. Can the Investment Money Be Held in Escrow?

Potentially.

For larger transactions, parties may use:

• escrow;
• blocked account;
• simultaneous closing mechanics; or
• other conditional payment arrangements.

This may be useful where:

• significant money is involved;
• share transfer and payment must occur simultaneously;
• regulatory approvals are pending; or
• the investor needs closing protection.

The escrow structure should be checked against Turkish banking and contractual rules before use.

41. What Happens If the Capital Increase Does Not Close?

The investment documents should address this explicitly.

Particularly where foreign currency has been sent to Türkiye with the declared purpose of a capital increase, the Central Bank Circular imposes specific timing and documentation rules.

For non-public companies, if the foreign currency brought in for a capital increase is not added to capital and documented within the applicable three-month period, the funds may be returned to the sender.

The parties should therefore avoid leaving investment funds indefinitely in legal uncertainty.

42. Can an Intended Capital Contribution Later Be Treated as a Loan?

Potentially, but not merely by changing the accounting description.

The Central Bank Circular expressly contemplates situations in which foreign funds originally brought for capital increase may instead be processed under foreign loan rules if the company wants to use them as credit.

That means the financing must then comply with the separate legal requirements applicable to foreign borrowing.

An investor cannot assume:

“If the share issuance fails, we will just call it a loan.”

The loan structure should independently satisfy Turkish law.

43. Can the Foreign Investor Send Money to the Founder’s Account First?

This is generally a poor structure where the real purpose is financing the company.

For example:

Investor → Founder Personal Account → Turkish Company

creates questions including:

• Is the founder receiving sale proceeds?
• Is the founder lending money to the company?
• Is the investor actually a shareholder?
• Is the founder acting as intermediary?
• Who owns the money?
• What is the tax treatment?

Where the investment is intended as company equity, payment should normally be routed consistently with the legal investment structure.

44. Do Not Mix Investment Money With Customer Revenue

The company should maintain clear accounting records distinguishing:

• share capital;
• share premium;
• shareholder loans;
• commercial revenue;
• advances;
• grants;
• founder contributions; and
• other financing.

A EUR 1 million VC investment should not be recorded as:

software sales revenue.

Likewise, customer revenue should not be incorrectly recorded as capital.

Incorrect characterization can affect:

• corporate tax;
• VAT;
• financial statements;
• bank compliance;
• due diligence; and
• future investor reporting.

45. Can the Investor Repatriate Profits Later?

Yes, subject to corporate, tax and banking requirements.

Law No. 4875 expressly protects the ability of foreign investors to transfer abroad through banks or financial institutions amounts such as:

• net profits;
• dividends;
• proceeds from the sale or liquidation of an investment;
• compensation;
• certain licence and management payments; and
• repayments and interest arising from foreign loans.

The ability to bring capital into Türkiye should therefore be considered together with the eventual:

exit and repatriation strategy.

46. Can the Investor Repatriate a Shareholder Loan?

A properly structured foreign loan can generally be repaid subject to:

• foreign borrowing rules;
• banking documentation;
• repayment schedule;
• interest;
• tax obligations;
• foreign exchange legislation; and
• the terms of the loan.

The bank may require the loan agreement and other documentation before processing repayment.

The Capital Movements Circular specifically requires banks to monitor foreign loan usage and repayment and may require credit agreements containing information such as maturity and interest rate.

47. Practical Example: EUR 2 Million Seed Investment

Assume a German VC wants to invest EUR 2 million into a Turkish technology startup.

The investor does not want founders to cash out.

Appropriate structure:

Capital increase

Payment:

German VC → Turkish startup bank account

Corporate process:

• investment agreement;
• shareholder approvals;
• capital increase;
• subscription of new shares;
• registration;
• updated cap table;
• E-TUYS reporting.

Result:

The company receives EUR 2 million in growth capital.

48. Practical Example: EUR 2 Million Founder Exit

Now assume the investor wants to buy 20% directly from the founder.

Payment:

German VC → Founder’s bank account

Result:

Investor becomes shareholder.

Founder receives EUR 2 million.

Company receives no new financing.

This is economically very different even though the investor may describe both transactions as a “EUR 2 million investment.”

49. Practical Example: Mixed EUR 5 Million Transaction

Assume:

EUR 4 million → new shares

EUR 1 million → founder secondary sale

The closing documentation should separately state:

Primary Subscription Price

EUR 4 million payable to the company.

Secondary Purchase Price

EUR 1 million payable to the selling founder.

The bank transfer instructions should match this distinction.

50. Practical Example: Foreign Parent Funding a Turkish Subsidiary

A Swedish parent company needs to provide EUR 500,000 to its Turkish subsidiary.

Possible alternatives include:

Alternative A – Capital Increase

Permanent equity capitalization.

Alternative B – Shareholder Loan

Repayable financing subject to foreign borrowing and tax rules.

Alternative C – Combination

EUR 300,000 equity
EUR 200,000 shareholder loan

The appropriate option depends on:

• balance sheet strength;
• repayment intention;
• taxation;
• foreign exchange exposure;
• future dividends;
• thin-capitalization rules; and
• business needs.

51. Common Mistake No. 1: Sending Money Before the Structure Is Decided

The investor wires EUR 1 million.

Only afterward do the parties ask:

“Was this a loan or equity?”

This should be avoided.

The legal documentation should normally exist before the payment.

52. Common Mistake No. 2: Wrong Payment Description

The investor is making an equity investment but writes:

“loan”

in the SWIFT description.

The bank may then apply foreign credit rules.

Conversely, a genuine shareholder loan described as:

capital investment

may create problems when the company later tries to repay it.

The payment description matters.

53. Common Mistake No. 3: Capital Increase Money Is Sent Too Early

Foreign capital increase funds are transferred before:

• valuation is agreed;
• corporate resolutions are ready;
• shareholder rights are finalized; or
• regulatory approvals are complete.

The three-month banking timeline applicable to foreign capital increase funds may then become a problem.

54. Common Mistake No. 4: Secondary Sale Is Mistaken for Startup Funding

An investor buys founder shares for EUR 3 million.

The founder receives all EUR 3 million.

The company later discovers it has no new working capital.

Primary and secondary investment must be distinguished during term-sheet negotiations.

55. Common Mistake No. 5: Undocumented Shareholder Loan

A foreign shareholder sends USD 1 million with no:

• loan agreement;
• maturity;
• interest provision;
• repayment schedule; or
• bank coordination.

Later, the company tries to repay the amount.

The bank asks for foreign credit documentation.

The financing should have been structured before the transfer.

56. Common Mistake No. 6: Ignoring Thin Capitalization

The foreign parent continually funds its Turkish subsidiary through debt.

Eventually:

Shareholder debt = EUR 10 million

Company equity = EUR 1 million

The company may face significant thin-capitalization and tax consequences.

Turkish corporate tax legislation generally treats the relevant portion of shareholder or related-party borrowing exceeding three times equity as thin capital.

57. Common Mistake No. 7: Using an Unrelated Sender

The investment agreement names:

Global Ventures Fund LP

but payment arrives from:

XYZ Holdings Ltd.

The Turkish bank may delay the transfer while asking why the sender and investor are different.

If another entity is legitimately funding the investment, this should be documented in advance.

58. Common Mistake No. 8: Ignoring MASAK Review

An investment may be perfectly lawful but still be delayed by banking compliance.

Before a large transfer, the Turkish company should prepare:

• investment agreement;
• investor ownership structure;
• UBO information;
• source-of-funds documents;
• board/general assembly resolutions; and
• explanation of transaction purpose.

MASAK’s risk-based framework requires financial institutions to understand both fund sources and expected customer activity.

59. Foreign Investment Transfer Checklist

Before transferring money to a Turkish company, the investor and company should confirm:

• Is the payment equity or debt?
• Is the investor establishing a new company?
• Is this payment of existing subscribed capital?
• Is there a capital increase?
• Is the investor buying newly issued shares?
• Is the investor buying existing founder shares?
• Is part of the deal primary and part secondary?
• Who should legally receive each payment?
• Has the investment agreement been signed?
• Have shareholder approvals been obtained?
• Has the capital increase resolution been prepared?
• Are regulatory approvals required?
• Is Competition Board clearance relevant?
• Is the foreign investor properly identified?
• Have UBO documents been prepared?
• Has source of funds been documented?
• Is the sender the same entity as the investor?
• Is the SWIFT description correct?
• Has the Turkish bank been informed in advance?
• Is the amount being transferred in EUR, USD or another currency?
• Has the TRY conversion methodology been agreed?
• Is share premium relevant?
• Does the three-month capital increase deadline apply?
• Does the investment need E-TUYS reporting?
• If structured as debt, do foreign currency loan rules apply?
• Is there a written shareholder loan agreement?
• Has the interest rate been reviewed for transfer pricing?
• Has thin-capitalization risk been considered?
• Have withholding and other tax issues been reviewed?
• Has post-closing Trade Registry registration been planned?
• Are exit and repatriation mechanics understood?

Conclusion: What Is the Safest Way to Transfer Foreign Investment Funds to a Turkish Company?

Foreign investment capital can generally be transferred into Türkiye through the banking system.

Türkiye’s Foreign Direct Investment Law expressly protects the freedom of foreign investors to establish companies, acquire interests in Turkish companies and bring foreign investment into the country, subject to special legislation applicable to particular sectors.

The Turkish Central Bank’s Capital Movements Circular likewise recognizes investment through:

• establishing a new company;
• participating in an existing company;
• capital increases; and
• acquisitions of ownership interests.

But the money should never be viewed as merely:

“investment money.”

Before the transfer, the parties should determine exactly whether it represents:

Initial share capital

Capital increase subscription

Existing share purchase

Share premium

Shareholder loan

or

another legally defined financing transaction.

The difference determines:

• who receives the money;
• whether the company must repay it;
• whether the investor receives shares;
• Trade Registry procedures;
• banking documentation;
• foreign exchange treatment;
• E-TUYS reporting;
• tax consequences; and
• future exit rights.

For startup investments, one distinction is particularly important:

If the investor wants the startup itself to receive the money, a primary capital investment is usually required.

Buying existing founder shares does not automatically finance the company.

Foreign investors should also be especially cautious with shareholder loans.

A foreign shareholder loan is subject to a separate legal regime involving foreign borrowing, banking and tax rules. The Turkish bank may request loan documentation and examine the SWIFT message and company declarations to determine whether an incoming payment constitutes foreign credit.

Similarly, where foreign currency is brought into Türkiye specifically for a non-public company’s capital increase, the relevant increase generally needs to be completed and documented within the applicable three-month period; otherwise the bank may return the funds or require them to be processed under the appropriate loan framework.

The practical rule is therefore simple:

Structure first. Transfer second.

The investment agreement, corporate resolutions, bank instructions, SWIFT description, accounting treatment and regulatory filings should all describe the same transaction.

That is the safest way to move foreign investment capital into a Turkish company without creating avoidable banking, corporate or tax problems.

Frequently Asked Questions

Can a foreign investor transfer money directly to a Turkish company?

Yes, provided the payment has a lawful and properly documented basis, such as share capital, capital increase or financing.

Is foreign investment subject to general prior approval in Türkiye?

Generally, no. Türkiye’s foreign investment system is primarily based on freedom of investment and notification rather than general prior approval, subject to regulated-sector exceptions.

Can investment funds be transferred in EUR or USD?

Generally, yes. The Foreign Direct Investment Law recognizes cash investment in convertible foreign currency as foreign direct investment.

Can a foreign investor pay company capital from abroad?

Yes. Foreign investors may transfer subscribed capital through the banking system.

How much A.Ş. capital must be paid before incorporation?

At least 25% of subscribed cash share capital must generally be deposited before registration, with the remaining portion payable within the statutory period.

Does an Ltd. Şti. require 25% capital payment before registration?

No. Official investment guidance states that this pre-registration 25% rule does not apply to limited liability companies.

Can a foreign investor join an existing Turkish startup through a capital increase?

Yes. A new foreign investor may subscribe for shares issued through a capital increase.

Does capital increase money go to the company?

Yes. A primary subscription normally provides new capital to the company.

Does buying founder shares put money into the company?

Normally, no. The purchase price is paid to the selling shareholder unless the transaction has been structured differently.

Can a funding round combine new shares and founder share sales?

Yes. Primary and secondary components may be combined, but the payments should be documented separately.

Is there a deadline for foreign funds transferred for a capital increase?

For non-public companies, foreign currency brought through banks with a capital-increase declaration generally must be added to capital and documented within three months.

What happens if the capital increase is not completed?

Under the Central Bank Circular, the relevant funds may be returned to the sender unless they are validly processed under the applicable foreign-loan framework.

Can a foreign shareholder lend money to its Turkish company?

Potentially, yes, but the financing is subject to foreign borrowing, banking, foreign exchange and tax rules.

Is a shareholder loan treated as equity?

No. A loan creates a repayment obligation and does not itself issue additional shares.

Will the bank ask for a shareholder loan agreement?

It may. Turkish foreign borrowing rules require banks to identify incoming foreign loans and obtain relevant credit information and documentation.

Can I write “investment” in the SWIFT description even if it is actually a loan?

This should be avoided. The payment description should accurately reflect the legal transaction.

Can a foreign shareholder loan create tax problems?

Yes. Issues may include transfer pricing, interest taxation, thin capitalization and other tax consequences.

What is the thin-capitalization rule?

As a general rule, related-party borrowing exceeding three times the company’s equity can fall within the Turkish thin-capitalization regime.

Does E-TUYS apply to foreign investments?

Companies with foreign investors are required to report specified foreign direct investment information electronically through E-TUYS, including capital and share transfer information.

Does the Turkish bank report incoming foreign capital?

The Central Bank Circular provides that banks report information concerning foreign capital entering Türkiye to the relevant Central Bank statistics authority according to applicable instructions.

Can the bank ask where the investor obtained the investment money?

Yes. MASAK customer due diligence rules require financial institutions to examine source of funds in relevant risk-based onboarding and monitoring processes.

Should the investor transfer money before signing the investment agreement?

Generally, the legal structure and documentation should be completed or sufficiently advanced before significant investment funds are transferred.

Can a foreign investor get profits and investment proceeds out of Türkiye later?

Generally, yes, subject to applicable tax and banking rules. The Foreign Direct Investment Law protects transfers abroad of items including profits, dividends, sale and liquidation proceeds and repayments arising from foreign loans.

Legal Disclaimer: This article provides general information concerning Turkish corporate, foreign investment, banking, foreign exchange and tax law and does not constitute legal or tax advice. The correct transfer structure depends on whether the payment constitutes equity, a share purchase, shareholder financing or another transaction. Foreign borrowing restrictions, regulated-sector approvals, tax rates, banking procedures and administrative rules may change, and the legislation applicable on the transfer and closing date should be reviewed before funds are sent.