Forming a company in Turkey

What are the advantages of establishing a company in Turkey? 

Turkey can be a lucrative business location as it is geographically located partly in Europe and partly in Asia, separated by the Bosphorus. Restrictions on foreigners now only apply to privileges in certain professions. Such restrictions no longer have any practical effect on companies.

There are several advantages to establishing a company in Turkey. These include:

• Low operating costs
• Proximity to Europe and Asia (geographical advantages)
• Ease of incorporation
• Good access to credit

By establishing a company in Turkey, you can establish a presence in Izmir, Istanbul, Ankara or any other location in Turkey in a free trade zone.

Establishing a Company in Turkey for Foreigners and the Different Types of Companies

Foreign natural and legal persons can make direct investments in Turkey by establishing a company. Once the decision to establish a company in Turkey has been made, the important question of the legal form of the company arises.

We assist our clients in establishing their presence in Turkey by designing the options listed below depending on your strategic decisions:

• Establishment of a Private Limited Company
• Establishment of a joint stock company
• Establishment of a branch in Turkey
• Establishment of a subsidiary
• Establishment of a Liaison Office

Foreign companies have the option of establishing a liaison office in Turkey. A liaison office is a special form of branch office, which is characterised by limited activities. It is not allowed to engage in commercial or industrial activities in the strict sense of the word, but only in activities related to the representation of the company.

Despite these restrictions, a liaison office has some legal capacity. It may employ its own staff and may acquire assets such as immovable property or vehicles necessary for its activities. Employees of a liaison office in Turkey are subject to a special tax regime that exempts them from income tax. However, this exemption only applies to income derived from the permitted activities of a liaison office.

However, the establishment of a liaison office is subject to the approval of the General Directorate of Foreign Investment of the Turkish Ministry of Economy in Ankara. This approval is necessary to legitimize the legal existence of the liaison office in Turkey.

For companies that only need a presence in Turkey without setting up a physical office, we offer the option of a virtual office. This includes providing an official business address and managing your company's incoming and outgoing correspondence. This allows you to efficiently organize your business activities in Turkey without having to invest in physical infrastructure. The virtual office allows you to run your business flexibly and cost-effectively.

The difference between a Turkish branch and a liaison office

For foreign companies that want to establish a local presence in Turkey without setting up a company in Turkey, there are two options: opening a branch or a liaison office. Neither of these options is a separate Turkish legal entity; instead, they are part of the foreign parent company operating in Turkey. In other words, both a branch and a liaison office represent the foreign head office in Turkey. They are part of the foreign legal entity and act in accordance with their interests.

Branch:

A branch in Turkey is authorised to supply goods and services and to issue invoices. It is fully subject to Turkish taxation, i.e. the branch is subject to Turkish tax on both its income and expenses. The branch's accounts are kept as part of the consolidated accounts of the foreign parent company. This requires that all tax and accounting requirements are met in accordance with Turkish tax regulations.

Liaison Office:

A liaison office is a less extensive form of local presence. It serves primarily as a point of contact and allows the foreign parent company to operate in Turkey with its own staff. However, a liaison office may not sell goods or services, issue invoices or generate revenue. It is limited to non-commercial activities. All operating costs of a liaison office, such as salaries, travel expenses and rent, are borne by the parent company abroad.

The choice between a branch and a liaison office depends on the type of business activity planned and the desired tax treatment. While a branch is fully integrated into the Turkish tax system, a liaison office is a cheaper but more limited way of establishing a presence in Turkey.

The incorporation process: step by step

The general procedure for starting a company in Turkey is as follows:

• The company is registered before a Turkish notary or at a commercial registry. The articles of association are signed by the parties on the spot and entered into the government's MERSIS system.
• If the business partners are legal entities, the signature of their legal representatives or duly authorised persons is required to confirm legal representation.
• The next step is to apply to the relevant chamber of commerce on behalf of the shareholders to register the company in the commercial register. The chamber of commerce will then check that the articles of association comply with Turkish commercial law.
• For this process, both the notary and the Chamber of Commerce require certain official documents from the shareholders. For legal entities, this is a current extract from the commercial register, while natural persons must provide copies of their passports. These documents must be notarised and translated into Turkish to confirm their validity.
• In addition, the notarised deeds of the appointed directors, together with their certified signatures, are also required for registration in the Commercial Register.
• Once the company has been registered, it will be registered with the relevant tax authority. For this purpose, the office lease contract must be submitted as proof of the company's legal domicile.
• The incorporation of the company is officially completed when the incorporation is published in the Official Gazette of the Commercial Register and the company receives a tax number.
• After successful registration, the Ministry of Economy in Ankara must be notified of the company's formation. The company must also register with the Social Security Institution and the Ministry of Labour in order to comply with all legal requirements and to ensure the social security of its employees.

After establishing the company in Turkey

Once the company has been established, one of the challenges is to find your way through the complex Turkish tax system, which is subject to constant changes and regulations by the Turkish legislator. Thanks to our many years of practical experience in Turkish tax consultancy and our understanding of Turkish law and the Turkish tax system, we are able to efficiently take over or set up the entire accounting of a company in Turkey. Our highly qualified team of accountants, who specialise in Turkish law and the Turkish tax system, will be happy to undertake this work for you. We take care of the whole process, from initial accounting entries to tax returns in Turkey.

In addition, the human factor is a crucial element in the success of any business. If you are building a new team or going through a period of restructuring or growth, you can rely on our recruitment services in Turkey. Thanks to our extensive recruitment experience, in-depth understanding of client needs and network, we are able to find local employees who can adapt to your global corporate culture. We use our expertise to ensure the best possible match for long-term success.

ALN Law Firm handles the establishment of companies in Turkey and, if required and within our capacity, provides virtual offices as company headquarters. We provide you with all the necessary documents, take care of all the formalities and translations in Turkey on behalf of our client and guide you through the entire process. We also take care of accounting. Together with our own tax advisors, we support our clients in all tax matters.

We are always at your disposal for a free and non-binding consultation and professional assistance in setting up a company in Turkey. Please do not hesitate to call us - we look forward to assisting you in registering your company in Turkey and guiding you through the entire incorporation process!