Turkey welcomes foreign entrepreneurs doing business within its borders. The country ranked as the world’s 13th most hospitable destination for foreign direct investment in 2012, according to the A.T. Kearney FDI Confidence Index, a regular survey of global executives.
Foreign DirectI Investment Law in Turkey
The Turkish government has introduced reforms to its Foreign Direct Investment Law. The new law removes various restrictions and simplifies the investment procedure.
The FDI screening and approval procedures required in cases of setting up of a new business and share transfers have been removed. According to the new law, the foreign investor will not be required to obtain approval from the business set-up and share transfer except in case of some specific sector. The conditions for the establishment of a business and share transfers have been made uniform for local and international investors.
Earlier, prior approval was required for certain transactions of foreign investment companies; this requirement has been waived. The earlier requirement regarding minimum capital investment of EUR 33.430 (USD 50.000) by each foreign shareholder has also been removed.
Previously, foreign investors could only set up a joint stock company or a limited company. Now, any form of company existing as stipulated by the Turkish Commercial Code, including partnerships, can be established by foreign investors.
The valuations done by the international credit agencies and courts or competent authorities of the investor’s country will also be accepted while determining the share value for marketable securities contributed as capital in kind. The new foreign investment legislation is based on the principle of equal treatment for both domestic and foreign investors.
Both foreign capital companies located in Turkey and domestic investors now have similar rights with respect to the acquisition of real estate. The legal entities of a foreign country can hire foreign personnel in Turkey if the personnel have work permits granted by the Ministry of Labour and Social Security.
Turkish FDI Law Based on Equal Treatment Principle
The Turkish law is based on equal treatment of national and foreign business investors. Unless there is an international agreement or a special law, foreign investors in Turkey have an equal right to make investments and participate in all types of companies and sectors which are open for investment to the domestic investors.
There will be no expropriation or nationalisation of FDI, except in the following cases:
- If it is required for the interest of the general public
- If payment has to be made for compensation according to the law
Investors are free to transfer their net profits, dividends, licence fee, fees received for management or other similar arrangement, etc. to other countries.
Foreign investors can approach the authorised local courts, national or international arbitration, or any other means for settlement of disputes arising from investment agreements, public concession contracts and other conditions concluded with the foreign investors. However, the related regulations must be fulfilled and parties to the arbitration should have mutually agreed to the settlement procedure.
Steps to Establish a New Company
There are minor differences in the procedures for setting up different types of companies. The required documents and statements should be submitted to the Trade Registry Offices (TRO) in the province where the new company is to be established.
The TRO will provide approval only if the documents and statements are in accordance with the legal requirements. The rights of a third person should be duly covered by the documents. On approval by the TRO, each company is provided with a unique registration number.
The Istanbul TRO maintains computerised copies of all the statements and documents submitted and also files them in the company dossiers. The TRO in Ankara publishes registrations and participations of the new company in the ‘Turkish Commercial Registration Newspaper.
Digital copies of the official newspaper published in Turkish are also maintained and filed in the related company dossiers. The fee for registration formalities is announced on a yearly basis by the Ministry of Finance.
The charges for publishing the registrations and participations in the Turkish Commercial Registration Newspaper are decided by the Union of Chambers, Ankara.
Document required to Set Up a Merchant Organisation
The following documents must be submitted to the TRO of the province where the company is to be established:
- Home address
- Business address
- Purpose/subject of the business
- Date of commencement of operation
- Nationality of the merchant
- Name of the company
The document should also include three specimen signatures of the merchant.
Administrative steps (useful links)
- Starting a new business in Turkey, bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Turkey
- starting a new business in Turkey (in Turkish)
- laws and regulations for investment in Turkey
- why invest in Turkey
- business environment in Turkey, taxation, tax incentives, accounting principles, agreements, statistics
- establishing a company in Turkey
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