Company Formation in Turkey
Updated on Tuesday 14th June 2022
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Bridgewest provides company formation services in Turkey. Our consultants can help foreign investors in setting up any of the legal entities prescribed by the national law. You can also rely on us for obtaining a registered address, compulsory for any company; our team can assist in tax registration and tax compliance.
Basic steps for company formation in Turkey
Although with the new Commercial Code in force, company formation process has been simplified and can now be conducted quite hassle-freely, clients should still fulfill certain prerequisites in order to successfully registering their Turkish business.
Once the decision to incorporate a company in Turkey has been taken, clients should provide the 3 company names at their choice.
The name must indicate the company’s scope of activities, e.g. foreign trade, and must equally contain the type of entity, e.g. limited company.
In addition to the thorough consideration clients must give to their business name, they should also provide details pertaining to the shareholding & directorship structure, and to the actual activities the company shall conduct.
Depending on the shareholding structure, i.e. whether the company will be incorporated by natural persons or legal entities, the documents necessary in the first stages of the incorporation will include the following:
- passport copies of the directors and shareholders;
- information regarding their residential address;
- Trade Register certificate showing that the founding company is duly registered in the country of origin;
- articles of association of the founding company;
- certificate of incorporation etc.
It is equally important mentioning the fact that part of the above documents will need to be apostilled in the country of origin.
All the above documentation and information must be translated into Turkish by a sworn translator and thereafter notarized via power of attorney, should the clients decide not to be physically present for the registration procedures, in front of a Turkish Notary Public.
Phase II of the procedures refer to the actual registration of the company. At this point a number of papers in which the company director accepts the appointment and signs certain statements are provided to the client in order to be notarized and apostilled.
Concurrently, the articles of association of the Turkish entity and the bank account set-up documents are prepared so that the share capital can be injected prior to the registration of the company (the share capital is available after the incorporation).
These procedures can be conducted either through personal presence of the client in Turkey or via power of attorney, the decision being left at the client’s discretion.
The final step is to register the company with the Trade Register and to obtain the Tax ID number of the company.
In order to obtain the company’s tax identification number a new series of documents must be prepared and submitted with the relevant authorities; among these we mention:
- the power of attorney;
- specimen signatures;
- copy of the Turkish Official Gazette on the registration of the company;
- office rental and accounting agreements, etc.
Proper fulfillment of the above steps leads to the successful registration of the Turkish entity.
Requirements for company formation in Turkey
Some of the main aspects to know when starting the process of company formation in Turkey are the following:
- there are no residency requirements – foreigners can easily become the directors or the shareholders of local businesses;
- a shareholder of a Turkish legal entity can be a natural person or another legal entity;
- all local businesses have to assign a physical address in Turkey, where they will have their registered address (this service is available through our team of specialists in company registration in Turkey);
- when setting up a limited liability company, the investors must submit TL 10,000, however, only 25% of it has to be submitted during the registration formalities;
- a local business can be incorporated with 1 shareholder and 1 director, as per the latest modifications of the law.
Some of the services offered by our company formation agents in Turkey are:
- preparing the articles of association of the company;
- drafting all other documents required for the registration of the Turkish company;
- arranging public notary meeting and procedures (the procedures for establishing a company in Turkey have to be performed by a Turkish notary public);
- obtaining a tax ID number;
- providing a registered office in Turkey for the company (if required);
- opening a bank account and providing the necessary forms and documents for the setup of a bank account;
- accounting and payroll services in Turkey - accountancy services are recommended for any new business establishment in Turkey.
Establishing a limited liability company in Turkey
The most common way to open a company in Turkey is by registering a limited liability company, a legal entity designed to fit the needs of small and medium-sized companies.
This business form benefits from a simple incorporation procedure, low corporate taxes and a lot more advantages.
The Turkish limited liability company needs only 1 shareholder (a natural person or a legal entity) who is liable for the debts of the company only in relation to the capital that the shareholder subscribed.
The minimum required capital to open this type of company in Turkey is TL 10,000, out of which 1/4 must be deposited upon the registration of the company. Limited companies cannot issue stock certificates.
The limited liability company is the most common way to start a business anywhere in the world.
The same business structure (which can have different names depending on the jurisdiction), can also be found in places that allow offshore company formation.
Most of the times, the registration procedures will be similar, although offshore jurisdictions can have fewer requirements.
In all cases, those interested in offshore company setup will also need to open an offshore bank account, to deposit the minimum capital required under the law of the respective country.
Setting up a joint stock company in Turkey
It is a company designed for businesses at a larger scale and it is not as common as limited liability companies. Nevertheless a lot of limited companies evolve into joint stock companies, or become shareholders of one.
A joint stock company must be established by at least 1 person or legal entity and the minimum required capital is TL 50,000 (approx. EUR 24,000).
The shareholders’ liability is limited with the share capital. A joint stock company can issue stock certificates, unlike limited companies.
The Turkish branch, subsidiary or representative office
Any foreign company is able to set up branch entities in Turkey. A branch office represents an extension of the parent company operating in the foreign country.
Foreign companies can start the process of company formation in Turkey through the subsidiary, which is a structure separated from the parent company and which has a higher level of independence compared to the branch office.
Typically, a subsidiary is registered as a limited liability company and there aren’t any legal distinctions between the subsidiary and Turkish incorporated business.
Company formation in Turkey can also be completed through the representative office, which is a type of structure that does not allow the initiation of commercial activities.
It can only be used as a way to establish business partnerships in a foreign country and to analyze the market and possible clients that the foreign company can have once establishing commercial operations in Turkey.
What is Turkey's tax system?
The Turkish standard corporate tax rate for the year 2021 was 25%, but starting with 2022, the corporate tax has been reduced to 23%, according to the Investment Office, working under the Presidency of the Turkish Republic.
The Turkish standard VAT rate is 18%. Also, reduced rates are applicable, as follows: 8%, 1% and 0%.
Under Turkish tax system all taxable companies are subject to the dividend withholding tax applied at 15% to profits.
Foreign investors interested in the process of company formation in Turkey can find below few basic information concerning the tax system and the taxes charged in this country:
- the basic rules for taxation are prescribed by the Income Tax Law Number 193 and the Corporate Income Tax Law Number 5520;
- the withholding taxes charged on professional services and royalties are imposed at a rate of 20%;
- branches are charged only for the income obtained in Turkey – the corporate income tax is charged at a rate of 23% and the profit transferred to the headquarters is imposed with the withholding tax, charged at a rate of 15%;
- companies are required to submit corporate income tax returns no later than the 25th day of the 4th month following the end of the current financial year;
- with regards to the payment of payroll taxes, companies have to withhold the employment taxes, which, in Turkey, vary from 15% to 40% from the value of the salary.
What are the indirect taxes in Turkey?
The Turkish tax system is created from 2 main types of taxes – direct taxes and indirect taxes. One of the indirect taxes is the value added tax, charged at the rates presented above for almost all the goods and services sold on the local market.
Another indirect tax is the digital services tax, which was implemented in Turkey starting with 1st of March 2020. It is charged to digital services delivered through the use of digital media.
The tax is charged at a rate of 7.5% of the revenue obtained from such services. Turkey also applies the special consumption tax for 4 main classes of products.
Other taxes charged here are the stamp duty and the real estate tax. The latter is imposed to real estate owners at rates of minimum 0.1% to 0.6% of the value of the property.
Other taxes can apply as well. For the process of company formation in Turkey, various fees can be imposed to both local and foreign investors, and for updated information on such fees, our consultants remain at your service.
Please contact us for more information regarding how to open a company in Turkey and prices!