Foreign-Capital Company Formation in Türkiye

The establishment of a company in Türkiye by foreign natural and legal persons rests on a technical process conducted through MERSİS. We examine the stages of incorporating joint stock and limited liability companies, the fields of activity subject to permission, the registration documents, the costs and timescales, and the notification and compliance obligations arising after incorporation.

For foreign natural or legal persons wishing to establish a commercial structure in Türkiye, the legislation has not laid down an incorporation regime different from that applied to Turkish citizens. Where the conditions sought are met and the file is submitted in full, incorporation takes place. In practice, however, the process carries additional layers such as registration in the system by way of a passport, the apostille and translation requirements applying to documents, and the prior permission sought in certain fields of activity.

The incentive instruments and economic opportunities Türkiye offers to investors have markedly increased interest in this subject in recent years. Yet the completion of the incorporation formalities does not mean the end of the process; once the company has been registered, the headings of notification, taxation and regulatory compliance come into play.

Below we examine how incorporation proceeds through MERSİS, the points at which joint stock and limited liability companies diverge, the fields of activity subject to prior permission, the documents required upon registration, the duration and the cost, the obligations arising after incorporation, and the safeguards afforded to the foreign investor.

How Does Incorporation with a Foreign Shareholder Work?

Incorporations involving foreign shareholders are conducted through the Central Registry Record System (MERSİS) and are concluded upon completion of the steps separately defined for each type of company.

Access to the system is obtained by identity number in the case of Turkish citizens and by passport number in the case of foreigners. In order for foreign persons to be able to initiate an incorporation transaction on the system, they must first obtain a tax number from the tax office. In addition, an application to the trade registry directorate is required so that the MERSİS record may be created. Once these preliminary steps have been completed, the formalities become capable of being conducted through the system.

Note: The incorporation formalities may be carried out with the personal participation of the shareholders, or equally through a representative authorised by power of attorney.

Drafting and Signing the Articles of Association

Once access to the system has been obtained, the first step to be taken is the selection of the type of company to be established. The mandatory elements that must appear in the articles of association drawn up for joint stock and limited liability companies differ from one another. In the articles of association of a limited liability company, for instance, information such as the company’s trade name, the place where its registered office is located, its business purpose, the amount of its share capital and the number of shares must be shown.

The MERSİS infrastructure guides the user step by step in entering these elements which must appear in the articles of association. Where the guidance is followed and the information is correctly recorded, the text of the articles corresponding to the type of company selected is generated.

The instrument of incorporation thus generated must be recorded in the system in full. The text is produced in Turkish in line with the information requested by the system. For foreign shareholders, the question of having the articles translated arises at this stage.

Once the articles have been prepared, they must be signed by the founders and the signatures must be approved by the competent authority.

In limited liability companies, the authority before which the signatures are to be approved is the trade registry directorate of the place where the registered office is located. In joint stock companies, approval may be obtained from the registry directorate of the same place or from any notary. Where approval is carried out before a notary, the tracking number generated on MERSİS is required to be submitted.

Note: As the articles of association are recorded on MERSİS, there is no need to submit the text separately in physical form to the authorities before which certification of signatures is sought. All of the founders are, on the other hand, required to be present before the competent authority.

Once the articles of association have been prepared and signed, it is the turn of the payments. The amount calculated at a rate of 0.04% over the company’s capital is transferred to the bank account of the Competition Authority as the Competition Authority share. The other payments required for incorporation are also made at the same stage. All of the payments, including the Competition Authority share, may be effected through the trade registry directorate.

A further rule applies in the case of joint stock companies. Where incorporation is to take the form of a joint stock company, an amount of not less than 25% of the shares subscribed for in cash must be paid in advance. That amount is transferred to the bank account which must be opened in the company’s name before registration.

The Registration Stage

Once the required payments have been completed, registration is effected before the trade registry directorate. The documents to be submitted upon registration vary according to the type of company. Certification of the commercial books which joint stock and limited liability companies are obliged to keep is likewise carried out by the trade registry directorate.

Incorporation of a Joint Stock Company with a Foreign Shareholder

A joint stock company is established, within the framework of Art. 335 et seq. of the Turkish Commercial Code No. 6102, upon the founders declaring their intention to form a company in articles of association drawn up in conformity with the law. In respect of the articles of association, the founders are required to undertake unconditionally to pay the capital in full, and their signatures must be approved by a notary or affixed in the presence of the trade registry director or the deputy director.

Pursuant to Art. 354 of the Turkish Commercial Code No. 6102, the articles of association in their entirety are registered, within 30 days following incorporation, with the trade registry of the place where the company’s registered office is located, and are announced in the Turkish Trade Registry Gazette. The moment at which the company acquires legal personality is the moment of registration.

Incorporation of a Limited Liability Company with a Foreign Shareholder

A limited liability company may be established under a trade name by a single person or by more than one natural or legal person. For incorporation, the articles of association must be drawn up in writing and signed by the founders in the presence of personnel authorised by the trade registry directorate.

According to Art. 573 of the Turkish Commercial Code No. 6102, a company can bear the character of a limited liability company only where its share capital is determinate and that capital consists of the sum of the shares in the share capital. The shareholders are not held liable for the company’s debts; their obligations consist of paying the shares in the share capital they have subscribed for and, where the articles of association so provide, of performing their obligations of additional payment and of ancillary performance.

The particulars which must be expressly shown in the articles of association of a limited liability company are as follows:

The forenames and surnames, titles and nationalities of the managers,
The nominal amount of the share capital, the number of the shares in the share capital and their nominal values, any privileges and the groups of shares,
The business purpose of the company, with its essential points stated and defined,
The trade name of the company and the place where its registered office is located,
The form of the announcements to be made by the company.

Apart from these mandatory particulars, the shareholders may also add to the articles any other provisions they wish, provided that these are not contrary to the law.

Fields of Activity Subject to Prior Permission from the Ministry of Trade

The Foreign Direct Investment Act No. 4875 has accepted that foreign persons may establish all of the types of company regulated in the Turkish Commercial Code No. 6102. Nevertheless, in certain fields of activity, permission must be obtained from the Ministry of Trade in addition to the ordinary incorporation steps. The types of company made subject to prior permission are as follows:

Banks,
Insurance companies and asset management companies,
Consumer finance and card services companies,
Factoring companies,
Financial leasing companies,
Companies operating foreign exchange offices,
Holding companies established in the form of a joint stock company,
Companies engaged in general warehousing,
Independent audit companies,
Surveillance companies,
Specialised commodity exchange companies,
Licensed warehousing companies for agricultural products,
Technology development zone management companies,
Companies founding and operating free zones,
Companies subject to the Capital Markets Act No. 6362 dated 6/12/2012.

Where a company with a foreign shareholder is established in these fields and prior permission is not obtained from the Ministry, the incorporation is deemed invalid. It is therefore of great importance to verify, before the file is prepared, whether the planned activity falls within one of the categories subject to prior permission.

Documents to Be Submitted upon Registration

The documents sought differ as between joint stock and limited liability companies. The documents in question are submitted to the trade registry directorate before which the application for registration is to be made. Physical production of the documents is mandatory; online transmission through the system is not accepted.

Documents Required for the Incorporation of a Joint Stock Company

The documents to be submitted for the registration of a joint stock company with a foreign shareholder are as follows:

The articles of association, duly drawn up, signed by the founders and with the signatures certified,
The document establishing that the Competition Authority share has been paid,
The document showing that the 25% portion of the capital subscribed for in cash has been transferred to the company’s bank account,
The written declarations of the members of the board of directors who are not shareholders that they have assumed office,
In types of company made subject to prior permission, the prior permission document or the letter of favourable opinion issued by the Ministry,
Where there is a legal person member on the board of directors, the forename and surname of the natural person who will act on behalf of that legal person together with that legal person, and a notarised copy of the decision of the competent organ making the designation,
The signature declarations of the persons authorised to represent and bind the company,
Where capital in kind is contributed, or a business or an asset in kind is taken over upon incorporation, the reports of the court-appointed experts on the valuation of those assets (the expert is appointed by the court),
Where capital in kind is contributed, the letter obtained from the relevant registry showing that there is no restriction over it,
The document showing that an annotation has been entered in the registries in which the immovable property, intellectual property rights and similar values falling within the capital in kind are recorded,
The agreements relating to the incorporation concluded by the company in formation with the founders or with third parties.

The competent authorities are also able to request documents in addition to those listed. Documents which the foreigner is to obtain from his or her own country must be submitted together with an apostille and a notarised Turkish translation.

In parallel, documents drawn up in a foreign country in a form subject to a foreign law are required to be certified by the Turkish consulate or within the framework of the provisions of the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, and to be delivered to the trade registry directorate together with a notarised Turkish translation. (Trade Registry Regulation, Art. 32(2))

Documents Required for the Incorporation of a Limited Liability Company

The documents to be submitted to the trade registry directorate for the registration of a limited liability company are as follows:

The articles of association, the founders’ signatures on which have been certified before the competent authorities,
The receipt proving that the Competition Authority share has been paid,
The signature declarations of the company managers,
The written declarations of the members of the board of managers who do not bear the capacity of shareholder that they have assumed office (2 copies),
Where there is a legal person on the board of managers, the forename and surname of the person designated by that legal person and on its behalf, and a notarised copy of the decision of the organ competent to make the designation,
Where capital in kind is contributed, or a business or an asset in kind is taken over upon incorporation, the reports of the court-appointed experts on the value of those assets (the expert is appointed by the court),
Where capital in kind is envisaged, the letter obtained from the relevant registry showing that there is no restriction over it,
The document showing that an annotation has been entered in the registries to which the immovable property, intellectual property rights and similar values contributed as capital in kind belong,
The agreements connected with the incorporation concluded by the company in formation with the founders or with other persons.

The registry directorate or the other competent authorities may request documents in addition to this list. In order for the formalities to be concluded, all of the documents requested must be submitted within time. The condition of an apostille and a notarised Turkish translation for documents to be brought from abroad applies here as well.

How Long Does the Incorporation Process Take?

The incorporation of a company in Türkiye by foreigners takes 7 days on average.

The preparation of the articles of association, the completion of the certification of signatures, the formalities before the trade registry directorate and the workload of the authority responsible for registration are factors capable of extending this period. Moreover, if the company to be established is one of the types subject to the prior permission of the Ministry of Trade, the period may be extended further on account of the permission procedure.

Cost of Incorporation

The cost varies according to the type of company selected. The incorporation of joint stock and limited liability companies, for instance, falls within the scope of the fee exemption. Accordingly, the incorporation certification fee, the book certification fee, announcement expenses and the Turkish Trade Registry Gazette announcement charge are not collected. The cost of establishing a sole proprietorship, on the other hand, is approximately TRY.

Can a Company Be Established Without Coming to Türkiye?

In respect of joint stock and limited liability companies, it is not mandatory for foreigners to come to Türkiye. As no residence condition is laid down for these types, a foreign person may effect the incorporation even without being present in the country.

In that case, the incorporation formalities must be conducted through a representative authorised by power of attorney. It is important that the person to be authorised has a command of the rules relating to the incorporation of companies and of the provisions of the Turkish Commercial Code No. 6102.

Steps to Be Completed After Incorporation

Once the company has been registered, the notification obligations must be met, the matters and formalities relating to taxation concluded, and the employment law procedures in respect of employees conducted, in that order.

For companies falling within the scope of foreign direct investment, the first of these headings is the meeting of the information obligations arising under the Foreign Direct Investment Act by entering information through E-TUYS and by keeping that information up to date.

The formalities to be performed pursuant to Articles 9 et seq. of the Regulation on the Implementation of the Foreign Direct Investment Act are as follows:

Completing electronically, within 1 month following the authorisation, the fields headed "Investor", "List of Shareholders" and, where applicable, "Affiliated Participations", by logging into E-TUYS, which is accessed from the Ministry’s website,
Completing through the system, annually and each year before the end of May, the Annex-1 Activity Information Form for Foreign Direct Investments concerning the activities of the company or of the branch,
Entering, within a period not exceeding 1 month, the "List of Shareholders" field on E-TUYS whenever an increase or a reduction occurs in the capital,
Where a payment has been made on account of a capital increase or a share transfer, completing the Annex-2 Capital Information Form for Foreign Direct Investments in the system within 1 month following the date of payment,
Updating the "List of Shareholders" field on E-TUYS within 1 month at the latest following the realisation of the transfer, after share transfers made by existing domestic or foreign shareholders among themselves or to any domestic or foreign investor outside the company (FDI Regulation, Art. 5).

Opening a Bank Account in the Company’s Name

The opening of a bank account by a foreign-capital company established in Türkiye is one of the complementary steps of the incorporation process. This transaction requires an application by the managers or the shareholders holding signature authority in the company. The application is concluded by approaching the bank with the requisite information and documents.

The details as to how the opening of an account proceeds are addressed in the study entitled the opening of bank accounts by foreigners.

Work Permit for the Foreign Shareholder of the Company

In order for the company to be able to pursue its activities, the foreign shareholder must obtain a work permit. In limited liability companies established in conformity with the provisions of the Turkish Commercial Code No. 6102, the managers bearing the capacity of shareholder are obliged to obtain this permit. Where the structure established is a joint stock company, a work permit must be obtained for the board member who is in the position of a shareholder.

The procedure to be followed in the permit application is the same as the procedure applicable to other foreigners in the country. The details of the process are explained in the study entitled work permits for foreigners.

Board members who do not reside in the country in joint stock companies, and shareholders who do not bear the capacity of manager in the other types, are regarded as falling within the scope of the work permit exemption. In order for these persons to benefit from the exemption, they must additionally make an application.

The work permit exemption is the document which enables a foreigner to work, to reside and to make multiple entries and exits without a work permit. Comprehensive information on the subject is set out in the study entitled the work permit exemption.

Taxation, Contracts and Regulatory Compliance

Alongside the incorporation formalities, responsibilities also arise in terms of tax law. For this reason, once the opening has been completed, the formalities directed at meeting the tax obligations must also be conducted.

Capital companies which are to operate in the country are liable to corporation tax. In addition, natural persons must pay income tax on the earnings and revenues they obtain during the year.

On the other hand, where certain conditions are met, a right to benefit from tax exemptions and exclusions may arise for companies under Turkish law. Tax incentives may also come into question for those satisfying certain criteria. Finally, international agreements must be examined with care so that companies of foreign origin are not exposed to double taxation.

In order for the company to be able to carry on its activities, the employment law formalities relating to the foreigners who are to work within it must be completed. The Social Security Institution (SGK) procedures must also be performed in respect of these persons. Indeed, those formalities must be completed at the incorporation stage and the entries and exits of employees must be followed up in the subsequent period.

The procedure to be applied in obtaining a work permit is the same as the procedure applicable to all foreigners in the country. All of the details of the process are examined in the study entitled work permits for foreigners.

Compliance Obligations According to the Field of Activity

The companies established in Türkiye by foreigners must conduct their matters and formalities in conformity with Turkish law and with international legislation. Accordingly, in the subsequent period as at the initial incorporation stage, compliance with the criteria laid down in the legislation is required for whichever field the activity is to be pursued in.

By way of example, upon incorporation the company must comply with the regime governing commercial electronic messages and conduct its activities in conformity with the legislation of the Personal Data Protection Act No. 6698 (KVKK). There are in particular matters within the framework of the KVKK which directly affect the company’s activities, and it is observed that this field has been made the subject of legal regulation in almost the whole world. For this reason, companies must without fail have regard to these headings.

As is apparent from the headings listed, the incorporation of companies in Türkiye by foreigners does not consist solely of the incorporation steps. Following incorporation, certain procedures laid down in Turkish law according to the type of activity must also be completed. In order for these processes to be conducted in an integrated, effective and swift manner, it will be useful to obtain support from a lawyer experienced in the field.

Advantages and Incentives Afforded to the Investor

The advantages which establishing a company in Türkiye provides for the foreign investor are far from negligible. Above all, foreigners are subject to the same procedure as Turkish citizens in incorporation processes. In addition, various privileges have been laid down with a view to encouraging foreign investment:

In determining the value of non-cash capital items, the reports of international valuation institutions are taken as the basis.
Facilities are provided in obtaining work permits for the personnel to be employed in foreign-capital companies.
In legal disputes concerning foreign-capital companies established in the country, recourse may be had to national or international arbitration and to other dispute resolution mechanisms.
These companies are able to transfer abroad the profits and other income they obtain.
By the regulations enacted, the expropriation of foreign direct investments in Türkiye has been restricted.
Foreign companies have been afforded the opportunity to open branches and to establish liaison offices in Türkiye.

Alongside these, there are also incentive programmes directed at foreign investors. Customs duty exemption, VAT exclusion, R&D incentives, attraction centres and investment incentive schemes are among these programmes.

Incorporation of Companies in Türkiye by Foreign Companies

The incorporation of a company in Türkiye by a foreign company is subject to the same procedure as the incorporation formalities of foreign natural persons. In other words, both foreign companies and natural persons may establish companies in the country; it is also possible for them to become shareholders in an existing company. The procedure to be applied in this respect does not differ from the procedure applicable to Turkish citizens.

Opening of Branches by Foreign Companies

The ability to open a branch is a further facility afforded to foreign companies. Such companies are able to establish branches in the country with the permission of the Ministry of Industry and Technology. The foreign company must have satisfied the conditions laid down in the legislation of its own country in relation to the opening of a branch. A fully authorised representative must also be appointed to represent the company in the country.

Companies satisfying the conditions may apply to the competent authorities by submitting the requisite documents. Once the first branch has been opened, both the branch and the trade name must be registered with the registry. The documents required upon registration, the conditions sought and the other details are addressed in a separate study examining the opening of branches by foreign companies.

Establishment of Liaison Offices by Foreign Companies

The possibility of establishing a liaison office is likewise among the facilities provided to the foreign investor. Companies established abroad under the legislation of foreign countries may open liaison offices in Türkiye for specified periods for the purpose of conducting market research. The conduct of commercial activity through such an office is, however, prohibited.

In the assessment of the application, criteria such as the company’s capital, its subject of activity and the number of persons it employs are taken into account. In order for a liaison office to be established, a period of at least 1 year must have elapsed since the company’s incorporation. Companies satisfying the conditions on first application are granted permission to establish a liaison office for a maximum period of 3 years.

The details as to the operation of the establishment of an office are set out in a separate study on the opening of liaison offices.

Establishment of Sole Proprietorships by Foreigners

It is possible for foreign persons to open a sole proprietorship in Türkiye. However, a foreigner who does not hold a work permit cannot establish a sole proprietorship. Indeed, Article 5 of the Regulation on Business Opening and Operating Licences provides that the legislation concerning foreigners is to be applied to the opening and operation of a business by foreigners. In this framework, pursuant to Act No. 6735, foreigners who are to open a business must first obtain a work permit from the Ministry.

Acquisition of Immovable Property by Foreign Companies

It is possible for foreign companies to acquire immovable property in Türkiye. This field is regulated in our legislation by the "Regulation on the Acquisition of Ownership of Immovable Property and of Limited Rights in Rem by Companies and Participations Falling Within the Scope of Article 36 of the Land Registry Act No. 2644". Accordingly, acquisition takes place upon the company applying to the governorship of the place where the immovable property is located.

The companies which must apply to the governorship for permission are as follows:

Companies in which the foreign shareholders’ share in the capital exceeds 50%,
Companies in which, although the foreign share in the capital does not exceed 50%, the power to appoint or to dismiss the majority of the managers lies with the foreign shareholder (the articles of association will be examined),
In respect of participations, the dominant position in the company of the shareholder subject to Act No. 4875 which holds a share in that company is examined; if that shareholder falls within one of the two categories above, the participations become subject to permission.

The cases in which there is no obligation to apply to the governorship are as follows:

Foreign-capital companies in which the foreign proportion of the capital does not exceed 49%, that is to say those falling outside the scope of Article 36 of the Land Registry Act No. 2644, do not obtain governorship permission, provided that an annotation is entered in the trade registry.
Companies established under the legislation of foreign countries cannot acquire property in our country; they may only create limited rights in rem. The acquisition of property by such companies is possible only by special permission (concession and the like).
Registration transactions in Free Zones,
Registration transactions in Technology Development Zones,
Registration transactions in Industrial Zones,
Registration transactions in Organised Industrial Zones,
Land registry registrations arising on account of the merger or the division of companies,
Registration of the immovable property acquired by banks and capital companies through enforcement proceedings on account of their claims,
Foreign-capital companies in which Turkish citizens holding a Blue Card (a document issued by the Ministry of the Interior) are shareholders in order to exercise the rights under Article 28 of the Turkish Citizenship Act No. 5901, and which have no other foreign shareholder.

The explanations above concern the acquisition of immovable property by companies. It is also possible for foreign natural persons to acquire immovable property in the country; detailed information on this subject may be found in a separate study addressing the acquisition of immovable property by natural persons.

Incorporation of Companies by Russian Citizens

There is no restriction of any kind in respect of the incorporation of companies in Türkiye by Russian citizens. Such persons may likewise establish the type of company they prefer by completing the procedural formalities relating to the incorporation of companies by foreigners and by submitting the documents required. Sanctions applied by other countries will not be legally applicable in respect of Turkish companies established by Russian citizens.

Independent Legal Assessment

Although, viewed from the outside, the incorporation of a foreign-capital company appears to be a standard registration transaction, in practice it is a field in which more than one body of legislation intersects. Alongside the rules of commercial law, the legislation on foreigners, the foreign direct investment regime, and the taxation and data protection rules are all engaged at the same time. The problems which cause files to be delayed are most often based not on the substance, but on incomplete particulars in the articles of association, on the manner of certification of documents arriving from abroad, or on the requirement of prior permission having been overlooked.

The period following incorporation demands at least as much attention as the incorporation itself. The E-TUYS notifications, the recording of changes in the shareholding structure within the one-month period, and the completion of the annual activity form by the end of May, make it necessary to establish a system of continuous monitoring.

When a concrete structuring is being planned, it is appropriate to give priority to the following headings:

Clarifying, before the file is prepared, whether the planned activity falls within one of the fields subject to the prior permission of the Ministry of Trade
Making the choice of the type of company not solely by reference to the capital threshold, but by reference to the management structure and to the work permit position of the shareholders
Planning from the outset the requirement of an apostille and of a notarised translation for documents drawn up abroad, so as to prevent loss of time
Where capital in kind is to be contributed, including the valuation report and registry annotation processes in the incorporation timetable
Addressing the work permit or exemption application for the manager or the board member who is in the position of a shareholder at the same time as registration
Placing the E-TUYS notifications and compliance with the KVKK and with the rules on commercial electronic messages on an institutional monitoring footing immediately after incorporation

Independent Legal provides advisory services to foreign investors in their incorporation of companies in Türkiye, from the drafting of the articles of association through to the management of post-registration notification and compliance processes.