Foreign companies entering Turkey need to plan their legal structure, tax arrangements, banking and employment obligations before they begin trading. Registering a company is one stage of the process, and the requirements depend on the activities it will undertake.
A business researching the market will have different needs from a group establishing a manufacturing operation or hiring a local team. Deciding who will own the operation, how it will earn revenue and where its staff will work helps determine the appropriate setup.
Choosing a business structure
Turkey’s Foreign Direct Investment Law is based on equal treatment of domestic and international investors, according to the Investment Office’s establishment guide. Sector-specific restrictions can still apply.
The available arrangements include the following.
- Limited liability company (Ltd. Şti.). A separate Turkish legal entity, commonly used by businesses establishing a subsidiary.
- Joint stock company (A.Ş.). Another corporate form that may suit larger investments or businesses with particular capital and ownership requirements.
- Branch office. An extension of a foreign parent company, rather than an independent legal entity. Its activities must remain within the parent company’s purposes.
- Liaison office. A representative office requiring permission from the Ministry of Industry and Technology. It cannot conduct commercial activities in Turkey.
A liaison office may suit permitted research or representation work, but a business intending to sell goods or services needs an arrangement that allows those activities. Ownership, liability, capital requirements and the planned scope of operations should be reviewed before choosing a structure.
Company formation and initial setup
Incorporation involves preparing the relevant corporate documents and applying to the trade registry. Foreign documents can require authentication, translation and notarisation. Where a representative handles the application, a suitable power of attorney may be needed.
Companies should confirm the documents required for their shareholders and authorised representatives before committing to an opening date. The Investment Office explains the official process, including the Central Registry Record System, known as MERSIS.
For a separate commercial explanation, A&M Consulting provides a guide to company registration in Turkey. The applicable requirements should also be checked with the relevant registry and authorities.
Initial arrangements may include a registered office address, tax registration, accounting records, banking and any operating licences. Registration alone does not settle every requirement for beginning work.
Understanding tax obligations
Turkish businesses may have corporate income tax, value-added tax and withholding obligations, depending on their circumstances. Value-added tax, usually shortened to VAT, is a tax on specified supplies of goods and services.
The Investment Office’s tax guide outlines the main categories. Current rates, exemptions and filing rules should be checked for the particular transaction and tax period.
Foreign parent companies should review payments between related businesses before trading begins. Management fees, royalties, service agreements and other cross-border transactions can create tax and documentation obligations.
Those arrangements also affect how revenue and costs are recorded. A company’s tax planning, contracts and accounting processes need to reflect the way it actually operates.
Accounting and financial reporting
Local accounting arrangements should be established from the outset. Statutory records, supporting documents and tax returns need to be maintained and submitted under the applicable rules.
Depending on the business, electronic invoicing or bookkeeping obligations may apply. The Turkish Revenue Administration’s e-document portal provides official information about its electronic document systems. Electronic ledger requirements should be checked separately for the company’s circumstances.
An international group’s internal reporting system may not meet every Turkish statutory requirement. Local records and reports to the parent company should be coordinated, with responsibility assigned for preparing, checking and filing them.
Payroll and employment compliance
Companies hiring employees need payroll processes that account for wages, taxes, social security contributions and required declarations. The Social Security Institution, known as SGK, administers the relevant social insurance arrangements.
Transferring managers or specialists from abroad introduces further requirements. The Ministry of Labour and Social Security states that foreigners covered by the International Labour Force Law must obtain a work permit or exemption before starting work.
Recruitment schedules should allow for the applicable procedures. An employment contract, company registration and immigration permission address different requirements, so completing one does not automatically resolve the others.
Registered office and banking
The business needs a registered address appropriate to its structure and activities. Office arrangements should be checked against registration, tax and any sector-specific requirements.
Opening a corporate bank account can involve company records, identification documents and information about the people who ultimately own or control the business. Banks may request additional documents during their customer checks.
A&M Consulting’s explanation of corporate bank account opening in Turkey describes some of these preparations. The selected bank should confirm its own requirements and approval process.
Banking should be assessed early enough to avoid a company becoming ready to trade without the arrangements it needs to receive payments or pay suppliers.
Licences and investment incentives
Some commercial activities require additional licences, registrations or approvals. The relevant regulator should be identified before incorporation, particularly where the activity or company structure is restricted.
Investment incentives should also be examined on their own terms. The Investment Office’s incentives guide sets out schemes associated with sectors, regions and project characteristics.
Technology businesses may want to assess technology development zones, also called technoparks. These are designated areas intended to support research and development and technology investment. Eligibility and the scope of any tax relief need to be confirmed for the project.
Planning for continuing compliance
After incorporation, recurring tasks can include tax declarations, payroll reporting, accounting records and corporate procedures. Changes to directors, shareholders, capital or the registered address may also require formal action.
A compliance calendar should identify each deadline, the records needed and the person responsible. This is particularly relevant when the management team operates outside Turkey.
Before opening, companies should review their proposed activities, ownership and capital; prepare registration documents; confirm tax and banking arrangements; organise accounting and payroll; and identify licences and any relevant incentive applications.
The sequence will depend on the business. Banking checks, tax planning and licence requirements may need attention before incorporation, while recurring reporting continues throughout the company’s operations.
An opening date should reflect the time needed to complete all of those arrangements, including any approvals required for the business to carry out its intended work.
