Wednesday, October 27, 2010

Setting up a Company in Turkey

With the passage of the Foreign Direct Investment Law in 2003, the process of establishing a company in Turkey has become a lot easier.Foreign nationals may now become shareholders of Turkish companies with no capital investment requirement and are allowed to establish any type of entity available under Turkish law. Depending on the type and size of your company, there are many incentives available to encourage inward investments. For instance, the Turkish Board of Ministers has recently passed a decision that would allow for customs tax and VAT immunity, as well as a substantial reduction in the corporate tax for newly established companies that creates jobs in certain areas of Turkey.


We have provided general information and listed the required documents for formation of a company, branch or liaison office in Turkey below.

Company

There are two types of companies that could be established: a Limited Liability Company (LLC) and a Joint-Stock Company. Both types of entities have a legal identity. The minimum paid in capital for a LLC is 5,000 TL and requires at least 2 founders (maximum 50). For a Joint-Stock Company, the paid in capital is 50,000 TL and requires at least 5 founders. It should be noted that the paid in capital for both types of companies are not immediately due at incorporation; 1/4 of the capital is required within 3 months after establishment and the remainder within 3 years. To register for a LLC, we would have to lodge a petition to the provincial trade registration office, and for a Joint-Stock Company, the registration process would have to be done with the Ministry of Industry and Trade. The current corporate tax in Turkey is a flat rate of 20%.

Some Required Establishment Documents

1) Articles of Association
2) Letter petitioning for establishment and notice signed by company’s representative
3) Notarized signatures of company’s representative with the company’s trade name
4) Letter of Commitment
5) Bank receipt showing a deposit of 0.04% of the company’s capital
6) Notarized copies of the passport, ID and residence certificates (for Turkish citizens) of the founders of the company
7) Certificate of Activity if there is a foreign shareholder legal entity, approved by the Turkish Consulate (with apostilled and notarized translation)

Branch Office


A branch office does not have a separate legal identity as it is seen as an extension of a foreign company. Any income originating from the branch is taxed by the Turkish government as a non-resident company. To establish a branch, your company would have to gain permission from the Ministry of Trade and Commerce and register with the regional Trade Registry Office.

Ministry of Trade and Commerce Required Documents

1) Letter issued by the company or its representative. The letter must include the following:
  • Name of Establishing Company
  • Date of Incorporation
  •  Nationality
  • Amount of stated capital
  • Name, Last Name, Address and nationality of the company’s representative in Turkey (appointed for the branch)
  • Legal Undertaking indicating that the representative shall abide by Turkish laws and regulations in the transactions carried out by the Branch inside Turkey
  • Address of the branch office
  • Field of activity
  • Amount of Capital
2) Resolution of the competent organ of the company, regarding the establishment of the branch (the original and one translated copy)
3) Company Articles of Association (original and one translated copy)
4) Official Document indicating the place, time and the country under the laws of which the company was incorporated; and certificate of activity indicating the status of the company (original and one translated copy)
5) Power of Attorney of the representative in Turkey, with the scope to cover the following aspects:

  • Authority to carry out the transactions indicated in the Company’s Articles of Association
  • Authority to represent the company
  • Authority to represent the company before all courts in matters arising out of activities carried out on behalf of the company whether as plaintiff, defendant or a third party
  • Authority to appoint a representative in accordance with the powers he holds, in the case he must temporarily leave the country
  • Authority to appoint representatives to branches which will be established subsidiary to the head entity
6) Documents listed must be certified by a public notary of the country the laws of which the company is subject to and by the Turkish Consulate in that country or the Turkish Ministry of Foreign Affairs or in accordance with the Hague Convention of 1961 Abolishing the Requirement of Legalization for Foreign Public Documents. These certifications must also be made for the notarized Turkish translations.

Trade Registry Office Required Documents

1) Application
2) Establishment Statement (the relevant parts of the form to be filled out and signed by the authorized official- 5 copies)
3) Power of Attorney issued for the representative in Turkey (3 copies)
4) Letter issued by the Ministry of Trade and Commerce granting permission of establishment
5) Additional Statement approved by the Ministry of Trade and Commerce and 3 copies of its written announcement
6) If the branch manager is a Turkish citizen, a copy of the identity; if foreigner, a notarized and translated copy of the passport and indication of the tax identification number (2 copies)
7) Declaration of Signature by the branch representative issued under the branch’s name (2 copies), which is certified by the Turkish Consulate or in accordance with the Hague Convention of 1961 Abolishing the Requirement of Legalization for Foreign Public Documents (Apostille)
8) Letter of Commitment (should be undersigned by the authorized official)
9) Chamber Registration Statement (the form should be typed and contain the photos of the branch representatives)

Liaison Office


A liaison office, like the branch office, does not have a legal personality as it is viewed as an extension of the company. A key difference is that the liaison office can not engage in commercial activities; it can only act a contact point, conduct market research, or coordinate marketing efforts of the company. Permits to establish a liaison office are issued by the Directorate of Foreign Investment of the Undersecretariat of Treasury and are valid for a period of 3 years from their issuance and can be extended upon application.

Documents required for the application are as follows:

1) Certificate of Activity of the Establishing Company
2) Annual Financial Statement and Income Statement or Activity Report of the Establishing Company
3) Power of Attorney issued by the Company to the person appointed or authorized to manage the activities of the liaison office
4) All documents should be submitted in original
5) The liaison office must be registered with tax office
 

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