Turkey is one of the most dynamic and fast-growing economies in the world, offering many opportunities for foreign investors and entrepreneurs. Its strategic location between Europe and Asia, diverse market, skilled workforce, and favorable government policies make it an attractive destination for starting a business. However, as a foreigner, understanding the legal and procedural steps is essential for a successful business launch. This article will guide you through the process of starting a business in Turkey as a foreigner.
1. Understand the Types of Businesses You Can Start
Before diving into the specifics of setting up a business in business in turkey for foreigners, it’s important to understand the types of legal structures available to foreign investors. The most common business entities in Turkey for foreigners include:
- Limited Liability Company (LLC): The most popular structure for small and medium-sized businesses. An LLC requires a minimum of one shareholder and one director, and the shareholders’ liability is limited to their capital investment.
- Joint-Stock Company (JSC): A more complex structure typically used by larger businesses. It requires a minimum of one shareholder and is suitable for foreign investors with larger capital investments. Shareholders’ liability is also limited to their capital contributions.
- Branch Office: Foreign companies can open a branch office in Turkey, but this type of business does not have a separate legal identity and operates as an extension of the parent company.
- Representative Office: This is more for marketing and promotional activities rather than full business operations. It cannot engage in direct business transactions or earn revenue.
2. Choose the Right Location
Turkey’s geographical advantages make it an ideal location for businesses targeting both the European and Middle Eastern markets. The major cities for business in Turkey are:
- Istanbul: The economic hub and largest city in Turkey, ideal for a wide range of businesses.
- Ankara: The capital city, home to government institutions and many multinational companies.
- Izmir: A growing city on the Aegean coast, with a strong focus on agriculture, manufacturing, and trade.
Consider the type of industry you plan to enter, proximity to your target market, and available infrastructure when choosing the right location.
3. Register Your Business
The process of registering a business in Turkey involves several steps:
a. Obtain a Turkish Tax Number
To start a business in Turkey, you first need to get a Turkish tax number from the local tax office (Vergi Dairesi). This is a requirement for all businesses in Turkey, regardless of whether they are foreign or domestic.
b. Register the Company with the Trade Registry
You will need to register your business with the Trade Registry Office in the relevant city. This step includes submitting documents such as:
- Articles of association (for LLCs and JSCs)
- Passport or identity card for shareholders and directors
- Proof of address for the business
- Signature circulars for the company directors
c. Register for Social Security (SGK) and Insurance
In Turkey, businesses must register employees with the Social Security Institution (SGK) for health and social security benefits. Foreign employees will need to obtain a residence permit and work visa to be eligible for social security coverage.
d. Open a Bank Account
Once your company is registered, you must open a corporate bank account in Turkey. Turkish banks typically require a copy of the company’s registration documents, tax number, and the company’s Articles of Association. Ensure that you choose a bank that offers services suitable for businesses and international transactions.
4. Obtain Necessary Licenses and Permits
Depending on the nature of your business, you may need specific licenses or permits to operate legally in Turkey. For example, businesses in certain sectors, such as food, pharmaceuticals, tourism, and construction, require sector-specific permits. Check with local authorities to ensure that you are complying with all necessary regulations.
5. Hire Employees
Turkey has a skilled and diverse workforce, and as a foreign entrepreneur, you can hire local staff to help run your business. Turkey has a young, educated workforce, with many employees fluent in English, especially in cities like Istanbul.
However, it’s important to understand the legal framework around hiring in Turkey:
- Labor Contracts: Employees must have a written labor contract, which outlines their rights and responsibilities.
- Work Permits for Foreign Workers: If you wish to hire foreign employees, they must obtain a work permit from the Turkish Ministry of Labor and Social Security.
6. Comply with Turkish Taxation Laws
Understanding Turkey’s tax system is crucial for operating a business in the country. Turkey has a competitive tax regime, but foreign business owners need to comply with the following key taxes:
- Corporate Tax: The corporate tax rate is 20% (though it can vary depending on the size of the business).
- Value Added Tax (VAT): The VAT rate in Turkey is generally 18%, but lower rates may apply to specific goods and services.
- Personal Income Tax: If you are an employee or self-employed, you must pay personal income tax. The tax rate ranges from 15% to 40%, depending on your income bracket.
It’s advisable to consult with a local tax advisor or accountant who understands the intricacies of Turkish tax law to ensure full compliance.
7. Explore Government Incentives for Foreign Investors
Turkey offers various incentives to attract foreign investment, including:
- Tax Incentives: Businesses that invest in certain regions or sectors may be eligible for tax reductions, exemptions, or deferrals.
- Subsidies: Some businesses may qualify for government subsidies, especially those in manufacturing or technology sectors.
- Free Zones: Turkey has several free trade zones where businesses benefit from tax exemptions, reduced customs duties, and easier export procedures.
Research government incentives that apply to your business sector, as they can significantly reduce your startup costs.
8. Understand the Legal Framework for Foreign Investors
Foreign investors in Turkey enjoy many rights, including the ability to own 100% of a business. Turkey is a member of international treaties that protect foreign investments and guarantee non-discriminatory treatment for foreign business owners. However, there are some restrictions on specific sectors, such as defense, media, and telecommunications.
It’s recommended to work with a local lawyer to ensure compliance with Turkish business laws, including understanding the rights and obligations of foreign investors.
Final Thoughts
Starting a business in Turkey as a foreigner can be a rewarding and profitable venture. With its growing economy, strategic location, and government incentives for foreign investment, Turkey is an excellent place for entrepreneurs to establish a presence in the region. By following the necessary legal steps and seeking the right professional advice, you can successfully launch and grow your business in Turkey. Whether you’re opening a small local business or a larger multinational enterprise, Turkey’s dynamic market offers significant opportunities for growth.