The first real decision for any foreign business entering Turkey (Türkiye) is the legal form of its presence. The choice determines who is liable for the Turkish business, what it is allowed to do, how it is taxed, how quickly it can start, how much ongoing administration it needs and how easily it can be closed or sold later.
There is no single right answer. A manufacturer building a plant, a software company hiring three engineers and a consumer brand testing the market through a distributor will usually choose differently. This guide explains each option available under Turkish law, compares them side by side, and sets out the questions that normally decide the matter.
Key points
- Most foreign investors operating actively in Turkey use a subsidiary, usually a limited company (Ltd. Şti.) or a joint stock company (A.Ş.).
- A branch can trade but has no separate legal personality, so the foreign parent is directly liable for its obligations.
- A liaison office can only carry out non-commercial activities such as market research and liaison, and needs a Ministry permit.
- Indirect models (distributors, agents, franchisees, employers of record) avoid a local entity but bring their own legal, tax and control risks.
- Activity in Turkey without a registered entity can still create a taxable permanent establishment.
What does Turkish law allow foreign investors to do?
The Foreign Direct Investment Law (No. 4875) is built on the principle of equal treatment. Foreign individuals and companies may establish companies, open branches and acquire shares in Turkish companies on the same terms as Turkish investors, and there is no general requirement for a Turkish partner or for prior approval of the investment.
In practice this means that the company law rules in the Turkish Commercial Code (No. 6102) apply to a foreign-owned company in the same way as to a Turkish-owned one, subject to foreign investment reporting and sector-specific rules. Companies with foreign capital do, however, have a reporting obligation: they are expected to provide information on their foreign direct investment to the Ministry of Industry and Technology through its online system (E-TUYS) after incorporation and periodically afterwards.
Equal treatment has limits. Regulated sectors, such as banking, insurance, capital markets, broadcasting, energy, telecommunications, civil aviation, private security, health services and education, have their own licensing regimes, and some impose ownership, capital or management conditions. The acquisition of real estate by companies with foreign capital is also subject to a separate approval process. If your activity is regulated, the sector rules usually shape the structure more than general company law does. Our regulatory and compliance page gives an overview.
The main options at a glance
| Structure | Separate legal entity? | Can it trade? | Liability | Minimum capital (at the time of writing) | Typical set-up effort |
|---|---|---|---|---|---|
| Limited company (Ltd. Şti.) | Yes | Yes | Limited to capital commitments, with some exceptions for unpaid public debts | TRY 50,000 | Moderate |
| Joint stock company (A.Ş.) | Yes | Yes | Limited to capital commitments | TRY 250,000 (TRY 500,000 under the registered capital system) | Moderate to higher |
| Branch of a foreign company (şube) | No | Yes | The foreign parent is directly liable | No statutory minimum; practice on declared capital varies | Moderate |
| Liaison office (irtibat bürosu) | No | No, non-commercial only | The foreign parent | None, but expenses must be funded from abroad | Ministry permit |
| Distributor, agent or franchisee | No (third party) | Through the partner | Contractual | None | Contract only |
| Employer of record or payroll provider | No (third party) | No sales activity | Contractual, plus statutory risks | None | Service contract |
| Joint venture or acquisition | Yes (the Turkish company) | Yes | As for the company | Depends on the target | Transaction-led |
| Free-zone company or branch | Usually yes | Within the free-zone regime | As for the chosen form | As for the chosen form | Operating licence under the free zone legislation (Ministry of Trade) |
The table is a simplification. The sections below explain where each option fits and where it can go wrong.
Limited company or joint stock company?
Both are capital companies with separate legal personality, both can be wholly foreign-owned, and both can be formed with a single shareholder. The differences are mainly about governance, share transfers and the image the company presents to banks, investors and counterparties. Our article comparing limited and joint stock companies in Turkey covers them in more depth.
Limited company (limited şirket)
- Managed by one or more managers (müdür), at least one of whom must be a shareholder. Legal entities can be managers, acting through an individual they appoint.
- Share transfers require a written agreement with notarised signatures and, unless the articles provide otherwise, approval of the general assembly. They are then registered. This makes a limited company less flexible for investors but gives founders more control over who joins.
- Shareholders can, in some circumstances, be held liable for unpaid public receivables of the company in proportion to their shareholding, and managers can face liability for unpaid tax and social security debts. Board members of a joint stock company, as legal representatives, can face similar liability; the main difference is that limited company shareholders can also be liable. These rules matter for foreign parents and should be understood before choosing this form.
- Often chosen for small and medium-sized subsidiaries, service companies and companies that exist mainly to employ staff and invoice locally.
Joint stock company (anonim şirket)
- Managed by a board of directors, which can have a single member. Board members need not be shareholders, Turkish citizens or residents.
- Shares can be transferred more easily, which suits joint ventures, groups planning further investment and businesses that may later be sold or listed.
- The higher minimum capital and stricter formalities make it somewhat more demanding to run. (Independent audit applies to both forms once the size thresholds are exceeded.)
- Some regulated activities can only be carried on by a joint stock company.
For most foreign groups the practical deciding factors are: whether outside investors or joint venture partners will join, how often the shareholding may change, the expectations of banks and customers, and sector rules. The incorporation process for both forms is set out in setting up a company in Turkey, and our earlier article on establishing subsidiaries in Turkey gives further background.
When does a branch make sense?
A branch of a foreign company is registered with the Turkish trade registry and can carry out the same commercial activities as its parent, within the scope registered. It is not a separate legal person: contracts are concluded by the foreign company acting through its Turkish branch, and the parent is liable for everything the branch does.
A branch can suit businesses that want to keep the Turkish operation within the parent's balance sheet, such as some contracting, engineering and project businesses, or groups whose home-country tax position favours a branch. It must have a representative resident in Turkey with full authority to represent it. For tax purposes a branch is generally treated as a permanent establishment of the foreign company and taxed on its Turkish-source income.
Because the parent's assets are exposed to the branch's liabilities, many groups prefer a subsidiary unless there is a specific reason for a branch. The detailed rules are covered in branches and liaison offices in Turkey.
When is a liaison office enough?
A liaison office (irtibat bürosu) is a permitted presence for non-commercial activities only: market research, promotion of the parent's products, liaison with suppliers and customers, quality control and similar support functions. It may not sell, invoice, sign commercial contracts in its own right or generate income in Turkey, and its expenses must be funded by the parent from abroad in foreign currency.
It requires a permit from the Ministry of Industry and Technology. The permit is commonly granted for an initial period of up to three years and can be renewed if the activity continues to fit within the permitted scope.
A liaison office is a sensible first step for a business still assessing the market or managing a supplier base, for example a buyer sourcing goods from Turkish manufacturers. It is not suitable once the business wants to sell to Turkish customers or employ staff to generate revenue. See also our article on establishing liaison offices in Turkey.
Can you enter Turkey without your own entity?
Many foreign businesses begin without a Turkish entity at all. The three most common models are set out below.
Distributors, agents and franchisees
Selling through a Turkish distributor or agent is often the fastest way to test demand. The legal relationship is governed by the contract and by the Turkish Commercial Code and Code of Obligations. Points that usually need attention are:
- Agency compensation. Turkish law gives commercial agents a claim to a goodwill-type indemnity on termination in certain circumstances, and Turkish case law has in some cases extended similar principles to exclusive distributors.
- Competition law. Exclusive territories, resale price provisions and non-compete clauses must comply with Turkish competition rules and the applicable block exemption regime.
- Brand protection. Register trade marks in Turkey before appointing partners, and control who owns local registrations, domain names and customer data.
- Exit. Plan how the relationship ends, who holds stock and customer relationships, and how disputes are resolved.
Our guide on trading with Turkish suppliers and the customs, import and export guide cover the trade side of this model.
Employer of record and payroll providers
An employer of record (EOR) is a Turkish company that employs staff on your behalf and charges you a fee. It can allow a foreign business to have people working in Turkey quickly without incorporating. However:
- Turkish law regulates the supply of workers by one employer to another (temporary employment relationships) and restricts it to licensed private employment agencies and specific circumstances. Arrangements must be structured to comply with these rules.
- Employees may, depending on the facts, seek to claim against the business that actually directs their work.
- Staff who habitually conclude contracts or carry on the core business of a foreign company in Turkey can create a permanent establishment for that company.
An EOR is often a bridge rather than a permanent solution. See hiring employees in Turkey for the employment law side.
Cross-border services without a presence
A foreign company can sell services into Turkey from abroad. Turkish customers may then need to withhold tax on certain payments and account for VAT under the reverse-charge mechanism, and contracts with Turkish public bodies or regulated customers may require a local entity. The tax guide explains how these payments are generally taxed.
Joint ventures and acquisitions
Buying into an existing Turkish business, or forming a joint venture company with a Turkish partner, can bring licences, premises, staff and customer relationships that would take years to build. It also brings the target's history, including tax, employment and regulatory liabilities.
Joint ventures are usually set up as joint stock companies, with the partners' arrangements recorded in a shareholders' agreement and, as far as possible, reflected in the articles of association so that they bind the company. Larger transactions may need clearance from the Turkish Competition Authority. See acquisitions and joint ventures in Turkey and our article on well-drafted shareholders' agreements.
What about free zones and technology development zones?
Turkey has free zones in which companies can operate under a special customs and tax regime, subject to an operating licence issued under the free zone legislation, which is administered by the Ministry of Trade. They are mainly relevant to manufacturers, exporters, logistics and trading businesses. Technology development zones (technoparks) offer incentives for qualifying research, development and software activities.
These are not separate legal forms: you still set up a company or branch, then apply to operate within the zone. Their incentives are conditional and are reviewed periodically, so they should be modelled carefully rather than assumed. See setting up manufacturing in Turkey and our article on technoparks in Turkey.
Permanent establishment risk
A foreign company does not need a registered entity to become taxable in Turkey. Under Turkish domestic law and Turkey's double tax treaties, a foreign company may be treated as having a permanent establishment where, for example, it has a fixed place of business in Turkey, or where a person in Turkey habitually concludes contracts on its behalf.
This risk most often arises when a foreign company employs sales staff in Turkey directly or through an employer of record, when senior managers run the business from Turkey, or when a "liaison office" in practice negotiates and closes deals. A permanent establishment can lead to corporate tax, VAT and penalty exposure. If people will work for you in Turkey, consider the structure before they start, not afterwards.
How to choose: questions by business type
| Business type | Usually considered | Key questions |
|---|---|---|
| Manufacturer | Joint stock or limited company; sometimes an acquisition | Land and permits, incentive certificate, industrial registry, capital needs, number of employees |
| Exporter or brand selling into Turkey | Distributor first, then a subsidiary | Volume, control of pricing and brand, customs and product compliance, after-sales service |
| Service provider | Limited company or branch | Local invoicing, client expectations, licensing, permanent establishment risk |
| International employer hiring talent | Employer of record initially, then a subsidiary | Headcount plans, duration, worker-leasing rules, payroll and data protection |
| Buyer sourcing from Turkish suppliers | Liaison office or no entity | Whether any sales or invoicing will happen in Turkey |
| Investor buying a stake | Share acquisition or joint venture | Due diligence, governance rights, merger control, exit |
Other factors that frequently decide the matter are:
- What the business will actually do in Turkey, and whether that requires a licence.
- Liability: whether the parent is prepared to be directly liable for Turkish operations.
- Tax: the home-country treatment of branch profits and dividends, treaty position and the availability of Turkish incentives.
- Speed: how soon the business must invoice, hire or import.
- Banking and counterparties: some customers, landlords and banks prefer to deal with a local company.
- Exit: how easily the structure can be sold, merged or liquidated.
If you are still mapping the options, our Türkiye market entry page describes how we approach these projects, working alongside Turkish-qualified professionals where required.
Frequently asked questions
What is the most common structure for foreign companies in Turkey?
Most foreign investors that operate actively in Turkey set up a subsidiary, either a limited company (Ltd. Şti.) or a joint stock company (A.Ş.). Both are separate legal entities, can be 100% foreign-owned and can have a single shareholder. The choice between them usually turns on governance, share transfer flexibility, sector rules and the expectations of banks and partners.
Is a limited company or a joint stock company better for a foreign investor?
A limited company is simpler and has a lower minimum capital, which suits many small and medium-sized subsidiaries. A joint stock company allows easier share transfers and is generally preferred for joint ventures, larger investments and regulated activities. The company formation guide explains how each is set up.
What is the difference between a branch and a subsidiary in Turkey?
A subsidiary is a separate Turkish legal entity whose liability is generally limited to its own assets. A branch is part of the foreign company itself, so the foreign parent is directly liable for its obligations. Both can trade in Turkey and both are subject to Turkish tax on their Turkish-source income.
Can a liaison office sell products or issue invoices in Turkey?
No. A liaison office may only carry out non-commercial activities such as market research, promotion and liaison, and its expenses must be funded from abroad. If the business wants to sell, invoice or earn income in Turkey, it needs a company or a branch. See branches and liaison offices.
Do foreign companies need government approval to invest in Turkey?
Generally no. Under the Foreign Direct Investment Law, foreign investors can set up or acquire companies on the same terms as Turkish investors, without prior approval. Exceptions arise in regulated sectors, for liaison offices (which need a Ministry permit) and for certain real estate acquisitions by foreign-capital companies.
Can I sell in Turkey through a distributor instead of setting up a company?
Yes, and many foreign brands start this way. The distribution agreement should deal with exclusivity, competition law compliance, trade mark ownership, termination and any end-of-contract compensation claims, which Turkish courts may recognise in some circumstances. A local entity can follow once volumes justify it.
Can I employ people in Turkey without a Turkish company?
It can be done through an employer of record or, in limited cases, directly by the foreign company, but each route has legal and tax risks. Turkish law restricts temporary worker supply arrangements, and staff working for a foreign company in Turkey can create a permanent establishment. See hiring employees in Turkey.
What is a permanent establishment and why does it matter?
A permanent establishment is a taxable presence of a foreign company in Turkey, for example a fixed place of business or a dependent agent who habitually concludes contracts on its behalf. If one exists, the foreign company may owe Turkish corporate tax, VAT and penalties even without registering an entity. The risk should be assessed before staff or agents start working in Turkey.
Can a Turkish company have only one shareholder?
Yes. Both limited companies and joint stock companies can be established and operated with a single shareholder, which can be a foreign company or a foreign individual. A limited company needs at least one shareholder-manager, while a joint stock company needs a board of directors, which may have a single member.
Do I need a Turkish resident manager or director?
There is generally no requirement for a Turkish company's managers or directors to be Turkish citizens or residents. A branch of a foreign company, however, needs a representative resident in Turkey. Many foreign-owned companies also appoint a local authorised signatory for practical reasons, such as dealings with banks and the tax office.
Can I start with one structure and change later?
Yes. A common path is to begin with a distributor or liaison office and later set up a subsidiary, or to convert a branch into a company. Changing structure can involve closing one presence, transferring employees and assets, and tax consequences, so it is worth planning the likely route at the outset.
Are there sectors where foreign ownership is restricted in Turkey?
Most sectors are open, but regulated activities such as banking, insurance, broadcasting, energy, aviation, telecommunications, private security, health and education have licensing rules that may include ownership, capital or management conditions. Acquisitions of real estate by foreign-capital companies follow a separate approval procedure. Check the sector rules before choosing the structure.
This guide is general information about Turkish law and practice at the date shown above. It is not legal, tax or customs advice and should not be relied on as such. Rules, thresholds and procedures in Türkiye change frequently and their application depends on the facts, so take advice on your own circumstances before acting. Advice on Turkish law is provided through lawyers qualified in Türkiye.