Establishing Subsidiaries in Turkey: A Guide for Foreign Companies
Turkey is increasingly becoming an attractive destination for foreign investors due to its strategic location, growing economy, and favourable investment climate. This guide provides an in-depth look at how foreign companies can establish subsidiaries in Turkey, covering legal requirements, necessary documents, and the benefits of setting up a business in this vibrant market.
Why Establish a Subsidiary in Turkey?
Turkey offers several advantages for foreign investors:
Strategic Location: Turkey's position at the crossroads of Europe and Asia provides access to multiple markets.
Economic Growth: With a robust and growing economy, Turkey presents numerous opportunities for investment.
Favourable Investment Climate: Turkey has streamlined its investment laws to encourage foreign direct investment, providing equal treatment to foreign and local investors.
Legal Framework for Establishing a Subsidiary
Foreign companies can establish various types of subsidiaries in Turkey under the Turkish Commercial Code (TCC). The most common types are:
Limited Liability Company (LLC):
Requires a minimum capital of 10,000 TRY.
Can be established by one or more individuals or legal entities.
Shareholders are only liable up to the amount of their capital contributions.
Joint-Stock Company (JSC):
Requires a minimum capital of 50,000 TRY.
Can be established by one or more individuals or legal entities.
Shareholders' liability is limited to their capital contributions.
Branch Offices:
Not a separate legal entity from the parent company.
Must appoint a representative in Turkey.
Steps to Establish a Subsidiary in Turkey
Preparation of Articles of Association:
Draft the company's articles of association, outlining the business's name, address, purpose, and capital structure.
Ensure the articles comply with Turkish regulations.
Notarisation and Translation:
Notarise the articles of association and other required documents.
Translate documents into Turkish if they are in a foreign language, with notarisation of translations.
Application to the Trade Registry Office:
Submit the notarised articles of association and other required documents to the local trade registry office.
The trade registry will review and approve the application, granting the company legal status.
Tax and Social Security Registration:
Register the subsidiary with the local tax office to obtain a tax identification number.
Register with the Social Security Institution for employee-related matters.
Opening a Bank Account:
Open a bank account in the name of the subsidiary to deposit the minimum capital required by law.
Required Documents
Articles of Association: Detailing the company's structure and operations.
Founders' Declarations: Statements from the founders about their commitment to establish the subsidiary.
Proof of Capital Deposit: Bank statement showing the deposit of the minimum capital.
Notarised Copies of Passports: For foreign shareholders and directors.
Power of Attorney: If the establishment process is being handled by a representative.
Trade Registry Application Form: Completed and signed.
Compliance and Reporting Requirements
Annual Reporting: Subsidiaries must file annual financial statements and other required reports with the trade registry.
Tax Compliance: Regular filing of tax returns, including corporate tax, VAT, and other applicable taxes.
Employment Laws: Adherence to Turkish labour laws, including employee contracts, social security contributions, and workplace regulations.
Advantages of Establishing a Subsidiary in Turkey
Access to Local Market: A subsidiary provides a direct presence in the Turkish market, facilitating business operations and customer engagement.
Tax Benefits: Turkey offers various tax incentives for foreign investors, including reduced corporate tax rates in certain regions and industries.
Legal Protection: Subsidiaries benefit from Turkey’s legal framework, which offers protection for foreign investments.
Operational Control: Establishing a subsidiary allows full control over business operations and strategic decisions.
Establishing a subsidiary in Turkey can provide foreign companies with significant opportunities for growth and expansion. The process involves careful planning and adherence to legal requirements, but the potential benefits make it a worthwhile endeavour. For tailored legal advice and assistance throughout the establishment process, it is advisable to consult with legal experts familiar with Turkish corporate law.
CCS Law offers comprehensive legal support to foreign companies looking to establish subsidiaries in Turkey. Contact us for expert guidance on navigating the legal landscape and successfully setting up your business.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.