Investing in Türkiye: A Practical Guide for Foreign Investors

Greetings from Istanbul, one of the most beautiful historical cities in the world!

In today’s article, we will be sharing some useful information for foreign investors who are considering investing in Türkiye, along with some practical advice based on our 30 years of experience in the field.

Most Popular Company Types in Türkiye

For foreign investors planning to establish a business in Türkiye, the most commonly preferred company type is the Limited Company. It is popular due to its flexibility and relatively simple setup process, making it the go-to option for both local and international entrepreneurs.

Following the Limited Company, the second most popular choice is the Joint Stock Company (Anonim Şirket). This type is often favored by larger businesses or those with multiple shareholders.

We help investors choose the most suitable company type by discussing their business plans in detail. When making this decision, we consider factors such as short, medium, and long-term investment goals, company structure, capital requirements, partnership models, and management strategies. Having a clear understanding of these factors will allow you to achieve your business goals with optimal effort and at the lowest cost.

Foreign Ownership in Türkiye

One of the major advantages for foreign investors in Türkiye is the ability to own 100% of the shares in a company. This is true for both foreign individuals and foreign companies. Additionally, foreign investors can also form joint ventures with local partners.

Another key point is that the company’s authorized signatory (general manager) can be a foreign individual or a foreign company. This flexibility makes it easier for international companies to operate smoothly in Türkiye.

Tax Rates for Foreign Investors

Tax rates are one of the most commonly asked questions by foreign investors. It’s important to note that foreign investors are subject to the same tax rates and legal regulations as Turkish investors. Here’s a brief overview of the main taxes:

  • Corporate Tax: For 2024 and 2025, the corporate tax rate in Türkiye is 25%. Tax calculations are done quarterly, and the annual corporate tax return is filed in April of the following year. In the case of profit distribution, a 10% withholding tax is applied. However, if the foreign investor provides a residency certificate from their home country, they may be exempt from this withholding tax on profits distributed in Türkiye.

  • VAT (Value Added Tax): Türkiye applies three different VAT rates:

    • 1% and 10% are applied to basic necessities like food, health, and education.

    • 20% is the standard VAT rate.

  • Withholding Tax: Türkiye also applies withholding taxes on certain services and rentals. For example, when renting an office owned by an individual in Türkiye, a 25% withholding tax is levied on the net rental amount, which can be deducted from the company’s taxable income. Similarly, invoices from lawyers, accountants, and some consultants are subject to a 20% withholding tax, which can also be deducted from the company’s taxable income.

Company Formation Process

Once the necessary documents are ready, the company formation process typically takes 5-7 working days. During this period, the company’s shareholders need to provide a power of attorney for the process.

Additionally, the company’s authorized general manager needs to be in Türkiye for about 4 working days during the establishment phase.

Post-Establishment Operations

Once the company is established, all legal procedures can be handled by accounting firms through a power of attorney. This ensures that investors can focus on growing their business while professionals manage the legal and tax requirements.

Conclusion

In conclusion, understanding the key aspects of company formation, tax rates, and the overall business environment in Türkiye is crucial for foreign investors. Planning ahead and seeking professional guidance can help ensure your investment is successful.

If you have any questions or need further guidance, feel free to reach out to our team.

info@karenaudit.com 👈

Thank you for reading, and good luck with your investment in Türkiye!


Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.