Can a Foreigner Register a Business in Türkiye?

One of the most important directions of the economic policy of any country, including Türkiye, is to attract foreign investors. Türkiye is the best option for investors not only due to its favourable geographical location, promising market, developed industry and infrastructure, but also the ease of setting up and doing business, subject to compliance with the requirements of local legislation. The Foreign Direct Investment Law No. 4875 dated 05.06.2003 (Doğrudan Yabancı Yatırımlar Kanunu) is the basic legal act regulating foreign investments in Türkiye. The law does not differentiate between Turkish entrepreneurs and foreign investors. Article 3 of the Law states, inter alia, that unless otherwise provided by international agreements and other special norms and regulations, foreign investors have the right to freely conduct investment activities in Türkiye and establish commercial entities. Foreign investors are also entitled to equal treatment along with local entrepreneurs. 

Foreign persons can either open branches and representative offices or set up a separate company. The system of organizational and legal forms used in Turkey is reflected in the Turkish Commercial Code No. 6102 (Türk Ticaret Kanunu). The most common forms are a joint-stock company (anonim şirketi, abbreviated as A.Ş.) and a limited liability company (limited şirketi, abbreviated as Ltd. Şti.).  Even though the registration procedure and the maintenance of these forms are similar, there are some differences, namely:

  • The shareholders in a joint-stock company are liable only to the extent of the value of the company’s shares owned by them; whereas the shareholders of a limited liability company are jointly liable for the payment of the due debts owed to the government with their personal assets proportional to their shares.
  • The minimum amount of the principal capital of a joint-stock company is 50.000 Turkish liras, 25% of which must be paid prior to the registration of the company. The minimum amount of the principal capital of a limited liability company is 10.000 Turkish liras and there is no need to deposit any amount prior to registration. The amount of the authorized capital is paid within 24 months from the date of registration of the company. 
  • The joint-stock company’s share transfer is carried out by concuding and signing a share transfer agreement; when it comes to the limited liability company’s shares, the share transfer agreement must be certified by a notary and registered in the commercial register. 
  • A limited liability company may not engage in certain types of business activities, such as: banking, insurance, foreign exchange and other fields stipulated by the law. 

Capital Loss And Technical Bankruptcy

The capital companies’ activities resulting in losses and the deterioration of their financial situation cause the company’s capital to remain partially or completely unrequited, and thus the company’s assets cannot meet the company’s debts and liabilities. The formula (Capital + Legal Reserves) – Equity / (Capital + Legal Reserves) is applied in the calculation of capital loss and insolvency. As a result of this calculation, in case of a partial or complete loss of the company’s capital, Company management and decision-making bodies have some legal obligations.

Article 376 of the Turkish Commercial Code No. 6102 regulates the procedures and principles to be followed in cases of capital loss or insolvency in capital companies. In addition, In addition, with the entry into force of the “Communiqué on the Procedures and Principles Regarding the Implementation of Article 376 of the Turkish Commercial Code No. 6102” on 15.09.2018 and the “Communiqué Amending the Communiqué on the Procedures and Principles Regarding the Implementation of Article 376 of the Turkish Commercial Code No. 6102” on 26.12.2020, it has been introduced detailed explanations regarding the practices on capital loss and insolvency. 

In this article, it is aimed to provide a general scheme on the measures to be taken according to the type of capital loss within the scope of the regulations brought by the TCC article 376 and the Communiqués.

  1. In case one-third of the total of the capital and legal reserves is unrequited

If it is determined from the last annual balance sheet that one-third of the total of the capital and legal reserves are unrequited, the company may continue to operate without taking any remedial action, since the company’s capital is considered to protect its equity.

  1. In case half of the total of capital and legal reserves is unrequited

If it is determined from the last annual balance sheet that at least half of the total capital and legal reserves are unrequited, the Board of Directors must convene and call the General Assembly immediately and present the company’s financial situation, the reasons for the loss and the remedial measures to the General Assembly. If the Board of Directors neglects its duty to convene the General Assembly, minority shareholders may also call the General Assembly for a meeting.

The remedial actions to be proposed by the Board are expressed in the Communiqué by way of example as capital completion, capital increase, closing of some production units or sections, sale of subsidiaries, changing the marketing system and similar measures. However, the specified measures are not limited and will be implemented by evaluating the financial situation and activities of the company.

The remedial actions offered by the Board may be accepted by the General Assembly in the same way or with amendments, or it may be decided to implement another measure, if it is considered that it would be more appropriate to improve the financial situation of the company in line with the information and financial statements presented by the Board.

  1. In case two-thirds of the total of capital and legal reserves are unrequited

As per the last annual balance sheet, if it is determined that two-thirds of the total of the capital and legal reserves are unrequited, the Board must immediately call the General Assembly to convene and present remedial actions to the General Assembly. The General Assembly must also decide to take one of the regulatory measures which are to settle for one-third of the capital or to complete the capital. Otherwise, the company will automatically terminate (TTK m.376.2). 

In the event that at least two-thirds of the total of the capital and legal reserves are unrequited, by the General Assembly, which is called for a meeting by the Board of Directors, may resolve:

  • Proceed with one-third of the share capital; It may be decided to reduce the capital in a way that does not violate the minimum capital and nominal value amounts, so that the loss is thrown out of the company and thus, the company proceeds with the amount equal to one-third of the share capital. Pursuant to articles 473 to 475 of the TCC, while it is aimed to protect the rights and interests of shareholders and company creditors by means of requiring an amendment of the articles of association in this regard, if the capital reduction the Board of Directors may waive the call to the creditors and the payment or guarantee of their rights in accordance with articles 474/2 of the TCC, in order to close the balance sheet deficit resulting from losses and only in the capital reduction to be made at this rate, the Board of Directors may waive the call to the creditors and the payment or guarantee of their rights in accordance with articles 474/2 of the TCC if the capital reduction is made in order to close the balance sheet deficit resulting from the losses
  • Completion; It may be decided to complete the capital by distributing the loss to the partners in proportion to the shares of the partners and by making a payment to be collected in the capital completion fund account by the shareholders without increasing the capital. If the unanimous vote of the shareholders regarding the completion is achieved, each shareholder will be obliged to proportionally provide the funds to close the balance sheet deficit. As explained in the justification of the article, this additional obligation is neither a capital investment nor a loan to the company and is unrequited. If there is no unanimity, some shareholders will be able to make completions of their own accord.
  • Capital increase; It may be decided to increase the capital as much or more as the reduced amount simultaneously with the reduction of the capital at the rate of balance deficit, or to increase the capital directly without any reduction.

As one of the remedial actions in the financial situation of the companies, the practice of removing the loss from the company by increasing it simultaneously with the decrease at the rate of balance deficit, is included in the scope with the Communiqué, and it is also possible to make a direct capital increase without reducing the capital.

  1. Over Indebtedness (Technical Bankruptcy)

In case it is understood that the assets of the company are not sufficient to meet the company’s debts, the company is deemed in over indebtedness. If it is determined that the company is in debt based on the interim balance sheets drawn up by the Board, the Board will be obliged to apply to the Commercial Court of First Instance where the company headquarters is located and to request the bankruptcy of the company. However, with the Communiqué, an important innovation has been introduced in this regard. According to Article 12 of the Communiqué, if it is determined that the company is in over indebtedness, it is possible to resort to one of the above-mentioned actions first. If one such remedial action is not taken or results ineffective, the Board will apply to the court for the bankruptcy of the company. 

Exception for Foreign Exchange Losses

Another important innovation brought by the Communiqué is that in the calculations made until 01.01.2023 regarding capital loss or insolvency under Article 376, foreign exchange losses arising from unfulfilled foreign currency liabilities will not be taken into account. Thus, it is aimed to prevent the risks of facing technical bankruptcy due to the fluctuations in the exchange rate and the current economic situation.

VAT Withholding And Income Tax Withholding In Commercial Advertising Services

As per the Value Added Tax General Implementation Communiqué, all VAT payers and designated buyers must apply 3/10 VAT withholding on commercial advertising services. 

The essential points that are considered in the invoices to be issued within the scope of services related to internet advertisements are as follows.

• 3/10 VAT withholding application is valid for real and legal persons who are liable to VAT. Companies that are VAT taxpayers must issue the invoices considering the 3/10 VAT withholding application, in case the service amount exceeds 2.000 TRL including VAT.

• Fully (10/10) VAT withholding is applied to the earnings of individuals who are not VAT taxpayers.

• 15% income tax withholding is deducted from individuals who are not VAT taxpayers and real persons who are VAT taxpayers.

Please find the sample calculations for invoices to be issued in this context below.

Amendment to M&A Transactions Requiring Autorization of the Competition Board

The Communiqué Amending the Communiqué on Mergers and Acquisitions Requiring Autorization of the Competition Board (“Communiqué 2022/2”) issued by the Competition Authority was published in the Official Gazette dated 04.03.2022.  By the Communiqué 2022/2, which will enter into force on 04.05.2022, the technology companies  are included in the scope of notification obligation, and turnover thresholds have been changed in mergers and acquisitions subject to the autorization of the Competition Board .

Turnover Thresholds in Mergers and Acquisitions

Due to the exchange rate fluctuations in the economy in recent years, the turnover thresholds for mergers and acquisitions subject to the authorization of the Competition Board have been updated as follows:

•             The threshold for the turnovers in Turkey of at least two of the transaction parties has been increased from 30 million TL to 250 million TL, and the total limit of the turnover in Turkey of the transaction parties has been increased from 100 million TL to 750 million TL.

•             The turnover limit of the asset or activity that is the subject of the transfer in acquisition transactions, and of at least one of the transaction parties in merger transactions, is from 30 million TL to 250 million TL, and the world turnover limit of at least one of the other transaction parties is from 500 million TL to 3 billion TL. has been increased.  The limit for the Turkish turnover of the transferred assets or business in acquisitions has been increased from 30 million TL to 250 million TL, and the limit for the worldwide turnover of at least one of the other parties to the transaction has been increased from 500 million TL to 3 million TL.  

Thus, if the above-mentioned thresholds are exceeded in mergers and acquisitions transactions, it shall be required to obtain authorization of the Competition Board for the transaction in question.

Technology Companies

By adding sub-paragraph e) to the first paragraph of Article 4 of the Communiqué no 2022/2, the notification obligation has also been imposed on technology enterprises which are defined as “enterprises operating in the fields of digital platforms, software and game software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies or their assets”.

In addition, with the second paragraph added to Article 7, It is aimed that transactions regarding the acquisition of technology companies will be subject to the supervision of the Competition Board by stating that “the above-mentioned 250 million TL threshold shall not be sought for the acquisition of technology enterprises operating in the Turkish market or having R&D activities or providing services to users in Turkey”,

Submission of the Notification Form

In addition to the update in the turnover thresholds, the notification obligation imposed on technology undertakings and the exception for technology undertakings included in the scope, now it is allowed to submit notification forms online via e-Devlet as well as physical delivery.

Since the notification form attached to the Communiqué numbered 2022/2 has been amended, the new notification form should be used in mergers and acquisition transactions as of 04.05.2022.

What are the current updates on tax regulations in Turkey? Our Senior Manager (CPA), Çağrı Özlü gives insights

The Law No 7338 related to making amendments on the Tax Procedural Law and Certain Laws (Law

No: 7338), which includes the significant amendments and regulations on the Income Tax, Corporate

Tax, Tax Procedural Law, VAT, Stamp Duty, Accommodation Tax, Special Consumption Tax and many

laws, was published in the Official Gazette dated 26.10.2021 and numbered 31640. We kindly submit

below the regulations and amendments made by the Law briefly for your information;

1- The commercial earnings of the taxpayers who are subject to the simple earnings basis were

exempted from the income tax in order to be applied to the earnings acquired from


2- The earnings acquired by those who create social contents and develop applications for

mobile devices were exempted from the income tax under certain conditions. Furthermore,

the same earnings were also exempted from the VAT.

3- The payments of the agricultural subsidies, which are made by the public institutions and

organizations to the farmers, were exempted from the income tax. The income tax which

had been deducted before 26/10/2021 shall be refunded to the farmers on condition that

application will be made.

4- The provisional tax return for the fourth period was excluded from the tax period in order to

be applied from the taxation period for 2022.

5- In the capital increases to be made from 26/10/2021, the rate of discount to be applied for

the part in which the cash brought from abroad is encountered with was determined as 75%

instead of 50%.

6- The part corresponding to 10% of the amount determined by applying the investment

contribution rate to the investment expenditure on the basis of investment incentive

certificate can be deducted from the other taxes accrued, excluding Special Consumption Tax

and Value Added Tax, on condition that it will be requested until the end of the second

month following the month in which the corporate tax return is required to be submitted.

7- The Ministry of Treasury and Finance was authorized for establishing a tax office in electronic

environment independently from the physical environment and for carrying out the

procedures electronically as of 26/10/2021.

8- A regulation was made for obtaining license for e-books and for declaring the approval of the

books as confirmation as of 26/10/2021.

9- Regulations were made with respect to granting additional period of 60 days in the case of

non-submission of the report in time with regard to the issues such as exemption, exception,

loss offsetting etc. which were conditioned to the submission of the attestation report issued

by certified public accounts as of 26/10/2021.

10- The scope of the application for the issuance of note of expenses was extended and the

obligation for the issuance of the document within 7 days from the date of delivery of goods

and performance of service was imposed as of 01/11/2021.

11- “Purchase Price” was added to the Tax Procedural Law as the valuation criteria as of

26/10/2021. Furthermore, the factors which must be included into the cost price and which

do not need to be included into the cost price were clarified.

12- The taxpayers were granted the rights of choices with respect to the application of

depreciation on a daily basis for the depreciable economic assets which will be newly


registered to the operating assets, and the determination of the depreciation period longer

so as not to exceed the double of the useful life period and fifty years as of 26/10/2021.

13- Provisions for doubtful trade receivables can be allocated without requiring any cause of

action and execution proceeding for the receivables at the amount of 3.000 TL, including the

bookkeeping taxpayers as per the operating account as of 26/10/2021.

14- It was clearly ensured that the period of 3 years included in the replacement fund

application will start from the year following the year in which the sale was performed as of


15- The irregularity and special irregularity fines exceeding 5.000 Turkish Liras were included into

the scope of conciliation and conciliation before assessment as of 26/10/2021.

16- “Mutual agreement procedure” was added to the Tax Procedural Law under the avoidance

of double taxation treaties as of 01/01/2022.

17- Quick depreciation can be applied to the new machinery and equipment acquired in order to

be used in the R&D, innovation and design activities from 26/10/2021 until 31/12/2023.

18- The effective date of the accommodation tax law was suspended to 01/01/2023.

19- Regulations were made for the capability of the income and corporate taxpayers, who are

subject to full obligation and who keep books on the basis of balance sheet principle, for the

revaluation of their depreciable economic assets included in their balance sheets and their

depreciations allocated over such assets and indicated in the liabilities of their balance sheets

under the terms set forth in the article as of 01/01/2022.

Why is getting services by expert certificated public accountants important for the startup of a business? Our founding partner Zeki Öcal gives insights

Entrepreneurs should be able to analyze the financial and legal processes that they will encounter on their way to implement the idea they believe to be successful, and if they are not competent in these subjects, they should seek external expert support. The support received on the way can reduce the problems that could be encountered in the future or even prevent them from taking place at all.

At the point where the idea is worth investing, it is time to familiarize with the Turkish Commercial Law. What kind of business organization will it be? Will it be a private company or a capital company?

For starters, founding and operating costs are important. Therefore, private company, which is less costly, is preferred. However, it is observed that capital companies are also preferred for the reasons such as share options, public offering, management of the partnership and protection of minority rights etc.

The content of the articles of association is significant due to the shareholding structure and the expectations of the shareholders. Articles of Association should be prepared by experts because they determine how important decisions about the company will be taken in the future.

At the foundation stage, the company is registered and announced in the trade registry. Also, a tax record is created for the company. At this point, an agreement is signed with a certified public accountant to keep the accounting records and submit the returns/declarations. Besides, the workplace is registered by the Social Security Authority for company employees, and registration process is initiated for the insurance of the employees.

Following these procedures, companies are obliged to regularly notify various authorities. Even if the relevant authorities vary according to the procedure to be followed; declarations/notifications are prepared and submitted to tax offices, Social Security Authority, chambers of commerce, audit and statistics organizations on monthly, quarterly and yearly basis. It should be kept in mind that failure to comply with these obligations is subject to various penal sanctions. Besides, response should be sent to the legal notifications and information requests received from official authorities on due time.

It is very important in terms of the organization of commercial activities that certified public accountants prepare regular income statements and balance sheets every month and duly notify business owners.

It is essential to take the frequent amendments introduced in tax legislation into consideration. Failure to adapt to amendments may cause errors and omissions and damage companies. Adapting to the amended legislation is possible thanks to specialized teams.

Finally, it is noteworthy that following up and benefitting from incentive programs can be achieved with specialized knowledge and skills in terms of the complex legislative regulations.

What are the current updates on tax regulations in Turkey? Our Tax Partner Serhat Umut Aydın explained

As it is known, the Law No. 7326 on the “Restructuring of Certain Receivables and Amending Some Laws” entered into force on 03 June 2021.

Among the institutions enacted by this law, the below are present:

  • eliminating the tax audit (tax inspection) risks of the past fiscal periods for which the taxpayers voluntarily increase the tax bases,
  • in some cases, termination of the tax audits of the taxpayers who have entered into tax audits,
  • restructuring of debts at the stage of tax audit and assessment,
  • the declaration of undeclared incomes and earnings without penalty and interest by declaration with regret,
  • restructuring of ongoing tax debts coming from the previous laws for debt restructurings,
  • discounts of up to 90% if tax disputes can be settled with a mutual agreement,
  • restructuring the unpaid debts to the tax administration and to the Social Security Institution with low interest rates and providing the opportunity to pay in installments,
  • making business records compatible with the real situation without penalty and interest,
  • approximation to the real situation by re-evaluating the values ​​of immovables and some other economic assets registered in the assets,

In Turkey, the sui-generis tax institutions named as “voluntary tax base increase” and “tax debt restructuring” have come into force several times before and attract a great deal of attention in the periods they are implemented. The legislator aims to collect some doubtful tax receivables quickly and to reduce the workload of the tax administration by putting these institutions into practice in certain periods. In addition, it can be said that taxpayers like the institution of “voluntary tax base increase” so much, which can also be described as a type of “tax audit insurance” in order to neutralize the unforeseen situations and risks that may arise in the tax inspection. In addition, the taxpayers avoid a significant financial burden as they will have the opportunity to pay their unpaid tax debts with low interest rates.

In order to benefit from the provisions of the said law, the application deadline is September 30, 2021, and the down payments resulting from this law must be made as of October 31, 2021. We need to express that taxpayers should be extremely careful about the payment schedule, since the advantages of the law cannot be benefited if the promised payment schedule is not complied with.