Procedure of Company Formation in Turkey
A Turkish entity can be registered by a non-resident of any nationality. Thus it can be wholly foreign-owned also. Turkey is expected to be growing at full pace & is the fastest growing economy in Europe. Its GDP has been increased threefold between 2002 to 2012. It boasts of as an institutionalized economy fueled by loads of FDI coming its way.
It is ranked 13th as the most attractive destination for FDI in FDI Confidence Index. Also, it is located strategically in a very convenient location which allows goods & services to flow easily in reduced cost of transportation. It also does have an excellent business environment.
- It boasts of a strong legal system.
- Greater transparency due to KYC aligned system.
- Reduced Cost of setup
- Inexpensive Country
- A large supply of skilled & unskilled labor
- The rapidly growing export sector
- A world leading agricultural sector
- It has the 10th largest steel industry in the world.
It is 20th best country in the world when it comes to the protection of investors.
Types of Entities in Turkey:
- Limited Liability Company: It is the most common sort of entity used to set up in Turkish region. It just requires one week to incorporate & a straight through process. It can also be incorporated to take benefit of investment in Turkish tax-free
- One shareholder required (non-resident)
- One director required (non-resident)
- Minimum Capital 3300 Euros.
- Resident Company Secretary not needed.
- Branch Office: Turkish Companies Act regulates the registration of foreign branches & they can be 100% wholly foreign-owned. It has to conduct its trading operations within the ambit set up by its Parent Company.
Although it is required to obtain a necessary license if it has to operate in a certain industry.
- Representative Office: If it is not able to start up with a branch office, it may seek to establish a representative office. It is wholly controlled by parent company & is not allowed to make direct sales with Turkey.
- Marketing the business of parent company
- Research & Development of market
Steps in Incorporation:
These are the following steps for Company Formation in Turkey–
- Application for a name which is apt.
- Preparation of a detailed business plan, the filing of incorporation documents.
- Finding out a Turkey business address for other important purposes.
- Notarizing the documents in Public courts.
- Generation of Incorporation Certificate, upon successful filing within a week’s time.
- Getting the necessary approvals done from Turkish Trade Registry.
- Fulfilling the Tax registration done by Tax Office & Social Security Administration of the company’s incorporation.
- Opening of Bank Account by arranging all sorts of required documentation
- Obtaining the necessary business license or registration certificate to operate freely from the relevant industry.
Turkey Free Zones:
Turkey boasts of 21 free export processing zones, offering export-oriented foreign company’s indefinite tax exemption. It enjoys
- No withholding tax on repatriation of funds
- No corporate tax
- No Customs duties
- No VAT Duty
- No Income Tax
- Easy repatriation of capital & profits
- Unrestricted Investment
- Access to foreign currency accounts
- Excellent export infrastructure
- Free circulation of goods
Also, it has a customs union agreement with EU, allowing free movement of exported goods into EU market. Various incentives make it an easy economy to flourish.
It has relatively simple tax laws regulated by Turkish State Tax Authority:
- Corporate Tax rate is 20%
- Capital Gains of non-resident Turkish entities are taxable in turkey if the individual owning shows resident in a calendar
- Dividend received from non-resident subsidiaries are exempt in certain cases
- Standard VAT Rate is 18% with reduced tax rates as 8% & 1%.
- Personal Income Tax ranges from 20 to 35% up to a certain level & then 35% afterward.
Turkey has embedded 76 taxation treaties with different nations & Free trade agreements with around 22 countries. A Turkey company with a minimum share capital of at least 250000 Euros is eligible for the following tax benefits:
- Receiving partial exemption from corporate tax, up to 50%.
- Complete exemption from withholding tax for the first 10 years of incorporation.
- Listed Entities must be audited by an independent audit company & prepare an audit report half yearly.
- Every Company must lodge Annual Return confirming relevant details to Public Register. The annual statutory obligation must be complied by filing details to Turkish Trade Registry.
- It boasts of a strong legal support system which settles contracts & disputes in a prompt manner.
All together Turkey has a liberalized investment economy with good taxation regime to put forth a business. Incentives are applicable for strategic ventures into developmental activities, large-scale investments.