How to Start a Business in Turkey: A Complete Guide for Entrepreneurs

Turkey is a strategic market for foreign investors, offering a favorable business environment and a wealth of opportunities across various sectors. If you are considering starting a business in Turkey, this guide will provide all the essential information on types of companies, legal procedures, tax advantages, as well as key sectors and the best regions to invest in. This guide is designed to accompany you at every step of your investment journey in Turkey.

1. Introduction

Why Invest in Turkey?

Turkey represents a dynamic market with considerable opportunities, backed by a consistently growing economy and a strategic geographical location. The country especially attracts foreign investors in key sectors such as technology, energy, healthcare, and agriculture.

A Growing Market

The Turkish economy is experiencing strong growth, driven by robust domestic consumption and ongoing development across several sectors. This dynamism is also reflected in the rise of startups and innovation, with key hubs in Istanbul and Ankara, attracting both local and international businesses.

A Young and Consumer-Oriented Population

With more than 80 million inhabitants, over 60% of whom are under 35 years old, Turkey represents an extremely attractive market for businesses targeting a young, dynamic population. This demographic is a major driver of consumption in various sectors, ranging from consumer goods to new technologies.

A Strategic Geographical Location

Situated at the crossroads of Europe, Asia, and the Middle East, Turkey benefits from a strategic location that provides direct access to several regional and global markets. This facilitates the rapid movement of goods and services.

Tax Benefits for Foreign Investors

The Turkish government offers several tax incentives to encourage foreign investments, such as exemptions in free zones and reductions in taxes for strategic sectors like technology and renewable energy.

Advantages of Doing Business in Turkey

A Skilled and Cost-Competitive Workforce

Turkey has a young, highly skilled workforce, offering competitive labor costs compared to Europe. This workforce is a significant asset for businesses looking to optimize costs while accessing talent in various sectors.

Modern Infrastructure

Turkey boasts high-quality infrastructure, including international airports, seaports, and a modern road and rail network. These infrastructures not only facilitate the movement of goods within the country but also make exports to international markets easier.

A Business-Friendly Environment

Turkey has reformed its legal framework in recent years to simplify administrative procedures and improve the business environment. The country also offers particular opportunities for businesses established in free zones, which benefit from favorable tax conditions.

2. Types of Companies in Turkey

There are several legal structures for setting up a business in Turkey. The choice of the legal form depends on the size of the business, its financing needs, and its commercial objectives.

Type of Company	Description	Minimum Capital Requirement	Advantages	Disadvantages
Joint Stock Company (JSC)	The ideal legal structure for large companies looking to raise funds.	250,000 TRY (January 2024)	Flexibility for shareholders, ability to raise capital.	More complex administrative procedures.
Limited Liability Company (LLC)	Best suited for SMEs and startups. Less paperwork compared to a JSC.	50,000 TRY (January 2024)	More flexible and less costly, limited liability for shareholders.	Less suited for raising capital, limited number of partners.
Sole Proprietorship	The simplest structure, ideal for individual entrepreneurs.	None	Easy to set up, full control by the entrepreneur.	Unlimited personal liability.
Partnerships and Commandite Companies	Suitable for partnerships where the partners share responsibility.	Variable	Flexible in management and organization.	Personal liability for active partners.

3. How to Start a Business in Turkey - Formation Process

Key Steps

• Choosing the Business Name: The company name must be unique and comply with Turkish regulations.

• Drafting the Articles of Association: The articles must be drafted and signed by the founders. It is highly advisable to consult a corporate law expert for this stage.

• Depositing the Share Capital: The share capital must be deposited in a Turkish bank account before the company registration.

• Registering with the Trade Registry: Once the articles are prepared and the capital is deposited, the company must be registered with the Trade Registry to acquire legal status and begin operations.

• Publication in the Official Newspaper: After registration, an official announcement must be published in the Official Newspaper of Turkey.

Work Permit Requirements for Foreign Shareholders

Foreign shareholders of companies in Turkey may need to obtain a work permit depending on their role within the company. The specific requirements are as follows:

Foreign Shareholders Who Need a Work Permit:

• Managing Director of a Limited Liability Company (LLC): If the foreign shareholder is also the managing director of an LLC, they are required to obtain a work permit.

• Board Members of a Joint Stock Company (JSC): Foreign shareholders who are also board members of a JSC must apply for a work permit.

• Managing Partner in a Share-Capital Based Commandite Partnership: Foreign partners who manage a share-capital based partnership must obtain a work permit.

Foreign Shareholders Who Do Not Need a Work Permit:

• Board Members of Joint Stock Companies Not Residing in Turkey: Foreign shareholders who are board members of JSCs but do not reside in Turkey are exempt from the work permit requirement.

• Non-Executive Shareholders in Other Company Types: In companies other than JSCs, shareholders who do not hold executive positions do not need to obtain a work permit.

Foreign shareholders falling into the above categories can apply for a work permit exemption. The exemption is granted by the Ministry of Labor and allows the foreign shareholder to work and reside in Turkey without needing a work permit for the duration of the exemption, which is typically up to 3 months.

How to Apply for a Work Permit for Foreign Shareholders:

• If the foreign shareholder resides in Turkey, the application is made through the e-permit system.

• If the foreign shareholder resides abroad, they must apply for a work visa at a Turkish diplomatic mission and later submit the work permit application via the e-permit system using a reference number obtained from the consulate.

In both cases, the foreign shareholder must have at least a 6-month valid residence permit in Turkey in order to apply for a work permit or exemption.

Required Documents

• Passport of the founders

• Proof of share capital deposit

• Proof of residence in Turkey

• Signed articles of association

Role of the Notary

Notaries play a vital role in authenticating legal documents, especially the articles of association. Some steps in the business formation process, such as signing documents and their submission, require notarization to ensure compliance with Turkish legal standards.

Obtaining a Tax Identification Number

Obtaining a tax identification number is mandatory for all businesses in Turkey. This number enables the company to fulfill its tax obligations, such as VAT and corporate tax declarations.

Permits and Licenses

Certain business activities require specific licenses or authorizations. Depending on your sector, it is essential to check if your business needs specific permits before starting operations.

Compliance with Environmental Regulations

Turkey has strict environmental regulations. Companies operating in certain sectors must adhere to environmental standards, including waste management, emissions control, and energy efficiency.

4. Turkish Tax System

Corporate Tax

The standard corporate tax rate in Turkey is 20%. This rate may be reduced for certain sectors as part of fiscal incentives. Companies must also pay social security contributions and other taxes, such as income tax on employees.

VAT

The standard VAT rate is 18%, although reduced rates may apply to specific goods and services. VAT is collected by businesses at the point of sale and paid to the state.

Other Taxes

Businesses may also be subject to various other taxes, such as income tax on employees and customs duties for imports and exports. The Turkish tax system is relatively transparent, and tax reductions are available in specific circumstances.

Tax Benefits for Foreign Investors

Turkey offers various tax incentives for foreign investors, such as exemptions from VAT and customs duties in free zones, which promote exports and facilitate trade with international markets.

5. Sector Focus: Investment Opportunities in Key Industries

Technology

Turkey is experiencing impressive growth in the technology sector. Istanbul and Ankara have become important hubs for startups and venture capital, attracting both local and international investors. The country has a dynamic ecosystem, supported by tax incentives and policies favorable to innovation.

Energy

Renewable energy is a rapidly expanding sector in Turkey. The country is investing heavily in solar and wind energy, offering promising opportunities for businesses in these fields.

Healthcare

Medical tourism and medical devices are key sectors for foreign investments. The healthcare sector in Turkey offers high-quality care at competitive prices, attracting international patients for medical treatments.

Agriculture and Food

Turkey has significant agricultural potential and is a leader in agricultural production. Agri-food businesses benefit from a strong local value chain, from production to processing.

6. Conclusion

Turkey is an essential destination for foreign investors, offering an attractive tax environment, a skilled workforce, and opportunities in key sectors such as technology, energy, healthcare, and agriculture. By working with local experts and understanding the legal and tax procedures, you can maximize your chances of success in your investment project.

7. FAQ

• What are the administrative procedures to start a business in Turkey?

The procedures include registering with the trade registry, drafting the articles of association, depositing the share capital, and obtaining any necessary licenses or permits.

• What is the minimum share capital required for a company in Turkey?

The minimum share capital for a Joint Stock Company is 250,000 TRY, and for a Limited Liability Company it is 50,000 TRY.

• What are the most promising sectors for investment in Turkey?

The most promising sectors are technology, renewable energy, healthcare, and agriculture.

• How can I obtain an investor visa in Turkey?

An investor visa can be obtained by investing in businesses or real estate in Turkey.

• What are the risks for foreign investors?

The main risks include economic fluctuations and legal changes, but Turkey remains a rapidly growing market with numerous opportunities.