Invest CPA Ltd. Turkey

Quality CPA & CFO Advisory Services in Turkey

Company Formation and Tax Registration Process for Foreign Investors in Turkey

Company Formation and Tax Registration Process for Foreign Investors in Turkey

Establishing a company in Turkey can be a strategic decision for foreign investors seeking to expand into one of the world’s most dynamic markets. However, navigating the legal, tax, and administrative requirements can be challenging without proper guidance. This comprehensive guide provides an overview of the company formation process and tax registration requirements, ensuring a smooth start for foreign investors in Turkey.

Why Choose Turkey for Investment?

Turkey offers a thriving economy, a young and skilled workforce, and a strategic location bridging Europe and Asia. Foreign investors are particularly drawn to its investment-friendly policies, a wide range of tax incentives, and an extensive network of double taxation agreements.

The Turkish government actively supports foreign investments, ensuring equal treatment for domestic and international businesses. By understanding the company formation and tax registration process, foreign investors can leverage these advantages effectively.

Step 1: Selecting the Appropriate Company Type

The first step for foreign investors is to determine the most suitable company type for their business activities in Turkey. The most common structures include:

  1. Limited Liability Company (LLC – Limited Şirket):
    • Requires at least one shareholder (individual or corporate).
    • Minimum capital: ₺50,000.
    • Capital Payment Requirement: No pre-registration capital deposit is required. The full amount must be paid within 24 months of incorporation.
    • Commonly preferred for small to medium-sized enterprises.
  2. Joint-Stock Company (JSC – Anonim Şirket):
    • Minimum capital: ₺250,000.
    • Capital Payment Requirement: At least 25% of the capital must be deposited before registration. The remaining portion must be paid within 24 months of incorporation.
    • Suitable for larger enterprises or businesses planning public offerings.
  3. Branch Office:
    • Acts as an extension of the parent company.
    • No separate legal identity, but subject to Turkish laws.
  4. Liaison Office:
    • No commercial activities allowed; established for market research or representation.
    • Exempt from corporate tax.

Step 2: Preparing the Required Documentation

To establish a company in Turkey, foreign investors must prepare and submit the following key documents:

  • Articles of Association (AoA), outlining the company’s structure and operations.
  • Notarized copies of the shareholders’ passports or corporate documents.
  • Proof of address for the registered office.
  • Tax Identification Number (TIN) for shareholders.
  • Bank deposit receipt for the initial capital deposit (if applicable).

Invest CPA can assist in preparing these documents and ensuring compliance with Turkish legal standards.

Step 3: Registering the Company

Company registration in Turkey involves the following steps:

  1. Submitting the AoA to the Trade Registry:
    • The Articles of Association must be registered with the Trade Registry Office (Ticaret Sicil Müdürlüğü).
  2. Obtaining a Tax Identification Number (TIN):
    • The company must apply for a TIN from the Turkish Tax Administration. This is a critical step for fulfilling tax obligations.
  3. Opening a Bank Account:
  4. Notarizing Documents:
    • Certain documents, such as the AoA and shareholder agreements, must be notarized.
  5. Registering for Social Security:
    • If the company hires employees, it must register with the Social Security Institution (SGK).

Step 4: Tax Registration for Foreign-Invested Companies

After the company is established, foreign investors must complete tax registration. Key considerations include:

  • Corporate Income Tax:
    • The corporate tax rate for 2024 is 25%.
    • Taxes are levied on the income generated in Turkey.
  • Value Added Tax (VAT):
    • The standard VAT rate is 20%, with reduced rates of 10% and 1% applicable to specific goods and services.
  • Withholding Tax:
    • Withholding taxes may apply to dividends, royalties, and interest payments. Rates can be reduced under double taxation treaties.
  • Personal Income Tax:
    • Foreign individuals involved in the business are subject to personal income tax. The brackets for 2024 are:
      • 15% for income up to ₺110,000.
      • 20% for income between ₺110,001 and ₺230,000.
      • 27% for income between ₺230,001 and ₺870,000.
      • 35% for income between ₺870,001 and ₺3,000,000.
      • 40% for income above ₺3,000,000.

Invest CPA can help foreign investors ensure compliance with these tax obligations, minimizing risks and penalties.

Challenges Foreign Investors May Face

Foreign investors often encounter obstacles such as:

  • Language barriers during registration.
  • Understanding complex tax regulations.
  • Identifying suitable office locations.

At Invest CPA, we offer tailored solutions to address these challenges, providing expert guidance every step of the way.

Benefits of Working with Invest CPA

Our team specializes in assisting foreign investors with company formation and tax compliance in Turkey. Our services include:

  • Preparing and registering Articles of Association.
  • Obtaining Tax Identification Numbers for companies and shareholders.
  • Providing tailored tax advisory to optimize corporate and personal tax liabilities.
  • Handling bookkeeping, payroll, and financial reporting in compliance with Turkish GAAP.
  • Representing companies in interactions with government authorities.

With our support, foreign investors can focus on growing their business while we handle the complexities of Turkish regulations.

Conclusion

Turkey’s strategic location, robust economy, and investor-friendly policies make it an ideal destination for foreign businesses. By understanding the company formation and tax registration process, foreign investors can confidently navigate the Turkish market.

For personalized assistance with company formation or tax registration in Turkey, contact Invest CPA. Our team is committed to helping your business succeed with professional guidance and tailored solutions.