There are several options for overseas companies wishing to establish in Turkey. These options (incorporating the recent changes in the law) are outlined in this present article.
For overseas companies wishing to establish a legal presence in Turkey, there are several options – the pros and cons of which should be thoroughly considered prior to such establishment. The incorporation of companies, the opening of branches and liaison offices are briefly examined herein below.
Incorporation of a Company
The following types of companies may be incorporated as per the Turkish Commercial Code which entered into force on July 1st, 2012.
1. Joint Stock Company
2. Limited Liability Company
3. Commandite Company*
4. Collective Company*
*Given that (c) Commandite and (d) Collective companies are rarely utilized for such purposes, they shall not be mentioned in this present article.
Joint Stock Company
A joint stock company (“JSC”) can be incorporated with at least one founding shareholder that can be a real and/or legal person.
A JSC is established by an Articles of Association which is signed by its shareholders. The Articles of Association should be notarized and registered with the Trade Registry and announced through publication in the Turkish Trade Registry Gazette within 30 days as of the incorporation thereof.
A minimum capital of 50.000 TRY is required for the incorporation of a JSC. However, the minimum capital requirement shall be 100.000 TRY if a registered capital system is to be adopted. In the event that the shares are subscribed in cash, at least 25% of the share capital must be paid before registration and the remaining amount must be paid within 24 months as of registration. Assets such as intellectual property may be contributed as capital in kind as long as they are transferable and appraisable.
Additionally, there are no obligations in the legislation for any director to reside in Turkey and/or to be a Turkish citizen. Furthermore, general assembly and board meetings can be held in electronic form and resolutions can be approved via electronic signatures.
Finally, a JSC can be offered to the public.
Limited Liability Company
A limited liability company (“LLC”) can be established by one or more real and/or legal persons (and the number of shareholders cannot exceed 50). Again, the LLC is established by an Articles of Association which is signed by its shareholders.
The management and representation of the LLC may be delegated to one or more shareholders or to third persons. In addition, there are no restrictions as to the nationality and/or residence of its director(s). However, at least one director thereof should be a shareholder.
The minimum share capital of the LLC is 10.000 TRY. Assets such as intellectual property may be contributed as capital in kind as long as they are transferable and appraisable.
It should be noted that in the event of an LLC being composed of one shareholder, such shareholder shall possess all the powers vested in the general assembly. The resolutions to be taken by such sole shareholder must be in writing in order to be valid.
Finally, an LLC cannot be offered to the public.
Opening of a Branch
On the other hand, when the opening of a branch is considered, the scope of business of the branch is required to be the same as the main company.
There are no specific requirements for capital. Additionally, the transfer of the shares and the distribution of dividend are authorized. Nonetheless, a branch is not allowed to issue any stocks.
Furthermore, there should be at least one branch director who resides in Turkey and who possesses full authority to carry out the management of the branch in question.
As to the taxation of branches, the branches shall be liable solely for their Turkish sourced income. Hence, a corporate tax procedure shall not be applicable.
Finally, the Ministry of Science, Industry and Technology is the competent authority which authorizes the opening of branches of overseas companies.
Establishment of a Liaison Office
Liaison offices differ from branches in particular with respect to the prohibition of commercial activities through the liaison offices. Liaison offices are established in order to carry out company representation, technical support, communication and information transfer, regional management and control and inspection of the Turkish suppliers in terms of quality and standard as well as procurement of Turkish suppliers.
The Ministry of Economy is the competent authority which grants permits for the establishment of liaison offices for a maximum of 3 years which can be extended (and the activities of the preceding year shall be taken into consideration in the evaluation of such applications for extension).
The liaison offices shall not be subject to any taxation (except for any social security premiums to be paid for any Turkish employees) given that they do not generate any income in Turkey as a result of being prohibited from conducting any commercial activities. Accordingly, the expenses of the liaison offices shall be borne entirely by the overseas company.
Should you require further information on the foregoing, please do not hesitate to contact us and we would be pleased to advise your party with respect thereto.