🏢 Legal Aspects of Establishing a Business in Turkey

Turkey presents significant opportunities for both domestic and foreign investors due to its strategic location, dynamic economy, and business-friendly reforms. However, establishing a business in Turkey requires compliance with a well-structured legal framework, involving corporate law, tax law, labor regulations, and sector-specific requirements.

This article provides a comprehensive overview of the legal landscape for establishing a business in Turkey, focusing on types of legal entities, incorporation procedures, regulatory obligations, and compliance considerations.

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1. Legal Framework for Business Establishment

Business operations in Turkey are primarily governed by the following laws:

• Turkish Commercial Code (TCC) – Law No. 6102

• Corporate Tax Law – Law No. 5520

• Tax Procedure Law – Law No. 213

• Labor Law – Law No. 4857

• Foreign Direct Investment Law – Law No. 4875

• Municipality Law, Environmental Regulations, and Sectoral Codes

These laws apply equally to domestic and foreign entrepreneurs unless otherwise specified.

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2. Choosing the Legal Form of Business

a) Limited Liability Company (Ltd. Şti.)

• Minimum 1 shareholder (natural or legal person)

• Minimum capital: 10,000 TRY

• Liability limited to capital contributions

• Ideal for SMEs

b) Joint Stock Company (A.Ş.)

• Minimum 1 shareholder

• Minimum capital: 250,000 TRY (non-public); 500,000 TRY (public)

• Can issue shares and go public

• Suitable for larger-scale enterprises

c) Branch Office

• Established by a foreign parent company

• No separate legal entity

• Must be registered with the Trade Registry and Ministry of Industry

d) Liaison Office

• Not allowed to engage in commercial activity

• Used for market research or promotional purposes

• Requires permission from the Ministry of Industry and Technology

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3. Company Incorporation Process

Incorporating a business in Turkey generally involves the following steps:

Step 1: Reserve Company Name

• Through the MERSİS (Central Registration System)

Step 2: Prepare Articles of Association (AoA)

• Outlining the company’s name, activities, capital, headquarters, and governance

Step 3: Notary Procedures

• Articles and signature declarations are notarized

Step 4: Open Temporary Bank Account

• Deposit capital (25% for A.Ş., full amount for Ltd. Şti. within 24 months)

Step 5: Register with Trade Registry

• Submit required documents

• Published in the Turkish Trade Registry Gazette

Step 6: Tax Registration

• Obtain a tax identification number

• Register with the Social Security Institution (SGK)

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4. Foreign Investor Considerations

Foreigners can own 100% of shares in Turkish companies. Additional requirements include:

• Notarized and translated passports

• Tax number for foreign shareholders

• Notification to the Ministry of Industry under FDI Law

No minimum capital thresholds apply beyond standard requirements, but certain sectors (e.g., banking, telecom) require special licenses.

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5. Regulatory Approvals and Licenses

Some business types require sector-specific approvals before or after incorporation:

• Tourism: Ministry of Culture and Tourism

• Education: Ministry of National Education

• Health services: Ministry of Health

• Financial Services: Banking Regulation and Supervision Agency (BDDK)

• Real Estate Brokerage: Trade Ministry certification and TTBS registration

Failure to obtain these licenses can result in administrative penalties and closure.

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6. Tax Obligations and Corporate Accounting

After establishment, every company must:

• Appoint a certified accountant (SMMM)

• Register legal books and maintain accounting records

• Submit:

  • Monthly VAT returns

  • Quarterly advance tax returns

  • Annual corporate tax declaration

  • Withholding tax returns (if applicable)

Tax Rates (as of 2025):

• Corporate Tax: 25%

• VAT: 1%, 10%, or 20% depending on the service or product

• Stamp Tax: 0.189% – 0.948% for contracts

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7. Labor Law and Employment Requirements

Companies hiring employees must:

• Sign written employment contracts as per the Labor Law

• Register employees with the Social Security Institution

• Pay monthly:

  • Gross salary

  • SGK premiums (~37.5% total)

  • Income tax withholdings

Employees are entitled to:

• Annual paid leave

• Overtime pay

• Severance and notice pay (in case of dismissal)

• Occupational safety compliance under Law No. 6331

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8. Data Protection and Privacy Compliance

If your business collects personal data (e.g., customer names, emails, financial info), it must comply with:

• KVKK – Personal Data Protection Law (Law No. 6698)

• Register with VERBIS

• Prepare privacy and cookie policies

• Ensure legal basis for data collection

Fines can reach up to 2 million TRY for non-compliance.

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9. E-Invoicing and Digital Transformation

The Turkish Revenue Administration (GİB) mandates:

• E-Invoice and E-Ledger systems for companies above revenue thresholds

• E-Archive for B2C invoices

Newly established companies should prepare for digital compliance early, especially in sectors like e-commerce, logistics, and finance.

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10. Investment Incentives and Support Mechanisms

Turkey offers several incentives to encourage entrepreneurship:

• KOSGEB grants for SMEs and tech startups

• Investment Incentive Certificates (tax exemptions, VAT refund, customs duty exemption)

• Free Zones offering corporate tax exemption and customs incentives

• Techno-Parks with R&D and income tax discounts

Application is made through the Ministry of Industry and Technology or regional development agencies.

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Conclusion

Setting up a business in Turkey involves more than bureaucratic registration. From selecting the correct legal form and fulfilling sectoral licensing requirements to complying with labor, tax, and data protection laws, entrepreneurs must navigate a multi-layered legal environment.

Engaging a lawyer, certified accountant, and business consultant early in the process ensures a smooth and compliant setup. Especially for foreign investors, Turkey’s legal framework is accommodating, but local legal guidance is essential to avoid pitfalls and seize regulatory opportunities.

                                                                                                                                                      INTERN LAW FACULTY STUDENT

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