Turkey: The Regulation Regarding Angel Investment Capital


Until recently, there was not any specific regulation in Turkey with respect to providing financing to entrepreneurs who had unique ideas and projects but not enough funding. However, there were indications of the preparation of a regulation regarding this issue.

Angel investment capital is a financial tool for start-up or growth stage ventures that lack financing; it is a system where real persons provide financing or become a shareholder by providing capital to such ventures. State support for angel investment capital was introduced with provisional Article 82 annexed to the Income Tax Law ("ITL") and additional article 5 of the Law regarding the Organization and Duties of the Undersecretariat of Treasury which was added with Article 14 of the Law numbered 6327.

The Regulation regarding Angel Investment Capital ("AICR" or "Regulation"), which was published in the Official Gazette dated 15.02.2013 and numbered 28560, contains principles and procedures regarding state support of angel investment capital and supervision of the activities of the investors. Within this article, the innovations brought by AICR shall be analyzed.

Benefiting from State Support

AICR stipulates that real persons investing as an angel investor to a venture firm may benefit from state support. The aim of this regulation is to entice investors and accordingly increase the number of investments qualifying as innovations. AICR and provisional Article 82 of the ITL set forth the conditions required to benefit from such state support. Pursuant to the Regulation, angel investors must hold the acquired participation shares, which belong to the venture company, for at least two years and must place the committed amount into the bank account of the venture company in cash. In addition, the industry sectors which can benefit from state support are set forth in AICR Annex 4. State support shall apply only to the sectors determined under Annex 4 of the Regulation. Furthermore, the Regulation indicates that investments may be made only in joint stock companies and the qualities that these companies must possess are specified in the Regulation.

The Regulation determines the minimum and maximum investment amounts in order to benefit from the tax-allowance. Accordingly, the value of the acquired company shares cannot be less than TRL 20.000 and more than TRL 1.000.000 per annum. These values are determined as fixed values and the non-specification of a rate of increase may be deemed as a weakness in the AICR. Moreover, angel investors may benefit from state support for up to twenty joint stock companies during a five year period of license validity.

Further to the provisions stated above, AICR contains an essential provision which holds that foreign nationals may be angel investors along with Turkish citizens.

Angel investors fulfilling the stipulated conditions will benefit from the tax-allowance ratios as stated in the Regulation. However, the tax-allowance amount has an upper limit of TRL 1.000.000 under the AICR.

Licensing and Application

AICR requires the pursuance of certain steps in order to benefit from the tax-allowance.

Pursuant to the Regulation, real persons must obtain a license for tax support. The license application is made to the Undersecretariat of Treasury through accredited angel networks and different documents are requested from the high-income earning and experienced investors pursuant to Article 7 of the Regulation. According to the Regulation, the license is valid for five years and licenses may be extended for a period of five years. If any situation stipulated under Article 11 of the Regulation materializes, the license will be canceled.

In addition to the above requirements, AICR stipulates in Article 21 separately that an application by the angel investors accompanied by documents such as a business plan and articles of association is necessary to gain tax support. Notwithstanding the requirement in Article 5 of the Regulation regarding the obtainment of a license, Article 21 of the Regulation sets forth the necessity of the application with other documents to the Undersecretariat to benefit from the support. Therefore, it may be concluded that the documents to be submitted and the procedures to be followed in order to benefit from state support are not specified in a clear and orderly manner under the Regulation.

Specific Regulations for the Angel Investor

The Regulation sets forth different provisions and regulations for angel investors.

Among the provisions, the one regarding angel investors' participation in the management of the venture company is of importance. Pursuant to this provision, the investors' participation in company management is limited to participation in the official management body. Angel investors cannot have any duty in the company except the board of directors and cannot work as company personnel in the venture company. Moreover, angel investors may not receive remuneration and salary. Therefore, the participation of angel investors in a start-up company is limited.

The Regulation provides an opportunity to angel investors for making investments into venture companies as a group. These joint investments are defied as "angel groups". In such cases, pursuant to the Regulation, the shareholders shall be subject to the provisions regarding joint-stock companies in the Turkish Commercial Code.

The angel network is defined in the Regulation as the structures where entrepreneurs come together with the angel investors. The Regulation governs the accreditation, accreditation criteria and the authority provided to the networks as a result of accreditation. The application to the Undersecreteriat is submitted through such accredited networks. These networks are authorized to file and finalize applications, supervise, audit the networks' members and report any irregularities to the Undersecretariat.

The Regulation sets forth certain reporting and notification obligations for venture companies. Pursuant to the Regulation, the venture company is obliged to send an activity report to the Undersecretariat indicating the company's business stage according to the business plan for two years as of the date angel investors become shareholders in the venture company and pay the capital to the bank account in cash.


AICR aims to support entrepreneurs and venture companies who experience financial difficulties, but have innovation-oriented creative ideas, by regulating angel investment capital, a financing tool for ventures who lack funding. This Regulation aims to, institutionalize angel investment capital and induce investments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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