Originally published in September 2003
LIST OF CONTENTS
II. SCOPE OF THE LAW
III. CONCEPTS RELATING TO FOREIGN INVESTMENTS
1. "Foreign Investor" Concept
2. Definition of "Direct Foreign Investment"
2.1. Economic Assets Supplied From Abroad
2.2. Economic Assets Supplied From Domestic Market
IV. BASIC PRINCIPLES OF "DIRECT FOREIGN INVESTMENTS"
1. Investment Freedom and Equal Treatment
1.1. In General
2. Ban on Expropriation and Nationalization
3. Transfers to Abroad
4. Ownership of Real Properties (Real Estates)
4.1. In General
4.2. Foreign Companies May Obtain Mortgages In Foreign Currency As Real Property Owners
5. Resolution of Disputes
5.1. Legal Arrangements
5.2. Special Arrangements on Arbitration
6. Assessment of Value of Non-Cash Capital Injected as Foreign Investment
7. The Right to Employ Foreign Personnel
7.1. Work Permits for Foreign Personnel
7.2. Opportunity Granted to Direct Foreign Investors in Terms of Employment of Foreign Personnel
7.2.1. Non-Consideration of Job Applications From Home Market
7.2.2. Facilities in Work Permits for Key Personnel in Specific Direct Foreign Investments
22.214.171.124. Concept of Specific Direct Foreign Investments
126.96.36.199. Concept of Key Personnel
7.3. Submittals and Procedures of Application
7.4. Requests For Work Permit May Be Refused
7.4.1. For Non-Key Personnel
7.4.2. In General
8. Liaison Offices
8.1. Permission for Liaison Office
8.2. Submittals of Application
8.3. Modus Operandi Provisions
V. FOUNDATION OF DIRECT FOREIGN CAPITAL COMPANIES
1. Content of the "Company" Concept
2. Foundation of Company
VI. SOME POWERS VESTED WITH THE TREASURY UNDERSECRETARIAT
1. Policy Making
2. Collection of Statistical Data
2.1. Units From Whom The Treasury Undersecretariat Can Request Information
2.2. Information That May Be Requested From Direct Foreign Investment Companies or Foreign Capital Branches
VII. PROVISIONS OF THE FORMER LEGISLATION
1. Investment Permission Certificates Granted Under the Repealed Foreign Investment Encouragement Law (Law No. 6224)
2. Transitory Provision
3. Companies Founded Under the Repealed Foreign Investment Encouragement Law (Law No. 6224)
MEMORANDUM ON DIRECT FOREIGN INVESTMENT LAW
It is unequivocal that the developing countries need to make investments in order to develop, and need resources for such investments. For these investment resources, Türkiye is in need of direct foreign investments, rather than "hot money" being liable to sudden withdrawal for reinvestment in countries with higher winning opportunities depending on the current economic conjuncture. And being a country showing great efforts for harmonization with the criteria imposed by the European Union, beside the political and democratic changes, Türkiye is taking steps for improvement of the atmosphere for probable foreign capital investments as a part of its initiatives taken for enhancing its economic integration with the European Union. As a country in the Customs Union with the European Union, Türkiye has enacted and issued the Direct Foreign Investment Law (Law No. 4875) (the "Foreign Investment Law") published in the Official Gazette on 17 June 2003 with a view to attracting direct foreign investments, in addition to the foreign capital invested in Türkiye through the Securities Exchange (i.e. the Istanbul Stock Exchange), for the purpose of removing some bureaucratic obstacles in its legislation and facilitating the foreign capital investments. Moreover, foundation and operations of joint-stock companies have been facilitated by certain amendments in the Turkish Commercial Code (Law No. 6762) (the "Turkish Commercial Code"), thereby creating a legal base and foundation for the "new investment atmosphere".
In this Study, we are going to summarize the legislation pertaining to direct foreign investments.
II. SCOPE OF THE LAW:
The Foreign Investment Law aims at:
- encouraging this type of investments;
- protecting the rights of foreign investors;
- harmonizing the investment and investor definitions with the international standard concepts;
- replacing the existing permission and approval system by a reporting system; and
- increasing this type of investment with the help of such policies.
III. CONCEPTS RELATING TO FOREIGN INVESTMENTS:
1. "Foreign Investor" Concept:
For the purposes of the Foreign Investment Law, "foreign investor" means:
- natural persons who are nationals of foreign countries and make direct foreign investments in Türkiye; and
- Turkish nationals who are resident abroad and make direct investments in Türkiye; and
- legal entities and international organizations which are organized in accordance with the laws of foreign states and countries and make direct investments in Türkiye.
2. Definition of "Direct Foreign Investment":
"Direct foreign investment" means the:
- foundation of a new company or opening of a branch, or
- acquisition of capital shares directly, not through the Istanbul Stock Exchange, or
- acquisition of capital shares equal to at least 10% or acquisition of voting securities at the same rate in a company quoted and traded in the Istanbul Stock Exchange
by a foreign investor by using the economic assets supplied from abroad or from the domestic market.
The Foreign Investment Law puts forth a criterion of acquiring capital shares or voting rights of at least 10% of the company capital by buying stock certificates in the Istanbul Stock Exchange. The Foreign Investment Law contain the following phrases: "The Foreign Investment Law considers and treats not only acquisition of capital shares outside the securities exchanges, but also acquisition of capital shares in excess of 10% of capital in the securities exchanges characterized by short-term capital movements as the direct foreign investments. This 10% ratio is globally and internationally accepted as a ratio which represents the long-term expectations of foreign investors."
2.1. Economic Assets Supplied From Abroad:
According to the Foreign Investment Law, the direct investment assets that may be supplied by the foreign investors from abroad are the economic assets such as:
- corporate securities, other than state bonds, and
- machinery and equipment, and
- industrial and intellectual property rights.
2.2. Economic Assets Supplied From Domestic Market:
Foreign investors are able to found a new company or open a branch also by using:
- profit shares, proceeds, money receivables or other investment rights having a monetary value, intended to be used for reinvestment purposes; and
- rights relating to search, exploration and extraction of natural resources; and
- capital shares acquired outside the exchange (Note: The Foreign Investment Law does not impose a ratio in relation therewith); and
- minimum 10% capital shares acquired in the exchange
supplied from the domestic market.
IV. BASIC PRINCIPLES OF "DIRECT FOREIGN INVESTMENTS":
The Foreign Investment Law stipulates some basic principles of direct foreign investments and investors, as listed below under 8 headings:
1. Investment Freedom and Equal Treatment:
1.1. In General:
Foreign investors are fully free to make direct foreign investments in Türkiye. If we recall that this type of investments was subject to permission in the repealed Foreign Investment Encouragement Law (Law No. 6224) (the "Repealed Foreign Investment Law"), it is overt that this provision of the Foreign Investment Law means to say that direct foreign investments are not subject to permission.
The principle is that the foreign investor is not required to make an application for permission prior to making investments. This provision is in fact a result of a principle existing in our legislation since past. "Foreign investors are subject to EQUAL TREATMENT with local investors." In short, the Foreign Investment Law does not discriminate between Turkish and foreign investors, and as also specified in Article 10 of the Repealed Foreign Investment Law, foreign capital is also eligible for all rights, exemptions and incentives granted to local capital under the same conditions.
Accordingly, foreign capital investors are not required to receive a prior permission for their investments.
1.2. Exception Provision:
Though the rule is that foreign investments are not subject to a prior permission and are treated equally with local firms and investors, it is also provided in the Foreign Investment Law that pertinent provisions of:
- international agreements and
- special laws, if any,
are required to be complied with.
2. Ban on Expropriation and Nationalization:
The Foreign Investment Law stipulates that direct foreign investments cannot be expropriated or nationalized unless:
- absolutely required for public interests pursuant to the applicable laws and regulations, and
- fully paid for.
This provision is parallel to Article 46 of the Constitution of the Republic of Türkiye, envisaging that expropriation can be effected "only against payment of real prices in cash".
3. Transfers to Abroad:
Foreign investors may FREELY transfer abroad through banks:
- net profits,
- proceeds of sale,
- proceeds of liquidation,
- compensation moneys,
- moneys payable under license, management and similar other agreements, and
- foreign credit principal and interest payments
arising out of their activities and transactions in Türkiye.
These transfers, allowed by and under the Law Regarding Protection of the Value of Turkish Currency (Law No. 1567), are thus secured by this provision of the Law. As a result, the provisions of the Repealed Foreign Investment Law pertaining to the obligation of the State to give transfer guarantees are no longer applicable.
4. Ownership of Real Properties (Real Estates):
4.1. In General:
As a result of the principle of equality between foreign and local investors, according to the Foreign Investment Law, the companies founded and wholly owned by foreign investors in Türkiye and the legal entities and companies founded in Türkiye and participated in by foreign investors are entirely free to acquire ownership of or limited "real rights" on real properties. Provided, however, that this freedom is valid and applicable only in the regions and zones where the Turkish citizens are also allowed to use such rights.
4.2. Foreign Companies May Obtain Mortgages In Foreign Currency As Real Property Owners:
The Foreign Investment Law permits foreign investors to acquire real estates and properties just like Turkish citizens, therefore it is easier for the foreign investors to borrow foreign credit and loan facilities.
Article 851 of the Turkish Civil Code (Law No. 4721) (the "Turkish Civil Code"), which was revised and put into effect as of the first day of 2002, has taken its place in the Turkish law as a new opportunity. Accordingly, as a matter of principle, real property mortgages can be established as a security for repayment of a certain amount of debt expressed in Turkish Lira. However, crediting institutions, such as banks and special finance institutions (Islamic banks), organized in Türkiye or abroad may obtain mortgages over real property in foreign currency in order to secure the credits made available in foreign currency or linked to a foreign currency index.
5. Resolution of Disputes:
5.1 Legal Arrangements:
According to the Foreign Investment Law provisions, for resolution of:
- disputes arising out of investment agreements subject to private law, or
- investment disputes arising out of public service concession agreements and specifications signed by foreign investors with the public administrations,
in addition to (i) the competent courts having jurisdiction, one may also have recourse to (ii) national or international ARBITRATION or other ways of resolution of disputes, on the condition of mutual agreement of the parties and of satisfaction of the conditions specified in the applicable laws and regulations.
5.2. Special Arrangements on Arbitration:
While resolution of disputes arising out of contractual relations by arbitration, in addition to the courts, is provisioned for in the Turkish Civil Procedure Code (Law No. 1086) (the "Civil Procedure Code"), as for the public service contracts and agreements, some problems attributable to the provisions of the Constitution and the laws due to one party thereto being the State have been removed by the legal arrangements made in the recent years, and thus, the legislation has come out to a level that may be desired by the foreign capital.
As a matter of fact, for resolution of legal disputes arising out of their trading relations in the international markets, the international companies wish to go to an arbitration panel formed and appointed in accordance with the pertinent international commercial arbitration rules, as a mechanism believed to allow equal representation of the international companies, in addition to the courts of the relevant State. Taking this wish into consideration, Türkiye has revised and amended its Constitution in 1999 so as to incorporate this type of arbitration into its legislation, and immediately thereafter, the Law Regarding Principles Applicable In The Case Of Referral To Arbitration For Resolution Of Disputes Arising Out Of Public Service Concession Specifications And Contracts (Law No. 4501) was enacted and put into effect in 2000, and the International Arbitration Law (Law No. 4686) was issued and adopted in 2001. Pekin & Pekin Law Office has issued a special Memorandum on arbitration.
6. Assessment of Value of Non-Cash Capital Injected as Foreign Investment:
According to the Foreign Investment Law, "value of non-cash capital is assessed within the frame of the pertinent provisions of the Turkish Commercial Code."
Pursuant to Article 139 of the Turkish Commercial Code, the below listed assets may be injected as capital into commercial companies:
- cash, receivables, negotiable instruments, rights and securities;
- industrial property rights such as licenses, trademark rights and concessions;
- all types of real properties and assets;
- rights to use all kinds of personal and real properties and assets;
- personal labor;
- commercial reputation and name;
- commercial enterprises and
- other rights having an economic value such as copyrights and mining licenses.
Furthermore, Article 293 of the Turkish Commercial Code pertaining to joint-stock companies sets down the principles of appointment/choice of assessor for assessment of non-cash capital assets.
The Foreign Investment Law further allows use of securities of the companies organized and resident in foreign countries as a means of investment. In addition, another important point is that the assessments made by:
- the authorities authorized to make value assessment as per the legislation of the country of origin, or
- experts appointed by the competent courts of the country of origin, or
- international assessment organizations
will "be taken as a base" in assessment of value. Thus, the needs of the international foreign capital and capital markets have been incorporated into our legislation, within the frame of a globalization approach.
7. The Right to Employ Foreign Personnel:
7.1. Work Permits for Foreign Personnel:
Pursuant to the Foreign Investment Law, a work permit is required to be granted by the Ministry of Labor and Social Security for the foreign personnel to be employed in the companies founded, the branches opened or other entities established in Türkiye to the persons resident/domiciled abroad. Principles and procedures of the work permit are set forth in the Regulation Regarding Employment of Foreign Personnel in Direct Foreign Investments, published in the Official Gazette on 29 August 2003, (the "Regulation Regarding Foreign Personnel") issued by the said Ministry.
7.2. Opportunity Granted to Direct Foreign Investors in Terms of Employment of Foreign Personnel:
7.2.1.Non-Consideration of Job Applications from Home Market:
Article 14 of the Law Regarding Work Permits for Foreigners (Law No. 4817) (the "Law Regarding Work Permits") provides as a condition precedent for granting a work permit to foreigners that no candidate could have been found in the home market for the relevant job/post within a period of four weeks as a general legislative arrangement. However, Article 3(g) of the Foreign Investment Law has abrogated this condition of "no candidate could have been found in the home market for the relevant job/post within a period of four weeks" only for the foreign investments. To put it in other words, the prohibition stipulated in Article 14(b) of the Law Regarding Work Permits will not be applicable in foreign investments and in employment of foreign personnel by direct foreign investors.
7.2.2. Facilities in Work Permits for Key Personnel in the Specific Direct Foreign Investments:
The Regulation Regarding Foreign Personnel has brought some facilities in addition to removal of the waiting (announcement) period of 4 weeks as mentioned above.
Namely, the facilities for granting work permits by the Ministry of Labor and Social Security to the "key personnel" to be employed in "specific direct foreign investments", and the facilities for granting work permits by such Ministry (i) to not more than ONE PERSON holding a certificate of authorization in the liaison offices (ii) on the condition that minimum 200,000 USD or its equivalent in any other currency has been brought from abroad for financing the office activities in the last year, and after an application for work permit made to the diplomatic representatives of the Republic of Türkiye in that foreign country is transmitted by the said diplomatic representatives directly to the Ministry of Labor and Social Security, any additional documents that may be requested are allowed to be submitted directly to such Ministry by the employer of the relevant foreign personnel.
At this point, we have to clarify the concepts of specific direct foreign investments and key personnel.
188.8.131.52. Concept of Specific Direct Foreign Investments:
A company or branch that is in the scope of the Foreign Investment Law and satisfies at least one of the following (5) conditions is considered and treated by the Foreign Investment Law as a specific direct foreign investment:
- the previous year turnover of the company or branch is minimum 30 trillion Turkish Lira, provided that the total capital held by the foreign partners is minimum 400 billion Turkish Lira; or
- the previous year exports of the company or branch is minimum 1 million US Dollars, provided that the total capital held by the foreign partners is minimum 400 billion Turkish Lira; or
- the employment of minimum 250 personnel enrolled and registered in the Social Security Agency in the company or branch in the previous year, provided that the total capital held by the foreign partners is minimum 400 billion Turkish Lira; or
- the company or branch plans to make investments, provided that the planned minimum fixed investment total is minimum 10 trillion Turkish Lira; or
- the parent company has made direct foreign investments in at least one country other than its home country.
Thus, an investment which satisfies at least one of the (5) conditions listed above will be considered as a specific direct foreign investment and will be eligible for the facilities in respect of employment of foreign personnel.
184.108.40.206. Concept of Key Personnel:
According to the Foreign Investment Law, key personnel means the personnel, of a company organized and registered as a legal entity in Türkiye, who satisfies at least one of the following conditions. These persons may be summarized as follows:
- company partner, chairman of the board of directors, member of the board of directors, general manager, deputy general manager or similar other title or position, who is entrusted with or authorized for at least one of the following functions and responsibilities:
- To work in the top management or executive position of the company; or
- To manage the whole or a division of the company; or
- To supervise or control the internal auditors1 , or administrative or technical staff of the company; or
- To recruit new personnel for the company, or to dismiss the existing personnel, or to make proposals thereon; or
7.3. Submittals and Procedures of Application:
Article 10 of the Regulation Regarding Foreign Personnel lists the documents (6) required to be submitted depending on the type of the specific direct foreign investments, and the documents (2) required to be submitted for the Work Permits of foreigners to be employed in the status of key personnel, and separately shows and lists the documents required to be submitted for opening a liaison office.
The foreign key personnel to be employed for and in the specific direct foreign investments, or their employee, may make direct application to the Ministry of Labor and Social Security if the foreigner is legally resident in Türkiye at that time. Applications from abroad are required to be made to diplomatic representatives of the Republic of Türkiye in their home country or the country of residence. In this case, having received a work permit, the key personnel are further obliged to receive a work visa within ninety days thereafter. Within thirty days after entering Türkiye with these documents, the key personnel are required to obtain a residence permit granted separately from the Ministry of Interior.
Requests for extension of term of the work permits will also be made by the employer or the key personnel directly to the Ministry of Labor and Social Security. The Ministry of Labor and Social Security will evaluate and respond to the request within 15 days.
7.4. Requests For Work Permit May Be Refused:
7.4.1. For Non-Key Personnel:
According to the Regulation Regarding Foreign Personnel, as the Law Regarding Work Permits and the other pertinent laws and regulations are enforceable in connection with the issuance of work permits for the personnel in general and the foreign personnel other than the key personnel to be employed for and in the specific direct foreign investments, no work permit will be issued and granted to the applicants who do not satisfy the required conditions.
7.4.2. In General:
It is also noted in the Foreign Investment Law that making an investment in the scope of the Foreign Investment Law and the facilities or rights specified in the Regulation Regarding Foreign Personnel do not oblige the Ministry of Labor and Social Security to give a work permit to the foreign personnel, including the company partners.
8. Liaison Offices:
The Foreign Investment Law envisages that the Treasury Undersecretariat is authorized to permit the companies organized and active in accordance with the laws of foreign countries to open a LIAISON OFFICE in Türkiye, providing that such liaison office is not engaged in trading activities in Türkiye.
The Regulation for Implementation of the Direct Foreign Investment Law (published in the Official Gazette on 20 August 2003) (the "Regulation Implementing the Foreign Investment Law") has been issued and enacted by the Ministry to which the Treasury Undersecretariat reports. The Regulation Implementing the Foreign Investment Law contains arrangements about liaison offices.
8.1. Permission for Liaison Office:
Companies organized and active in accordance with the laws of foreign countries may open a liaison office only with a prior permission of the Treasury Undersecretariat, providing that the liaison office is not engaged in trading activities in Türkiye. An application for permission is to be responded to within 5 days, if the submittals are complete. However, applications in respect of the fields of business subject to special laws, such as money and capital markets and insurance, are evaluated by the relevant official authorities.
8.2. Submittals of Application:
The following documents are required to be submitted in an application of permission for Liaison Office:
- original of the certified activity certificate of the parent company;
- activity report or balance sheet and income statement of the parent company;
- original of the certificate of authorization granted to the liaison office manager; and
- if the foundation process is handled by a third person, original of the power of attorney.
8.3. Modus Operandi Provisions:
- The liaison office is required to submit a certificate of registration in the tax department to the Foreign Capital General Directorate of the Treasury within ONE MONTH following the date of opening.
- In May every year, the activities of the previous year are required to be reported in a certain FORMAT to the Treasury Undersecretariat. This form will be appended by a document evidencing that the expenses are paid out of foreign currency funds brought from abroad.
- The permission will be valid for a maximum term of 3 years and may be extended for the same period.
- If the office is closed, a closing certificate/document received from the tax department will be sent to the Foreign Capital General Directorate, and in this case, only the balance of proceeds of liquidation may be transferred abroad.
- The Treasury Undersecretariat may cancel the permission in the case of breach of laws.
V. FOUNDATION OF DIRECT FOREIGN CAPITAL COMPANIES:
1. Content of the "Company" Concept:
According to the Regulation Implementing the Foreign Investment Law enacted by virtue of the Foreign Investment Law, the foreign investors may found or participate in any one of the following types of companies as described in the Turkish Commercial Code:
- collective company;
- ordinary commandite (partnership in commendam) and commandite with shared capital
- joint-stock company
- limited liability company and
- ordinary companies described in the Turkish Code of Obligations (Law No. 818) (the "Turkish Code of Obligations").
Partnerships which are organized by contracts under various names such as "ordinary partnership", "consortium", "business partnership" or "joint venture" and do not bear the certain characteristics of companies as described in the Turkish Commercial Code are considered and treated as "ordinary companies" for the purposes of this Law.
2. Foundation of Company:
The companies are founded in accordance with the provisions of the applicable laws and in conformity to the legal procedures.
In general, foreign capital companies are structured as a joint-stock company or a limited liability company defined as separate company types in the Turkish Commercial Code. As a great majority of the companies are founded as a joint-stock company, we are going to give information about foundation of this type of company:
- Joint-stock company must, unless otherwise provided in the laws, be founded with a minimum capital of 50 billion TL and by at least 5 founding partners. The condition of the Repealed Foreign Investment Law for injection of a minimum capital of 50,000 USD per foreign partner has been removed and repealed. The new Foreign Investment Law does not specify any minimum capital requirement, which is left to the discretion of investors.
- Without prejudice to the special provisions of the Turkish Commercial Code and the Capital Markets Law pertaining to gradual foundation of joint-stock company, the foundation process may be summarized as follows:
- Articles of Association are prepared and notarized.
- Articles of Association must show in details the founders, corporate name, head offices of company, objectives and fields of business of the company and terms of payment of capital subscriptions.
- After completion of the procedures stipulated in the Turkish Commercial Code, the company is registered and announced in the relevant Trade Registry.
- Amendments to the Articles of Association and capital increases can be made in accordance with the procedures described in the pertinent laws.
- Except for the companies active in the fields of business listed below, foundation of a joint-stock company and amendments to the Articles of Association are not held subject to a prior permission of the Ministry of Industry and Commerce. Types of companies subject to a prior permission of such Ministry pursuant to Article 273 of the Turkish Commercial Code are:
- special financial institutions,
- insurance companies,
- financial lease companies,
- factoring companies,
- holding companies,
- exchange bureaus,
- public retail store operators,
- publicly held companies subject to the Capital Markets Law, and
- companies founded and/or operating in a Turkish Free Zone.
There is no discrimination between local and foreign capital companies in terms of foundation of companies.
VI. SOME POWERS VESTED WITH THE TREASURY UNDERSECRETARIAT:
The Law has separately authorized the Treasury Undersecretariat on the following two topics:
1. Policy Making:
The Treasury Undersecretariat is authorized to outline the general framework of the POLICIES RELATING TO DIRECT FOREIGN INVESTMENTS, by taking into consideration:
- the growth plan and yearly program targets,
- general economic situation of Türkiye,
- investment trends in the global market, and
- comments of public administrations and private sector vocational/professional organizations.
2. Collection of Statistical Data:
The Treasury Undersecretariat is authorized to request all kinds of statistical data and information about direct foreign investments from all and any:
- public administrations, and
- private sector vocational/professional organizations.
Furthermore, foreign investors are under obligation to supply statistical data about their investments within the framework outlined by the Treasury Undersecretariat, and such data CANNOT BE USED AS A MEANS OF PROOF, other than statistical purposes (Article 5/last paragraph).
The Regulation Implementing the Foreign Investment Law contains the following provisions about the information that may be requested by the Treasury Undersecretariat.
2.1. Units From Whom The Treasury Undersecretariat Can Request Information:
- Central Bank of the Republic of Türkiye
- Capital Markets Board
- Ministry of Industry and Commerce
- Turkish Union of Chambers and Exchanges
- Trade Registers
- Other relevant public administrations
- Vocational/professional organizations in the status of a public entity and
- Non-governmental organizations
The Treasury Undersecretariat may collect the required information by signing Data Exchange Protocols with the above listed entities or by other ways and methods.
2.2. Information That May Be Requested From Direct Foreign Investment Companies or Foreign Capital Branches:
The company or the branch is under obligation to report to the Foreign Capital General Directorate as follows:
- information about its capital and operations, in the format of Activity Information Form Direct Foreign Investments, in May on yearly basis; and
- information about payments to its capital account, in a certain format, within ONE MONTH following the date of payment; and
- information about share transfers and participation of a foreign investor in the local company, in a certain format, within ONE MONTH following the date of transfer or participation.
VII. PROVISIONS OF THE FORMER LEGISLATION:
1. Investment Permission Certificates Granted Under the Repealed Foreign Investment Law:
The Foreign Capital General Directorate can transact the Investment Permission Certificates issued pursuant to and in accordance with the Repealed Foreign Investment Law; however, according to the regulations issued thereunder, the vested rights are retained and reserved until completion of the investments in the scope of the certificate.
2. Transitory Provision:
The Foreign Investment Law provides that the provisions of the existing current governmental decrees, communiqués and circulars will remain in force and be enforceable if and to the extent they are not in conflict with the Foreign Investment Law, until regulations in respect of implementation of the Foreign Investment Law are issued and put into effect.
After the Foreign Investment Law became effective on 17 June 2003, the Regulation Implementing the Foreign Investment Law was published in the Official Gazette on 20 August 2003. Therefore, we are of the opinion that the governmental decrees, communiqués and circulars relating to the former legislation are no longer enforceable even for a transition period.
3. Companies Founded Under the Repealed Foreign Investment Law:
Existing foreign capital companies founded under the Repealed Foreign Investment Law are also subject to and governed by the Foreign Investment Law, WITHOUT PREJUDICE TO THEIR VESTED RIGHTS.
Following is a brief summary of the changes in laws aimed at paving the way for foreign capital investments in Türkiye. Under the new Foreign Investment Law:
- the obligation to receive a prior permission for foundation of foreign capital companies or branches or participations in Türkiye has been removed;
- international standard definitions relating to foreign investments have been accepted;
- foreign capital companies organized in accordance with the Turkish laws no longer positively or negatively discriminate against the Turkish companies organized in Türkiye;
- provisions relating to "permission for foundation of company or branch", "permission for participation of foreign investors in local companies", "permission for investments", "permission for changes in the fields of business of a company", "permission for capital increases or share transfers", "permission for indirect participation" and "registration of license, know-how, technical assistance and franchising agreements" have been repealed and removed;
- the obligation to inject of a minimum capital of 50,000 USD per foreign partner is no longer in force;
- Turkish citizens resident abroad are also allowed to make foreign investments in Türkiye;
- companies founded by foreign investors may also freely acquire real properties, just like Turkish companies; and
- companies founded abroad are no longer required to receive a prior permission for opening a branch office in Türkiye from the Foreign Capital General Directorate, and a permission granted by the Ministry of Industry and Commerce is deemed sufficient, just like the Turkish companies.
1. We believe that the term "internal auditor" as used herein does not extend to the members of the board of audit elected as a body of the joint-stock companies generally in the Law of the Continental Europe.
2. The Regulation Regarding Foreign Personnel does not define the term of "basic and key information". Therefore, the Ministry of Labor and Social Security is expected to interpret and comment thereon.
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.