Turkey: How To Best Locate Your Company In Turkey?

In the establishment process of a company, the question which comes to the fore first of all is where the company shall be established. Since the place of business of a company plays an essential role for an investor, he/she shall be informed about the advantages and disadvantages of special areas detailedly in the start-up phase, even if the company's sector is also relevant for investor's decisions regarding his/her projects.

Special investment zones

Special investment zones are areas based on specific laws and regulations which provide financial, technological and procedural advantages to investors. There are three types of special investment zones in Turkey and each investment zone provides different facilities to the investors. These are:

  • Technoparks which have been planned for Research & Development ("R&D") purposes. These zones provide numerous financial facilities to technological investments such as venture capital and private equity funds, VAT, corporate and income tax exemptions and tax reductions for the taxpayers in these zones under certain conditions. As of 2014, the number of existent technoparks in Turkey is more than 50.
  • Organized industrial zones have been established in order to provide infrastructural and social facilities to the companies which are established in these zones. These infrastructural facilities include electricity, natural gas, water and telecommunication. An organized industrial zone may be established by legal entities or real persons after fulfilment of establishment procedures such as land allocation, application to chamber of commerce.

    These zones have been started to be established in 1960's and as of 2014, the number of these zones is approximately 275 in Turkey. There are 8 organized industrial zones located only in Istanbul. Investors may benefit from financial advantages of investing in organized industrial zones. For example, the land allocation in these zones causes less expenses, there are tax incentives for investors in organized industrial zones and these properties are provided to use of investors with all necessary infrastructural and social facilities. Moreover, the expenses of these infrastructural facilities are less than expenses in other standard areas. Organized industrial zones may also be established in accord with their specific subjects such as machinery, chemistry and automotive.
  • Free trade zones are investment areas which are not or partially subject to commercial and financial legal and administrative regulations where incentives for industrial and commercial activities are provided. These zones are not subject to customs regime even if they are located in Turkey. Free trade zones offer numerous advantages to the investors such as exemptions of VAT, customs tax, corporate tax and easier profit transfer into other countries. With the establishment of these zones, the facilitation of export oriented investments and foreign direct investments is aimed.

    Free trade zones in Turkey have been started to be established after 1988 especially in locations with an easy access to the airports or ports and the trade volume of these zones has been increasing year for year. An investor intending to invest and establish a company in free trade zones shall consider the rental fee of properties and the application terms and conditions in order to obtain an operation permit.
  • Free Healthcare Zones are a recent type of investment zones in order to develop and increase investments in medical tourism. Currently, no free healthcare zone has been established in Turkey. However, the establishment of these zones is intended until 2017 and the institutions have been working on the legislation about free healthcare zones.

Which companies may be established according to Turkish legislation?

Apart from specific requirements in certain sectors such as energy, insurance and banking, an investor may make a selection between the company types regulated by Turkish Commercial Code. According to the statistics, the mostly preferred company types are joint stock companies and limited liability companies. With entering of the New Turkish Commercial Code into force in 2012, establishment of a single-shareholder company and the conduct of general meetings in electronic form have been enabled. In addition to this, the company establishment procedures have been accelerated due to online application systems such that a foreign investor does not need to find a Turkish shareholder and to perform long procedures for company establishment and general meetings.

Which company type may be more advantageous, is also one of the frequently asked questions by investors. The advantages and disadvantages of a company type may depend on numerous factors such as company's sector, financial status and place of business. Important in this regard is to consider the liabilities such as liability for tax, company's debts and social security premium for each company type.

In conclusion, there are many reasons for preference of Turkey in order to make investments. First of all, the facts that there is no difference between domestic and foreign investors, the existence of investment incentives in different sectors and legal amendments in company and commercial law in accord with the European Union laws and directives play an essential role.

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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