Turkey: Angel Investment In Turkey

Angel investment is provision of financial capital to newly established or growing companies which have novel business models or technologies with high potential for growth and profit, but are unable to find eligible financing resources to realize their investments.

The concept of angel investment is relatively new to Turkish legal system as the Regulation on Angel Investment Regulation ("Regulation") was promulgated by the Undersecretariat of Treasury on February 15, 2013.

The rationale behind the Regulation is to promote financing of small enterprises and entrepreneurs through angel investment by providing tax incentives to the angel investors.

1- INCENTIVES

According to the Regulation, licensed angel investors may benefit from the following tax incentives: 75% Tax Deduction and 100% Tax Deduction.

Licensed angel investors are allowed to deduct 75% of the capital that they invest under the angel investment system, from their income and revenues subject to the annual tax return issued during the year in which the shares of the company they invested in, were acquired. 

Shares acquired through angel investment must however be held by the angel investor for at least 2 years. This 2-year period starts as of the date the capital is deposited in cash into the bank account opened on behalf of the company in which the investment is made.

In case the angel investment is made in companies that have research, development and innovations projects which have been supported by the Ministry of Science, Industry and Technology, Scientific and Technological Research Council of Turkey and Small and Medium Industry Development and Support Organization within the last 5 years, licensed angel investors may benefit from %100 tax deduction instead of %75.

The deduction made within the context of the above-mentioned tax incentives cannot exceed 1.000.000 TRY. 

However, the Council of Ministers has the authority to increase the deduction rate and maximum deduction amount by up to 50%.

The above-mentioned tax incentives will be applied until December 31, 2017. However, the Council of Ministers is authorized to extend this period for up to 5 more years.

2- INVESTMENT REQUIREMENTS

Angel investors can benefit from the abovementioned tax incentives only if they invest in companies that are qualified under the Regulation. 

Companies that the angel investors desire to invest in must be established as a Joint Stock Company (A.S.) as per the Turkish Commercial Code and the total value of such companies' assets must not exceed 10.000.000 TRY prior to the date of investment.

Also, net selling amount of the company in which the investment is made cannot be higher than 5.000.000 TRY for 2 fiscal years prior to the investment. 

Employees of the target company must not be more than 50. 

In order to benefit from the above-mentioned tax incentives, the capital to be invested into each individual qualified company cannot be less than 20.000 TRY and more than 1.000.000 TRY annually. 

In case the investments are made in different companies, the above-mentioned maximum total investment amount of 1.000.000 TRY can be exceeded. However, in case of co-investments, the capital to be invested in each company can be 2.000.000 TRY at maximum.

As another condition to be able to benefit from the above-mentioned tax incentives, the angel investment must be made in certain sectors and business areas which are determined by the Treasury (such as agriculture, forestry, production of food products, textile products, chemical goods, etc.)

Finally, the target company must be a non-public company and must be not controlled by another legal entity.

3- RESTRICTIONS

Angel investors cannot directly/indirectly or separately/together be the controlling shareholder of the company which they invest in. 

Angel investors cannot invest in a company if such company is owned, supervised, audited, controlled by, or directly/indirectly dependent on the investors' spouses, or their descendants, ascendants or collateral relatives (including 3rd degree collateral relatives).

Subsequent to the realization of the angel investment, angel investors cannot be holding more than 50% of the voting rights in the company they invest in. 

Also, the angel investors cannot have the right to appoint more than 50% of the Board of Directors on their own or together with other angel investors, or their spouses, or their descendants, ascendants or collateral relatives (including third degree collateral relatives).

Angel investors are entitled to hold privileged shares which grant the right to be represented in the Board of Directors of the company they invest in. 

The participation of an angel investor in the management of the company is limited to participation in the General Assembly, the Board of Directors, the Advisory Board or the Advisory Committee.

The angel investor cannot hold any other executive or administrative position and cannot work as an employee of the company that the angel investor invests in.

Angel investor cannot receive any salary or other fees from the company. 

Non-compliance with these restrictions may result in the cancellation of the angel investor license.

4- WHO CAN BECOME AN ANGEL INVESTOR?

Under the Regulation, angel investors are defined as real persons; therefore, legal entities are not qualified to become angel investors and benefit from the above-mentioned tax incentives.

For avoidance of doubt, angel investment and private equity in Turkey – as a rule - is not subject to any prior regulatory approval or licensing system. However, angel investors are required to meet certain criteria and obtain a license to be eligible to benefit from the tax incentives regulated under the Regulation.

According to the Regulation, an angel investor license must be obtained from the Treasury to be eligible to benefit from above-mentioned tax incentives. In order for investors to obtain an angel investor license, either of the following qualifications must be possessed: High Income and Experience

High income requirement:  In order to apply for an angel investor license, the investor must have an annual income of at least 200.000 TRY within the last 2 fiscal years prior to obtaining the license OR the total amount of personal wealth of the investor including all types of movable and immovable assets must at least be 1.000.000 TRY.  

Real priorities used as residence or acquired through mortgage or rights arising from insurance contracts, pension rights, life insurance payments are not taken into consideration while calculating the personal wealth.

Experience requirement: Investors who have at least 2 years of experience as a fund or portfolio manager in financial institutions or manager and/or in likewise position in SME finance department of a financial institution, or in private venture companies; OR investors who work for at least 2 years as deputy general manager/or in equivalent or a higher position in a company with the annual turnover of at least 25.000.000 TRY within the last 5 years prior to obtaining the license; OR investors who have been a member of an angel investor network for 1 year prior to applying for a license and who have been shareholders in non-public companies whose net sales in the last financial year is below 5.000.000 TRY, as angel investors are also entitled to apply for an angel investor license.

5- LICENSES

License applications are made to the Treasury through accredited angel investor networks with the required forms and documents evidencing that the requirements for obtaining a license are met (such as application form, resume, tax returns, payroll, reference letters, etc.)

Angel investors are required to become a member of an angel investor network.

Angel investor licenses are issued for 5 years maximum, however investors may apply for extension with the updated required documentation.

Angel investor licenses cannot be transferred. New licenses can be issued in case the licenses are lost or destroyed.

Angel investor licenses are cancelled in case of decease or loss of legal capacity of the angel investor or failure to maintain any of the requirements set forth under the Regulation.

The Treasury however first grants a grace period to the angel investor before cancelling the license in case invested capital is utilized for reasons that are not declared to the Treasury or the (below-mentioned) investment restrictions or limitations are not followed.

6- ANGEL INVESTOR NETWORKS

Angel investor networks are established by angel investors to gather the angel investors and the entrepreneurs.

The Treasury accredits and audits the angel investor networks. The accreditation period is 5 years. However, the Treasury may extend this period for periods of 5 more years. In order to be accredited by Treasury, the angel investor network must apply to the Treasury fulfilling the requirements set forth under the Regulation.

In case the accreditation of an angel investor network is withdrawn by the Treasury, angel investments made prior to the withdrawal date through such network will still benefit from the above-mentioned tax incentives. 

However, angel investments made by the angel investors which are members to the angel investor network of which accreditation is withdrawn, will not qualify for the above-mentioned tax incentives if the investment is made after withdrawal date.

Moreover, in the event that an angel investor makes a license application to the Treasury through an angel investor network and the network's accreditation is withdrawn after the investor's application, the Treasury will still complete the application procedure.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
GSG Attorneys at Law
Herdem Attorneys at Law
Moroğlu Arseven
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
GSG Attorneys at Law
Herdem Attorneys at Law
Moroğlu Arseven
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions