FOREIGN INVESTMENT

We are aware of Turkey's high commercial potential. Due to the fact that Turkey is a natural center of attraction for foreign investors, it is recommended to seek legal assistance in many matters from company establishment to preparation of contracts with local counterparts or from employment process to profit transfer.

In this context, as Ave Law Bureua, with its long years of experience and reference, we provide legal support to investors with high foreign language knowledge and professional expertise in order to meet the needs of foreign investors. A 7day /24 hour accessible structure has been created with our dedicated work team, which is prepared for every issue that a foreign investor may need regarding their commercial activities in Turkey.

It should also be noted that; there is no doubt that Turkish companies have a special position in the production and supply chain in the foreign market. In addition to the customs union agreement with the European Union, Turkey's free trade agreement with 28 countries provides direct access to 996 million consumers. The talented and educated workforce strengthens the competitive structure of Turkish companies in many markets.

In this context, in the investments and/or marketing activities of Turkish companies abroad; It is clear that they need a professional legal support with a good knowledge of foreign languages, experienced in preparing international contracts and widerange international solution partners. As Ave Law Bureau, we have the qualifications and experience to meet the expectations of Turkish companies in order to respond to this need.

Are you planning to invest Turkey?

Turkey acted 4875 numbered Foreign Direct Investment Law¹ (hereinafter: FDI) on 17 June 2003. FDI Law orders equal treatment to foreign investors and gives the same rights & liabilities as if they are local investors. There is no special obstacles or limitations for foreign investors to create a company and/or transfer of profit.

The foreign investors are free to create any form of commercial corporates which are determined in the 6102 numbered Turkish Commercial Code (hereinafter: TCC). All forms of commercial corporates determined in TCC meet the international standards and have compliance with the European Union regulations.

Which type of company is suitable for you ?

The most common commercial corporate types are Joint Stock Company (JSC) & Limited Liability Company (LLC). Beside from slight differences, both of the company forms are subject to same establishment and management process.

The most favored advantages of commercial corporate are a) to recognized as separate legal identity from its shareholder and b) to hold accountable with the commercial company’s assets which can be named as limited liability against to the 3rd parties. In other words, the shareholders of commercial corporates are only liable to pay the capital which they committed towards the corporate. It is legally possible to incorporate a commercial corporate with one real/legal person as shareholder.

Freelance working & Joint Ventures ?

Also, you may choose to run your business without establishing a commercial corporate. In this option, you should consider that in case of any dispute, you will be hold accountable with your whole assets which are registered in your identity.

Joint ventures mostly used as a vehicle for foreign investment with local partners to participate a tender or relatively short-term specific businesses. For this reason, it should beneficial to highlight that the Joint ventures are not considered as commercial corporates and they do not have legal identity.

Joint ventures, are governed by the 6098 numbered Turkish Code of Obligations (hereinafter: TOCS) and the partners of Joint Venture are hold accountable with their personal assets for the debts of the partnership. As a consequence of this unlimited liability of the partners for the debts of the company status, all lawsuits should to be filed against or by partners of joint venture together.

In any preference, We (as Ave Law Bureau) are eager to assist you to decide the best form that fits your vision and expectations.

Let’s create company in Turkey.

Main (incorporation) agreement is needed as first step. Although you may reach templates for main agreement, We (as Ave Law Bureau) strongly recommend you to ask for professional help in order to avoid the legal obstacles for modification of the main agreement latterly. When the founder accepts the main agreement unanimously then the documentation process should be followed.

The documents process starts with online application of MERSIS (Central Registry Record System) system. After the completion of documentation and data entry process to the MERSIS system, a unique potential tax number is designated to commercial corporates and non-Turkish shareholders by MERSIS.
Potential tax number is a pre-requisite to open a bank account for the deposition of money for the incorporation. As a following steps %0.04 of the capital must be paid to the account of the Competition Authority and at least 25% of the subscribed capital must be deposited to the commercial corporate’s bank account. The remaining 75% of the capital may be deposited within 2 years of incorporation.

As a next step, the Trade Registry Directorate on its own motion will inform the tax & social security offices and announce the incorporation in the Trade Registry Gazette within 10 days. To finalize the process, a tax registration certificate and social security number for employment must be obtained with separate applications. The tax officer in a short time will visit the commercial corporate office to create a determination report and expects to see the presence of at least one authorized signature during his/her visit.

As a reminder, you should know that all relevant documents that will be issued in a foreign country must be notarized & apostilled in the state of origin. Accordingly, those original documents, in the time of submission phrase will be officially translated and notarized by a Turkish notary again.

Commercial company (trade) name and trademarks are two different concepts which was regulated under different Laws.

Commercial company (trade) name must be original and it is not to be registered by anyone else previously. According to Turkish Law the words: “Türkiye, Türk, Cumhruiyet, Milli” names cannot be used legally.

A trademark is not always merely a name. A logo, color, shape, or a mix of these can be used. However, it cannot misrepresent the nature of the products or services, nor can it be overused or bland. It should be registered as well to benefit from the Intellectual Property protections.

What are the tax & liabilities in Turkey?

Commercial corporates are only taxed on earnings Turkey operations. The Turkish corporate income tax (CIT) is on %23 rate for the year 2022. A Turkish commercial corporate is completely free from paying corporate income tax on the dividend income that received from a Turkish resident company. It is also beneficial to say that Turkey has acted international / bilateral agreement with more than 85 countries to avoid Double Taxation.

There are other major types taxes and public receivables. Based on the accounting profit result, the taxable result is calculated. Deductible expenses are those incurred in the course of and for the purpose of the company's business, such as depreciation and amortization of production equipment, rent for buildings and equipment, royalties for licensing of intellectual property, and so on. Taxable income of a company is therefore calculated based on its accounting result and adjusted by taking into account additional income not taken into account in the computation of the accounting result, non-taxable income, and nondeductible expenses.

As a principal fines and penalties are not deductible. The shareholders of commercial company are liable of uncollected public debts of the commercial corporate, if it is understood that the public receivables cannot be collected or seems uncollectible. The liability limit is the percentage of the share for the shareholders. However, the directors of commercial corporates are responsible for the public debts accrued during their office with whole amount and as unlimited liability. In case of share transfer, the transferor and transferee are jointly liable for the payment of the public debts which sources before the share transfer date. Unless otherwise agreed in the company share transfer agreement, the new partner/shareholder does not have the right to demand the amount paid for the past public debt from the transferring ex-partner/shareholder.

Labor Law & Local Employment

Turkey became a member of the International Labour Organization (ILO) in 1932 and participated the Board of Directors on various dates as a principal and auxiliary country. Turkey has ratified a total of 59 international labor agreements, including eight “fundamental” agreements on fundamental labor rights, and incorporated them into its national legislation. 55 of these international labor agreements are still in effect.

Regardless of the size of the company & beside from some sectoral exceptions² , all employees in Turkey are subject to the 4857 numbered Labor Law. The purpose of this Law is to regulate the rights and responsibilities of parties and to protect the employees who considered the weak party with respect to employer.

As a consequence of this legal understanding, the rights and benefits that are granted to employees by the Labor Law are the mandatory minimum standards and they cannot be excluded or changed contractually. Obviously, there is no limitation to enrich the rights or benefits of the employees via employment agreement. The employer must fulfill specific requirements³ with regard to the minimum paid capital, gross sales, exports, and number of Turkish employees it employs in its company in order to hire a foreigner.

The employment agreement must be in written form and should include the definition of job, salary amount, general and specific terms relating to working conditions such as daily or weekly working hours and other supplied benefits to salaries etc. The salary must be decided as monetary. The premiums, bonuses, social benefits or other supplemental benefits are not considered in the calculation net salary. Although the employment agreement has salary flexibility, the salary cannot be less than the minimum wage set by the Minimum Wage Determination Commission.

Cost of minimum salary is as follows : Please note that minimum wage will be decided by relevant government authority each year and the cost will be differ accordingly.

In principle, the employment agreements deemed for an indefinite term contract. Any significant modifications in the employment agreement must be offered in written form and it is important to know that the employee is free to accept or refuse it within six days of notification. If the employee clearly refuses it or keep silent in 6 days (which is tacitly refusal) then the modification do not bind him/her.

According to Turkish Law, It is also possible to set probation period in the employment agreements. However, the maximum period of probation is 2 months. Both parties may terminate the employment agreement during this period without obligation of payment notice or compensation.

If fifty or more employees are working in one work place, a specified percentage (%3) of disabled employees must be hired by employer.

Regular working hour is 45 hours per week and cannot exceed 11 hours per a day. For overtime working, the consent of the employee must be achieved. Overtime working is calculated as the number of hours worked beyond the employee’s normal working day and rewarded as %50 raised hour-based payment. Total overtime working may not exceed a maximum of 270 hours days per a year.

Accordingly, without the consent of the employee, it is not possible to work in national and religious holidays. And working in national and religious holidays rewarded like 2 day working.

The employee has a right to annual paid leave. The burden of proof is on the employer’s shoulder and this must be prove in written form. Annual paid leave days is decided according to the employment duration.

According to Labor Law, the termination of employment agreement may be a) arbitrary (without any cause) b) relying to valid reasons, c) relying to a just cause or d) by mutual consent. And the consequences of termination are different in each situation. Nevertheless, the employer is under liability to prove the cause & reasons of the termination of employment agreement.

In context of termination, it should be emphasized that if employee has a minimum 6-month seniority and the employer is employing 30 or more employees then the termination of employment must rely valid reasons. Otherwise, the employee has a right to sue for re-employment.

As a general information, in case of termination, the employee has a right to take severance payment (1 net amount salary for each year) and to learn the employment in advance to termination regarding the certain notice periods. The consequence of non-compliance to notice period is to compensate it as monetary payment.

The salary payments must be done to the employee’s bank account and it must be in harmony with payrolls. The payrolls should include all the necessary information and clearly reflects the overtime or national holiday workings. To avoid any doubts, We (as Ave Law Bureau) strongly recommend the employer to control the working hours via technological equipment such as electronic score cards. Additionally, it is also useful for employers to take the signature of employee for each and every payroll.

In terms of Primary Employer – Sub employer relationship, it should be known that sub-contractor’s employees are also under the responsibility of primary employer. So, it would be wise for the employers who use outsourcing system to control his/her sub-contractor’s actions in terms of labor law.

Protective side of Labor Law is forcing the employers to organize properly and follow the documentation process with the professionals.

Are you charging/charged a criminal offence in Turkey ?

According to 5237 numbered Turkish Criminal Law, Turkish Laws are automatically valid for the crimes committed in Turkey. If the act is partially or wholly committed in Turkey or if the result takes place in Turkey, the crime is deemed to have been committed in Turkey. Being a foreigner gives no benefit or disadvantage in terms of criminal charges and importantly, the ignorance of Turkish criminal laws is not considered as a legal excuse.

Miranda Rights are also valid and adopted to 5237 numbered Turkish Criminal Procedure Law. There is no hesitation to claim that any suspect (including foreigners)

• Have the right to remain silent and refuse to answer questions except for his/her identity information
• Anything he/she says may be used against his/her before Court
• Have the right to consult an attorney before speaking to the police and to have an attorney present during questioning
• If you cannot afford an attorney, one will be appointed for you at public expense before any questioning if you wish.
• If you decide to answer questions now without an attorney present, you will still have the right to stop answering at any time until you talk to an attorney.
• Presence of translator is a natural obligation
• When the suspect or accused is caught, taken into custody or the detention period is extended, a relative or a person designated by the public prosecutor is notified without delay. If it is a foreigner who is caught or taken into custody, his/her situation is reported to the consulate of the relevant state of, unless he/she objects in writing.

The general criminal procedure will be explained in two phrase which are investigation and prosecution stages.

Investigation : This is the first step of a criminal proceedings. In case of complaint or ex officio crime determination, the police (under the supervision of Public Prosecutor) start the investigation. Broadly, the police will begin with taking statement of the complainants and ask for the orders of Public Prosecutor.

Accordingly, accused’s statement will be taken respectively to the accusation and the relevant evidences for both party’s claims will be collected by the police. All evidences must be obtained by due process of law. Because “Fruit of the poisonous tree” legal metaphor became a code in Turkish Criminal Law system. And on contrary to some legal systems, the Public Prosecutor is obliged to collect the evidence which are also in favor of the accused. Then the whole documents will be presented to the Public Prosecutor to his/her determination in terms of Turkish Criminal Law.

If the public prosecutor convinced that there will be reasonable evidence to prove that accused committed the imputed crime(s), the indictment will prepare and addressed the Court. Otherwise, decision not to prosecute (nol.pros.) issued by the Public Prosecutor.

Prosecution : This phrase is start with the submission of indictment to the Turkish Court and finalize with the verdict of Court. Accused now take the name of suspected in legal terminology. The suspected will be asked to appear before the Court in a hearing to give his/her defence. The suspected must obey the hearing invitation, otherwise he/she will be forcefully bring to the Court. At this stage he/she still have a chance to bring new evidence to the Court or challenge the already presented evidence by Public Prosecution. And it should be also emphasized that the Miranda Rights are still valid in this stage. Most of the Court’s verdict is subject to appeal but in principle, the Court of Appeal (District Court) will rule the case without hearings.

You should also keep in mind that beside from crimes committed in Turkey, there is still probability to be judged before the Turkish Courts. For example, if a foreigner committed a crime in a foreign country to the detriment of Turkey and he/she presents in Turkey for any reason, he/she will be judged according to Turkish laws upon the request of Minister of Justice. While making a trial for the crimes that was committed outside Turkey's jurisdiction, the penalty cannot be more than the law of the country where the crime was committed. The Ministry of Internal Affairs is immediately notified for the deportation proceedings, after the foreigner service his/her execution of the sentence ruled by Turkish court.

Do you need to collect your credit in Turkey?

You may start the enforcement proceedings before the Enforcement Offices (branch of Turkish Judiciary system) to collect your credits and/or credit claims s(uch as rentals, bill of debts, contract based damages etc) from the relevant authorized Enforcement Office by means of jurisdiction.

In principle, beside from exceptions regulated in Turkish the Bankruptcy and Enforcement Law, the relevant enforcement office is the site of the debtor. Under Turkish law, there are primarily two different kinds of enforcement actions: (1) enforcement proceedings with judgment and (2) enforcement proceedings without judgment. The main difference of the enforcement proceedings are while in the enforcement proceedings with judgment, the debtor has no room for objection, in the enforcement without judgement, the debtor may object the debt even without referencing a specific reason.

In case of an enforcement proceeding with judgement, a judgement of the court or a corresponding document must be submitted with the request. Upon the submission of the request, the enforcement office communicates an order of payment to the debtor.

In enforcement proceedings without judgement, if the debtor does not object to the order of payment in a certain period of time (seven days), the proceeding becomes definite, and the process will proceed with the seizure phase. Following the seizure of the rights, receivables and assets of the debtor, the sales phase will begin in which the income obtained from the sales of the seized assets will be used for the closure of the debt.

On the other hand, if the debtor objects to the order of payment in due course, the enforcement proceeding would be suspended. In such case, the creditor would have two options to advance the enforcement proceedings: (i) applying to the enforcement office for the removal of the objection due to an acknowledgement of the debt or an official document/receipt, and (ii) initiating a lawsuit for the annulment of the objection. In any case, if the enforcement proceeding advances after the annulment or removal of the objection, the proceeding will be sustained as if there were not any objections procedurally.

In addition to the presence of a judgement of the court or a corresponding document, the major difference of enforcement proceedings with judgement is the fact that in principle, the debtor is not allowed to object to the order of payment.

However, the debtor is granted the right to object to the order of payment under certain conditions such as prescription of the debt or extinguishment. The general procedure of enforcement proceedings with judgement is similar to enforcement proceedings without judgment except for the objection of the debtor.

Disclaimer : The content of website prepared to provide a general guide to the subject matter and does not constitute legal advice.

Specialist advice should be sought about your specific circumstances. The information provided in this guide is general

The information is not intended to create, nor does receipt of it constitute, a lawyer-client relationship. Whilst every effort has been taken to ensure the accuracy of this guide, the editors and authors accept no responsibility for any inaccuracies or omissions contained herein. Legal advice should always be sought before taking any legal action based on the information provided. Should you have any queries regarding the issues raised and/or about other legal topics, please contact the authors of this guide.

[1] You may see the English translation of Act with this link http://www.lawsturkey.com/law/foreign-direct-investment-law-4875
[2] Sportsmens, air & seafreight etc.
[3] https://www.csgb.gov.tr/uigm/calisma-izni/calisma-izni-degerlendirme-kriterleri/