Under Turkish law, foreign investors are generally subject to the principle of national treatment, meaning they are treated similarly to domestic investors. Companies in Turkey are organized entities established through contracts for economic purposes. According to Turkish law, individuals can establish partnerships under the Turkish Code of Obligations (TCO, Art. 620 et seq.) or companies under the Turkish Commercial Code (TCC). The types of companies that can be established under the TCC include joint-stock companies (TCC, Art. 329 et seq.), limited liability companies (TCC, Art. 573 et seq.), ordinary or shareholding commandite companies (TCC, Art. 304 et seq. and Art. 564 et seq.), collective companies (TCC, Art. 211 et seq.), or cooperatives (in accordance with the Cooperative Law). Foreign investors can establish these companies from scratch or through mergers or spin-offs with existing companies to form new entities. [1]

An ordinary partnership agreement is a contract where two or more persons agree to combine their labor and assets to achieve a common objective (TCO, Art. 620). No specific form is required for the establishment of an ordinary partnership in Turkish law, meaning it can be established verbally. However, having a written agreement is crucial for evidentiary purposes and resolving potential disputes. Ordinary partnerships formed through joint ventures or consortiums, where multiple companies (especially when involving domestic partners) come together for direct foreign investment, are categorized as ordinary partnerships under Turkish law since they do not possess the distinct characteristics of legally regulated companies (TCO, Art. 620/2).

A joint-stock company is a company whose capital is determined and divided into shares, and the liability of its shareholders is limited to the capital they have subscribed (TCC, Art. 329). Joint-stock companies can be established through new formations, mergers, spin-offs, transformations, or the conversion of a commercial enterprise into a joint-stock company. In accordance with Articles 335 and following of the TCC, joint-stock companies are formed when the founders declare their intention to establish a company in a duly notarized or approved articles of association, in which they unconditionally commit to paying the entire capital. The articles of association must be executed in writing and signed by all founders, with their signatures notarized or signed in the presence of the trade registry officer. The articles of association must be registered at the trade registry office within thirty days of signing and published in the Turkish Trade Registry Gazette (TCC, Art. 354). Upon registration, the company gains legal personality.

A limited liability company is established by one or more natural or legal persons under a trade name, with a defined capital, consisting of a sum of capital shares, and the shareholders are not liable for the company’s debts but are only obligated to pay the capital shares they have undertaken and fulfill any additional payment obligations as provided in the articles of association (TCC, Art. 573). The articles of association must be executed in writing and signed by the founders in the presence of authorized personnel at the trade registry office.

A collective company is formed by natural persons for the purpose of operating a commercial enterprise under a trade name, where none of the partners’ liability towards the creditors is limited (TCC, Art. 211). The company’s articles of association must be in writing and signed before a notary or in the presence of the trade registry officer. The founders must submit a notarized copy of the articles of association to the trade registry office within fifteen days of notarization for registration (TCC, Art. 215).

A commandite company is established for the operation of a commercial enterprise under a trade name, where one or more partners have unlimited liability, while others have limited liability based on their capital contribution (TCC, Art. 304). The rules for the establishment of collective companies apply to commandite companies (TCC, Art. 305/1). In shareholding commandite companies, capital is divided into shares, and one or more partners are liable like shareholders of a joint-stock company (TCC, Art. 564/1). The rules for joint-stock companies generally apply to shareholding commandite companies (TCC, Art. 565/1).

A cooperative is an organization with a legal personality established by natural or legal persons with variable capital and membership, for the purpose of meeting the economic needs of its members, particularly those related to their professions or livelihoods, through mutual assistance, solidarity, and guarantees (Cooperative Law, Art. 1). Cooperatives are established by at least seven members who sign the articles of association in the presence of authorized personnel at the trade registry office (Cooperative Law, Art. 2). The articles must be submitted to the Ministry of Trade, and upon approval, the cooperative is registered at the trade registry and gains legal personality (Cooperative Law, Art. 3). Only Turkish citizens can serve as members of the board of directors in cooperatives, meaning foreign investors cannot be board members unless they are Turkish nationals residing abroad. [2]

Applications for the registration and announcement of commercial companies in the trade registry must be submitted to the trade registry offices established by the Ministry of Trade in coordination with local chambers of commerce and industry (TCC Art. 40). [3]

Applications for registration can be made either in writing or electronically (Trade Registry Regulation, Art. 23/1). Upon registration, companies are assigned a Central Registration System (MERSIS) number (Trade Registry Regulation, Art. 13/2). The required documents for registration vary depending on the type of company.

Foreign investors must ensure that documents issued under foreign law are notarized at a Turkish consulate or certified in accordance with the Hague Apostille Convention, and they must be accompanied by a notarized Turkish translation before submission to the trade registry office (Trade Registry Regulation, Art. 32/2). [4]

The place of residence, citizenship, and partnership information of foreign nationals are critical during the registration process, as they determine the company's status. Simplification of company establishment procedures is important for promoting investment. Law No. 7099, which aims to improve the investment environment, has reduced the number of procedures required for company establishment for both Turkish and foreign investors and shortened the time required to complete these processes. As a result of these reforms, joint-stock and limited liability companies can now be established through a single point of contact at the provincial trade registry offices. Foreign direct investment (FDI) in Turkey is thus completed in this manner. Although Turkish law does not have specific regulations on the nationality of companies, certain laws provide criteria for determining when a company is considered Turkish.

For example, based on the expressions "domestic" and "headquarters outside of Turkey" in TCC Art. 40/4, a company’s nationality is determined by whether its headquarters are located in or outside of Turkey. [5]

As mentioned earlier, foreign-owned commercial companies must register their headquarters with the relevant trade registry office in Turkey to establish a legal presence. Commercial companies gain legal personality upon registration with the trade registry in the location of their headquarters. From these provisions, it is clear that the place of management is the criterion for determining the nationality of a company.

Additionally, the explanatory note for TCC Art. 421/2-b states that moving the de facto management of a commercial company abroad results in the loss of its Turkish nationality, indicating that the place of management is used as the basis for determining nationality. In other words, commercial companies registered in Turkey, with their headquarters in Turkey, are considered to hold Turkish nationality. [6]

Under the Foreign Direct Investment Law (FDIL), the previous system of approval and permits has been replaced with an information-based system. This system requires the collection of certain information regarding foreign investments during the establishment phase and subsequently by the Ministry of Industry and Technology. Trade registry offices are required to send forms and petitions regarding the establishment of companies or branches within the scope of FDIL, as well as copies of documents such as shareholder lists or attendance sheets, to the Ministry of Industry and Technology during registration. The ministry also collects information from public institutions, professional organizations, and NGOs regarding foreign direct investment. (FDIL Regulation, Art. 4)

Under this system, companies and branches within the scope of FDIL must submit certain information electronically via the Electronic Incentive Application and Foreign Capital Information System (E-TUYS), managed by the General Directorate of Incentive Practices and Foreign Capital of the Ministry of Industry and Technology (FDIL Regulation, Art. 9 et seq.). Authorized users of the system are required to enter data such as the "Investor," "Shareholder List," and "Affiliates" within one month of receiving authorization.

Companies must also update the "Activity Information Form for Foreign Direct Investments" in E-TUYS annually by the end of May, report capital increases or decreases within one month, and update the "Shareholder List" following any share transfers. (FDIL Regulation, Art. 5)

By entering and regularly updating this information in E-TUYS, foreign direct investors fulfill their information obligations under the FDIL.

Certain companies in Turkey require special permission from the Ministry of Trade for their establishment. Under TCC Art. 333, joint-stock companies in specific sectors, as defined by a decree issued by the Ministry, are subject to this requirement. These sectors include banks, financial leasing companies, factoring companies, insurance companies, consumer finance companies, asset management companies, holding companies, and companies engaged in the operation of public warehouses, among others (as listed in the relevant decree). [7]

Foreign investors wishing to establish such companies must obtain approval from the Ministry of Trade after securing other necessary permissions or approvals from relevant authorities. The Ministry's approval must be obtained before submitting the registration application to the trade registry office.

As detailed above, the company establishment process in Turkey, despite certain obligations, is relatively straightforward. The fact that foreign investors are subject to the same standards and procedures as Turkish citizens has significantly simplified the process. Thanks to the Foreign Direct Investment Law, foreign investors in Turkey are treated equally with Turkish companies and even enjoy certain advantages in specific situations. For example, foreign direct investments are protected against expropriation and nationalization under this law. Additionally, foreign investors can freely transfer their earnings from activities such as sales, liquidation, licensing, compensation, and management agreements abroad. Foreign investors are also granted certain advantages when employing foreign personnel, with facilitated work permit procedures. Moreover, foreigners investing in Turkey can benefit from various incentives such as land allocations, tax reductions, and insurance premium discounts. In Turkey, the corporate tax rate for limited liability and joint-stock companies is 20%. Additionally, individuals are required to pay income tax on their earnings, with income tax rates ranging from 15% to 35%. Ultimately, under the current legal framework, there is no distinction between domestic and foreign investors regarding company establishment and investment in Turkey. As explained, foreign investors enjoy numerous legal and commercial safeguards in Turkey. However, to fully benefit from these privileges, it is essential to establish a strong company foundation.