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Legal Framework for Foreign Direct Investment
Foreign investors seeking to establish a permanent presence in Türkiye are primarily governed by the Foreign Direct Investment Law No. 4875 (“FDI Law”). This legislation enshrines the principle of equal treatment, ensuring that foreign investors enjoy the same rights and bear the same obligations as local investors.
Türkiye imposes no restrictions on the nationality or residence of shareholders or directors, and direct investments can be freely made in most sectors, subject to specific regulatory approvals for sensitive industries. Additionally, profits, dividends, capital gains, licensing fees, loan repayments, and similar proceeds can be freely transferred abroad, provided that standard banking and tax procedures are fulfilled.
1. Establishing a Company in Türkiye
Turkish Commercial Code (“TCC”) permits several corporate forms, yet the two most widely used by investors are the Limited Liability Company (“LLC”) and the Joint Stock Company (“JSC”) considering the full range of advantages and disadvantages. Both allow for 100% foreign ownership and can be incorporated by a single shareholder.
With respect to liability, shareholders of a JSC are only responsible for fulfilling their subscribed capital commitments and are not personally liable for the company’s debts. However, directors are personally liable for unpaid public debts, such as taxes or social security premiums. In LLCs, while shareholders are likewise liable only up to the amount of their capital commitments, they may additionally be held personally liable for public debts on a pro rata basis corresponding to their shareholding. The liability regime applicable to directors in LLCs mirrors that of JSCs.
Limited Liability Company
- Shareholders: 1 to 50 natural persons or legal entities
- Minimum Capital: TRY 50,000
- Capital Payment: Entire capital can be paid within 24 months; no minimum amount required at incorporation
- Liability: Shareholders are not personally liable for company debts, except for public debts (taxes, social security premiums), for which they may be held liable on a pro rata basis
- Management: Managed by one or more Managers appointed by the shareholders. At least one manager should be appointed from among the shareholders.
- General Assembly: Required to convene at least once annually
Joint Stock Company
- Shareholders: Minimum of one shareholder (no upper limit)
- Minimum Capital: TRY 250,000
- Capital Payment: At least 25% must be paid before registration; remaining 75% within 24 months
- Public Offering: JSCs may become publicly traded companies
- Liability: Shareholders’ liability is limited to unpaid capital commitments
- Management: Managed by a Board of Directors, which may include non-shareholders. Legal entities can also serve as board members
- General Assembly: Convened at least once annually. For certain meetings, presence of a Ministry Representative may be required.
Incorporation Process (LLC and JSC)
- Preparation of Articles of Association
- Online application via MERSIS system
- Notarization of signatures and necessary documents
- Tax registration and acquisition of a potential tax number for foreign shareholders and directors
- Trade Registry filing and registration
- Opening of a bank account and capital deposit (where applicable)
- Notification to the General Directorate of Foreign Investment within one month upon the incorporation
The entire process generally takes between 5 to 10 business days, assuming all required documents are correctly prepared and legalized where needed. Furthermore, companies intending to operate in regulated sectors such as banking, financial leasing, or factoring should obtain prior authorization from the Ministry of Trade and/or the relevant regulatory authority.
Companies with foreign shareholding, including JSCs and LLCs, are required to submit an annual Foreign Capital Activity Report to the General Directorate of Foreign Investment by the end of May each year.
2. Establishing a Branch Office
A Branch is a legally dependent extension of a foreign company, operating in Türkiye under its name. Unlike a subsidiary, a branch does not have a separate legal personality but is still registered with the Trade Registry and subject to local tax and regulatory compliance.
Internally, branch offices operate under the control and instructions of the parent company, and all acts and transactions carried out by the branch are legally attributed to the parent. As a result, any profits or losses arising from branch operations directly affect the parent company. In terms of liability, the parent company bears full legal responsibility for all obligations, liabilities, and third-party claims arising from the activities of the branch office.
Key Features
- Activities: Must be limited to the business scope of the parent company
- Capital: No statutory minimum, but in practice TRY 50,000 is often required by Trade Registries.
- Management: Must appoint at least one branch manager who resides in Türkiye
- Liability: The parent company is directly liable for all obligations of the branch
- Reporting Obligations: Annual submission of foreign capital activity report to the General Directorate of Foreign Investment by end of May each year
Branches are often chosen where the parent company wishes to maintain full control while conducting commercial operations in Türkiye without creating a separate entity. They are also favored by investors aiming for limited-scale, regulated, or short to mid-term commercial presence without establishing a separate legal entity.
3. Establishing a Liaison Office
Foreign companies that do not intend to carry out commercial activities but wish to maintain a non-operational presence for promotional or coordination purposes may apply to establish a Liaison Office. Unlike companies and branches, liaison offices are not registered with the Trade Registry, but operate with temporary permits granted by the Ministry of Trade.
Foreign investors who do not intend to pursue commercial operations in Türkiye may consider setting up a liaison office. Liaison offices are not regarded as separate legal entities and are strictly limited to non-commercial functions. These offices are commonly used for conducting market analysis, coordinating communication, overseeing supplier standards, managing public relations, and promoting the parent company’s presence in the Turkish market. Additionally, they may function as regional hubs for administrative coordination, provided that their activities remain within the non-commercial boundaries permitted by the relevant authority.
Permitted Activities (Non-commercial)
- Market research and feasibility studies
- Promotion of the parent company’s products and services
- Representation and hosting
- Supplier audits, quality control, and procurement coordination
- Technical support and client visits
- Acting as a regional management hub (without engaging in sales or contracts)
Authorization & Reporting
- Initial permit is granted for up to 3 years; may be extended based on activity and justification
- Annual activity report must be submitted to the General Directorate of Foreign Investment
- Notification is also mandatory within one month of establishment
If commercial activities are anticipated in the future, the Ministry may recommend transitioning to a branch or subsidiary structure.
Conclusion
Türkiye offers a business-friendly and flexible legal environment for foreign investors. The choice between incorporating a company, registering a branch, or opening a liaison office depends on the intended scope of operations, long-term goals, and tax considerations.
- For full operational control and limited liability: a JSC or LLC is typically recommended
- For extending an existing corporate structure: a branch may be suitable
- For non-commercial presence: a liaison office is the appropriate option
Each structure has its own regulatory implications and documentation requirements. To ensure a seamless and compliant establishment process in Türkiye, our team offers tailored legal guidance at every stage.