Due to its fast growing young population, qualified labour force, geographical and geopolitical location, Turkey is one of the countries that foreign investors prefer. With “Foreign Direct Investment Law” which entered into force in 2003, the number of foreign investors and companies has increased and continue to increase.
Thanks to this law, the obstacles in front of foreign investors have removed and many advantages have been provided to investors. Furthermore, the Turkish citizens who live abroad may also benefit from these advantages.
Therefore, we have compiled the advantages of making investment in Turkey for foreign investors and the Turkish citizens living abroad.
What types of Advantages are offered to Foreign Investors?
The foreign nationals who make direct investment may equally take advantage of the opportunities delivered to domestic investors. Direct investment is also made by opening branch, company in Turkey or becoming partner to an existing company. However, as regards the indirect investments realized through purchasing stock or bond, no incentive exist. For this reason, only the foreign nationals who make long term and direct investment may use the facilities offered by state.
In addition to this, foreign investors can freely transfer abroad the earnings provided against agreements of damages, license, management and similar ones and the profit, sale, liquidation developed out of their activities in Turkey.
In addition to all these, the foreign nationals who seek to make investment in Turkey may benefit from tax deductions, allocations of investment place, insurance premiums and similar government promotions.
Special Tax Regulations
Bilateral agreements have been signed with various countries with the intent of precluding tax payment both to their countries and Turkey by foreign investors. For instance, a French citizen who want to make investment in Turkey pay tax only in Turkey owing to his/her activities in Turkey. No tax is paid to France because of these activities.
Some of the countries that Turkey has made agreement with them within the scope of agreement on prevention of double taxation are: USA, Germany, Azerbaijan, People’s Republic of China, France, South Korea, Georgia, Iran, Qatar, K.K.T.C., Malesia, Pakistan, Russia, Singapore, Jordan.
What Kinds of Companies can be established by Foreign Investors?
Foreign investors have possibility to found joint stock, limited and ordinary company in Turkey. Even though private companies which not have any institutional structure like ordinary company bring a number of advantages on account of easy foundation and low cost, the investors who have an investment in Turkey mostly prefer limited and joint stock company type.
In establishing a company; title, registered Office, director, capital structure of the company should be determined. Later, notarized company documents should be recorded to central register system and trade registry directorate should be applied. The documents which are prepared outside Turkey should also be certified by consulate or notary. Besides, potential tax number should be taken for the company partners who are not Turkish citizen.
Moreover, foreign companies may open branch or contact Office in Turkey too. In establishment stage of these branches, there is no obligation to invest capital but this branch should also be recorded to trade registry directorate.
Finally, it is worth noting that: Foreign investors opt for taking over existing companies not to engage in such establishment procedures.
How is Taxation Determined for Foreign Investors?
Corporate tax for the limited and joint stock companies in Turkey is 20%. In addition to this, persons are also supposed to pay income tax for the earning they have obtained in year. Individual income rate is also between 15%-35%.
Turkey is a country acceding to treaties which hinder payment of double tax both in his/her country and in Turkey by a foreign investor. Number of the country which becomes party to this treaty rises gradually and making investment in Turkey becomes easier.
Furthermore, tax exemptions are presented to foreign investors in various periods by state.
Can Foreign Investors have Turkish Citizenship?
In company with the regulation which come into force on January 12 2017, the foreign nationals who have an investment in Turkey can obtain Turkish citizenship right.
Turkish citizenship right has been recognized to the foreign nationals who make investment more than a certain amount and create employment or keep deposit.
In case they assure the following conditions, foreign investors can gain Turkish citizenship.
- To make capital investment of at least 2 million American dollars,
- To purchase immovable property amounting to minimum 1 million American dollars,
- To create at least 100 person- employment,
- To keep deposit of at least 3 million American Dollars in the banks operating in Turkey for a minimum period of 3 years,
- To purchase government debt securities of at least 3 million American dollars provided that they are kept for three years.
The foreign national who fulfil one of these conditions may gain Turkish citizenship upon the offer made by relevant ministry and the resolution of Council of Ministers.