How to set up a business in Türkiye

Why you may want to start a business in Türkiye

There are a number of things that make Türkiye an attractive destination for considering a business venture.

The country's location at the crossroads of Europe and Asia provides significant advantages for investors, particularly when it comes to accessibility. Türkiye's unique position, bordered by seas on three sides, offers substantial benefits in sea transportation. Additionally, Türkiye's proximity to both Europe and the Middle East, with all destinations within a maximum four-hour flight, boosts its logistical appeal even further.

Demographically, Türkiye presents a dynamic profile. As per recent data, the nation is nearing a population of 85 million people, characterized by a youthful demographic with an average age of 32.7 years. This contrasts with the aging populations typically found in Europe.

Moreover, a substantial portion of Türkiye's population, about 67.7%, falls within the working-age category. Coupled with having the region's lowest minimum wage, Türkiye emerges as an economically attractive destination for investors, especially considering labor costs.

On the legal front, Türkiye has shown a commitment to fostering foreign investment. A pivotal development in this regard is the enactment of the Foreign Direct Investment Law in 2003. This legislation is aimed at encouraging investment, safeguarding investors' rights, and aligning with international standards.

Challenges of starting a business in Türkiye

While there are definitely a number of benefits that come with opening a company in Türkiye, there are definitely challenges that you will need to address:

The first and most significant challenge will be navigating the country's legal and regulatory framework. Türkiye has its own unique set of business laws and regulations, which can be complex and challenging for newcomers to understand. Moreover, frequent changes in laws and regulations may require businesses to adapt quickly. Obtaining the necessary permits and licenses can be time-consuming – and, quite often, may rely heavily on networking. Building trust and relationships is key in Turkish business culture, which may take time.

Read also Residence and work visas for Türkiye

The language barrier can be a significant challenge if you are not fluent in Turkish.

Just like in most countries, starting a business in Türkiye requires going through a substantial share of bureaucracy. The bureaucratic process can be cumbersome and time-consuming, particularly for starting a business and dealing with government agencies. Paperwork and procedures can be extensive, requiring patience and persistence. Most official documentation is handled in Turkish, and it may take you some time to find an official who will be able to assist you in English. The best course of action would be to work with a Turkish assistant, lawyer or translator to guide you through all the paperwork.

Another thing you should definitely be aware of when starting a business in Türkiye is that the country's economy has experienced significant fluctuations in recent years, including currency volatility and inflation. These economic changes can impact business operations, costs, and profitability.

Certain sectors in Türkiye are highly competitive with well-established local and international players. Standing out in the market may require significant effort in terms of marketing, quality, and customer service.

Access to proper financing may be another concern. Securing funding or credit can be challenging, especially for foreign entrepreneurs. Local banks may have stringent lending criteria, and interest rates may be high.

To address these challenges, it's best to start by doing thorough research, possibly consulting with local experts or legal advisors, and building a network of local contacts and partners. Understanding the market, staying adaptable, and having a solid business plan can also significantly improve your chances of success in the Turkish business environment.

Do expats need a visa for doing business in Türkiye ?

If you are traveling to Türkiye for a short business visit (to attend a meeting, conference, purchase goods), you can do this on a tourist visa or visa exemption, based on your passport.

If you need to travel to the country frequently and stay for a prolonged period of time, it may be best to apply for a business visa. These visas are generally issued for six months to a year and will allow you to stay in the country for up to 30 days on a single visit and no longer than 180 days in a year. With a business visa, you will be able to:

• attend negotiations or commercial meetings with clients or partners;
• attend exhibitions, and conventions put on by industries;
• participate in various training programs, as long as the business traveler is invited by a Turkish company;
• visit the location of your own business or the property you intend to buy or invest in;
• pay for services or transacting business on behalf of a business or a foreign government.

However, if you plan to set up a company in Türkiye, you will need a work permit and work and residence visa.  

Understanding the Turkish market in Türkiye

Türkiye's economy is a dynamic and complex blend of traditional industries and emerging sectors. Among the traditional powerhouses, the automotive, textile, and agricultural sectors have long been the backbone of the Turkish economy, contributing significantly to both domestic and export revenues.

In recent years, the emergence of technology and renewable energy sectors has signaled a shift in the economic landscape. The technology sector, especially in Istanbul, Izmir, and other major cities, is experiencing rapid growth, fueled by a young, tech-savvy population and increasing investment in startups.

Renewable energy is another rising sector, with the government actively promoting wind and solar energy projects to reduce reliance on imported energy.

In addition, Türkiye's strategic location as a bridge between Europe and Asia continues to bolster its logistics and transportation sectors. The country's extensive transportation networks and logistic hubs are not only vital for domestic economic activities but also play a crucial role in international trade.

The tourism sector also plays a vital role in the Turkish economy and presents a niche that may be one of the most accessible to expat investors. As a country rich in historical, cultural, and natural attractions, Türkiye has long been a favored destination for travelers from around the world. Large cities like Istanbul, historical locations like Cappadocia and the Turkish turquoise coast are renowned globally for their unique blend of history, culture, and natural beauty, drawing millions of tourists annually. The government's continuous efforts to improve infrastructure, coupled with aggressive marketing strategies, have bolstered the country's appeal as a top tourist destination.

Read also Istanbul's labor market

Insights into consumer demographics and trends in Türkiye

Another important thing to take into account when considering starting a business in Türkiye is the country's increasingly young and urban population. As of 2022, the median age in Türkiye tends at 33.5 years, which is considerably lower than in many European countries. This makes Türkiye a youthful market with preferences leaning toward modern, tech-oriented products and services.

This demographic shift is also influencing market trends, with a growing demand for digital services, e-commerce, and sustainable products.

Turkish consumers are also known for their brand loyalty but are open to new and innovative products, especially from brands that can effectively integrate into the local culture. As digital literacy increases, online shopping and social media usage have surged, creating new avenues for digital marketing and e-commerce businesses.

Regional business hubs in Türkiye

Türkiye is composed of diverse regions, each of which has a distinct economic identity.

Istanbul stands out as the economic powerhouse of the country, a hub for finance, technology, and commerce, hosting both local and international companies. It is a melting pot of culture and business, reflecting the country's diverse economic activities.

Ankara, the capital, is known for its focus on government-related services and has a growing reputation in the technology sector, especially in software development.

Izmir, with its strategic port, is a key player in trade and export, particularly in agricultural products, textiles, and, recently, in tech startups.

In southeastern Türkiye, Gaziantep is famous for its thriving food and agriculture industry, while Antalya is a major tourism and real estate hub, attracting both local and international investors.

Each of these regions offers unique opportunities and challenges, understanding which is crucial for any business looking to penetrate the Turkish market.

Types of businesses in Türkiye

In Türkiye, the legal framework for businesses is designed to accommodate a variety of business needs and structures. The most common types of business entities include:

• Limited Liability Companies (LLC) (Limited Şirket): These are preferred by small to medium-sized businesses. An LLC requires a minimum of one shareholder and a minimum capital of TRY 10,000 (around USD $330). LLCs are subject to corporate income tax at a rate of 20%. Profits distributed to shareholders are subject to dividend withholding tax. Additionally, LLCs must pay Value Added Tax (VAT) on goods and services, and there may be other applicable taxes based on the business activities.
• Joint Stock Companies (JSC) (Anonim Şirket): Suitable for larger businesses, a JSC requires a minimum of one shareholder and a minimum capital of TRY 50,000 (around USD $1640). JSCs are subject to the same corporate income tax rate of 20% on their profits. Dividends paid to shareholders are also subject to withholding tax. JSCs must also comply with VAT regulations and other taxes pertinent to their sector.
• Commandite Companies: Similar to partnerships, but not commonly used by foreign investors. The company itself is not subject to corporate income tax; instead, profits are taxed as personal income for the partners. The rate of taxation depends on the income level of each partner.
• Collective Companies: They operate under the owners' names and are less common among foreign investors. Similar to commandite companies, collective companies are not taxed at the corporate level. Profits are distributed to partners and taxed according to their personal income tax rates. Partners are responsible for filing and paying taxes based on their share of the profits.

How to register a business in Türkiye

To register a company in Türkiye and obtain the related business licenses, you will need to work with the closest Turkish Trade Registry Office.

First, you will need to prepare the Articles of Association. This is the most essential document for starting a company in Türkiye, as it lays down the foundation for your future company's legal structure, operations, and leadership. This document must fully comply with the Turkish Commercial Code (TCC) and should include the following information:

• Company information, such as the company's name, type (e.g., Joint Stock Company, Limited Liability Company), headquarters' address, and the main field of activity.
• Share capital and shares, including the total amount of share capital, the nominal value of shares, the rights attached to different classes of shares (if applicable), and the payment method for capital contributions.
• Board of Directors and management structure, including the composition, powers, and functions of the Board of Directors or any managing bodies, as well as appointment and removal procedures.
• Provisions regarding the General Assembly of shareholders, including how and when meetings are held, voting rights, and the process for decision-making.
• Financial matters, including fiscal year, accounting principles, profit distribution, and reserve funds. It should also state how financial statements will be prepared and audited.
• Procedures for amending the Articles of Association and the conditions under which the company may be dissolved and liquidated.
• Additional causes, depending on the nature and requirements of the business, such as conflict of interest policies, non-compete clauses, or specific operational guidelines.
• Registration and notarization of the Articles of Association with the relevant Trade Registry Office. This formalizes the company's existence under Turkish law.

In Türkiye, notarization must be done by a licensed Notary Public (Noter). There are many notaries available throughout the country, so you should be able to easily locate a notary office close to you.

Once the paperwork is ready, you will need to deposit your company's paid-in capital. A percentage of the capital must be deposited into a bank account, and proof of this must be provided during registration.

Next, you will submit your application to the Trade Registry Office in your location.

After registration, your new company must be registered with the local tax office and obtain a tax identification number.

Once this is ready, you will need to register your business and its employees with the Social Security Institution (SSI). This organization is responsible for managing the social security rights of employees, which covers their health insurance, pension, and other social security benefits. What's convenient here is that the SGK allows for online registration with the help of its e-SGK system. To use this system, you must first obtain an e-government password (e-Devlet şifresi) from the local PTT (Post and Telegraph Organization) branch in Türkiye. While online registration is available, you may still want to visit your local SGK office in person if you have specific questions about your business's social security registration.

Important:

Keep in mind that SGK registration is not a one-time process. You need to continuously update the SGK about any changes in your workforce, such as new hires, terminations, salary changes, and other relevant employment details.

Note that, depending on the nature of your business, you may also need to acquire additional permits and licenses.

• For instance, almost all businesses will need an operating license issued by the local municipality. This license confirms that your business complies with local zoning and safety regulations.
• Additionally, if your business is involved in food service, healthcare, or childcare, you'll likely need health and safety permits from local health departments.
• Businesses that may impact the environment, such as manufacturing plants, will typically need to obtain environmental permits to operate.
• Certain professions (e.g., legal, medical, architectural services) require professional licenses, verifying related qualifications and allowing them to practice legally.
• If your business involves importing or exporting goods, you'll need the appropriate licenses from the Ministry of Trade.

Understanding Turkish Commercial Law and Regulations

Turkish commercial law is primarily governed by the Turkish Commercial Code and the Code of Obligations. These laws cover a wide range of business activities, including company formation, corporate governance, financial reporting, and bankruptcy.

Here's a very brief overview of what you will need to know:

• The Turkish Commercial Code stipulates strict rules for the management and governance of companies, particularly JSCs and LLCs, focusing on transparency and fairness.
• Businesses must comply with the Turkish Labor Law, which outlines the rights and obligations of employers and employees. This includes contracts, working hours, minimum wage standards, and termination procedures.
• Understanding the Turkish taxation system is crucial. This includes corporate tax, income tax, VAT, and specific industry-related taxes. The Turkish Revenue Administration is the relevant authority for tax matters.
• With the increasing importance of data, compliance with the Personal Data Protection Law is crucial. Additionally, businesses should be aware of intellectual property laws to protect their assets.
• Certain sectors, such as finance, energy, and healthcare, are subject to additional regulations and oversight by respective authorities like the Banking Regulation and Supervision Agency (BDDK) or the Energy Market Regulatory Authority (EPDK).

Read also The work culture in Istanbul

Cultural aspects of doing business in Türkiye

Understanding the Turkish business culture and etiquette is the foundation of successful business operations in Türkiye. Türkish culture is deeply rooted in its history, which includes influences from various civilizations, making it a blend of East and West.

When doing business in Türkiye, it's best not to rush the process and leave space for traditional rituals, customs, and interactions.

For instance, in Türkiye, a lot of business meetings begin with serving çay (traditional Turkish tea). This is a sign of hospitality and helps build personal connections. Sharing tea allows for casual talk and helps create a friendly atmosphere before moving on to a more formal business discussion.

Networking plays a pivotal role in Turkish business circles. Building strong relationships with local partners can open doors to opportunities that may not be readily available to outsiders.

Turks value personal connections and tend to do business with those they know and trust. Therefore, investing time in networking events, dinners, and social gatherings is a wise strategy.