Legal Guide for Foreign Investors: Company Formation and Share Transfer in Türkiye

Türkiye has emerged as one of the most attractive destinations for foreign investors over the last two decades. Positioned strategically between Europe, Asia, and the Middle East, Türkiye offers access to more than 1.3 billion consumers within a four-hour flight radius. Its young population, dynamic workforce, customs union with the European Union, and government-backed incentives make it an appealing market for international businesses.

However, navigating Türkiye’s legal and regulatory environment can be complex, especially for foreign investors unfamiliar with local procedures. Understanding the framework for company formation and share transfer is essential for smooth entry and sustainable investment. This guide provides a comprehensive overview of the legal processes, requirements, and strategic considerations foreign investors need to be aware of when doing business in Türkiye.

Legal Framework for Foreign Investors in Türkiye

Foreign investors in Türkiye operate within a transparent and liberalized legal environment. Key legislation includes:

• Turkish Commercial Code (TCC, No. 6102) – regulates company structures, shareholder rights, corporate governance, and mergers/acquisitions.

• Foreign Direct Investment Law (FDI Law, No. 4875) – provides equal treatment to foreign investors, ensuring they can establish companies under the same conditions as Turkish citizens.

• Capital Markets Law – governs publicly traded companies, securities, and financial markets.

Rights of Foreign Investors

• Foreign investors can establish all types of companies available under Turkish law.

• 100% foreign ownership is allowed in most sectors.

• Profits can be freely transferred abroad in foreign currency.

Restrictions

Some restrictions apply in sensitive industries such as banking, insurance, energy, aviation, and telecommunications, where special approvals may be required. In addition, real estate acquisitions by foreign investors are subject to specific rules, particularly for properties located in military or security-sensitive zones.

Company Formation in Türkiye

Foreign investors typically choose between two main structures:

1. Limited Liability Company (Ltd. Şti.)

• Most common form for small and medium-sized enterprises.

• Minimum share capital: TRY 10,000.

• At least one shareholder (can be foreign natural or legal person).

• Liability limited to capital contribution.

2. Joint-Stock Company (Anonim Şirket – A.Ş.)

• Preferred for larger businesses and companies planning to go public.

• Minimum share capital: TRY 50,000.

• At least one shareholder required.

• Shares can be easily transferred.

• Subject to stricter corporate governance rules.

Other company forms (general partnerships, cooperatives, branches, liaison offices) also exist but are less commonly chosen by foreign investors.

Step-by-Step Process of Company Formation

The establishment process in Türkiye is relatively efficient, but requires careful compliance:

1. Preparation of Articles of Association – must include trade name, headquarters, scope of activity, capital, and shareholder details.

2. Notarization of Company Documents – shareholder signatures and key corporate documents must be notarized.

3. Opening a Bank Account & Capital Deposit – required for depositing initial capital. At least 25% must be paid at incorporation for joint-stock companies.

4. Application to Trade Registry Office – all documentation submitted electronically through the Central Registration System (MERSİS).

5. Issuance of Tax Number – required for financial and banking transactions.

6. Social Security and Employment Registration – necessary before hiring employees.

7. Publication in the Trade Registry Gazette – final step confirming legal personality.

The entire process can usually be completed within 7–10 business days, assuming documents are correctly prepared.

Share Transfer Procedures in Türkiye

1. Share Transfer in Limited Liability Companies

• Share transfers require notarized share transfer agreement.

• Must be approved by the General Assembly of shareholders.

• Registration with the Trade Registry is mandatory.

• Effective only upon registration.

  
  

2. Share Transfer in Joint-Stock Companies

• Shares represented by certificates can be transferred more freely.

• If not publicly traded, transfer must still be recorded in the company’s share ledger.

• For registered shares, board approval may be required.

• In some cases, restrictions can be included in the Articles of Association.

Tax Implications

• Share transfers may trigger capital gains tax.

• Stamp duty and notary fees may also apply.

• Proper tax planning and structuring are essential.

Due Diligence and Legal Considerations

Before purchasing shares in an existing company, conducting legal and financial due diligence is crucial. This process examines:

• Company’s debts and liabilities.

• Existing contracts (employment, leases, suppliers, customers).

• Ongoing litigation.

• Compliance with licenses and permits.

• Tax obligations.

Due diligence protects investors from unexpected risks and ensures fair valuation of the target company.

Restrictions and Sector-Specific Rules

Certain industries require additional approvals or licensing for foreign investors:

• Energy – licenses from the Energy Market Regulatory Authority (EPDK).

• Banking & Finance – regulated by the Banking Regulation and Supervision Agency (BDDK).

• Telecommunications – licenses from the Information and Communication Technologies Authority (BTK).

• Real Estate – foreign ownership is limited in military and strategic zones.

  
  

Taxation and Incentives for Foreign Investors

General Taxation

• Corporate Income Tax: 20% (subject to changes depending on annual legislation).

• Withholding Tax: applies to dividends, interest, royalties.

• VAT: standard rate 20%, with reduced rates for specific goods and services.

  
  

Incentives

Türkiye provides extensive incentives to attract foreign direct investment:

• Investment Incentive Certificates – exemptions from VAT, customs duty, and social security contributions.

• Free Zones – tax exemptions on profits, customs duty-free imports.

• R&D Incentives – tax deductions for research and innovation projects.

Practical Challenges and Common Mistakes

Despite a supportive environment, foreign investors often face challenges:

• Language barrier – all documents must be in Turkish, requiring certified translations.

• Complex bureaucracy – although digitalized, still requires strict compliance.

• Overlooking due diligence – leading to unforeseen liabilities.

• Ignoring tax planning – resulting in higher tax burdens.

Working with professional legal advisors minimizes these risks.

Conclusion: Importance of Professional Legal Support

Entering the Turkish market offers immense opportunities, but success depends on proper legal structuring. Whether forming a new company or acquiring an existing one, foreign investors must comply with Turkish corporate, tax, and regulatory requirements.

Professional legal support is crucial for:

• Drafting and reviewing Articles of Association.

• Navigating share transfer procedures.

• Conducting due diligence.

• Structuring investments for tax efficiency.

• Ensuring compliance with sector-specific regulations.

  
  

By partnering with trusted legal counsel in Türkiye, foreign investors can safeguard their investments, minimize risks, and unlock the full potential of the Turkish market.