7 Key Aspects of Turkey’s Foreign Investment Laws

Turkey has emerged as a significant destination for foreign investment, thanks to its strategic location, dynamic economy, and favorable legal framework. The country has implemented various laws and regulations to attract foreign investors while ensuring their rights are protected.

Table of Contents

7 Key Aspects of Turkey’s Foreign Investment Laws

As a leading accounting firm in Istanbul, Akkas CPA & Turkish Accounting Firm has been at the forefront of guiding foreign investors through Turkey’s complex legal landscape since 2017.

1. The Foundation: Foreign Direct Investment Law No. 4875

The primary legal framework governing foreign investments in Turkey is the Foreign Direct Investment Law (FDI Law), enacted on June 17, 2003 (Law No. 4875). This law aims to promote foreign direct investments by establishing principles that protect investors’ rights and ensure equal treatment with domestic investors.

This pivotal legislation established the principle of equal treatment between domestic and foreign investors, marking a significant shift in Turkey’s approach to international capital.

Key provisions include:

• Freedom to invest for foreign investors
• National treatment principle
• Guarantee against expropriation without fair compensation
• Free transfer of profits, fees, and capital

Understanding this law is crucial for any foreign entity considering investment in Turkey, as it forms the bedrock of your rights and protections.

2. Company Establishment: Simplified Procedures for Foreign Investors

Turkey has streamlined its company establishment process, making it increasingly attractive for foreign investors. As of 2024, foreign individuals or legal entities can establish companies with 100% foreign capital in just a few days.

Notable points:

• No minimum capital requirement for limited liability companies
• Equal rights with local companies, including eligibility for incentives
• Option to establish liaison offices for non-commercial activities

Our firm has guided numerous clients through this process, ensuring compliance with all legal requirements while maximizing efficiency.

3. Real Estate Acquisition: Opportunities and Limitations

Foreign investment in Turkish real estate has seen a boom in recent years, partly due to the country’s citizenship-by-investment program. However, it’s essential to understand the nuances of property acquisition laws.

Key considerations:

• Restrictions on land acquisition in military forbidden zones and security zones
• Limitation on foreign ownership to 10% of district land
• Requirement for project approval when purchasing land for development

Navigating these regulations requires expert guidance to ensure your investment is both legal and profitable.

4. Employment Regulations: Balancing Local and Foreign Workforce

Turkey’s employment laws strike a balance between protecting local employment and attracting foreign talent. For companies with foreign capital, understanding these regulations is crucial.

Important aspects:

• The requirement to employ at least five Turkish citizens for each foreign employee
• Special provisions for key foreign personnel in certain sectors
• Social security obligations and work permit procedures

Our firm specializes in helping foreign-owned businesses navigate these complex employment regulations, ensuring compliance while optimizing workforce strategies.

5. Tax Implications for Foreign Investors

Turkey’s tax system offers both opportunities and challenges for foreign investors. Understanding the tax landscape is crucial for financial planning and compliance.

Key tax considerations:

• Corporate Income Tax rate of 25% (as of 2024)
• Withholding tax on dividends, varying based on tax treaties
• Value Added Tax (VAT) ranging from 1% to 20%
• Double Taxation Avoidance Agreements with numerous countries

Our expert team at Akkas CPA can provide tailored tax planning strategies to optimize your investment structure while ensuring full compliance with Turkish tax laws.

6. Investment Incentives: Boosting Foreign Capital Inflow

Turkey offers a comprehensive investment incentives system designed to attract foreign capital and promote economic development. These incentives vary based on the investment’s location, scale, and sector.

Major incentive categories:

• General Investment Incentives
• Regional Investment Incentives
• Large-Scale Investment Incentives
• Strategic Investment Incentives

Benefits may include VAT exemption, customs duty exemption, tax reductions, and social security premium support. Our firm can help you navigate these incentives to maximize the benefits of your investment project.

7. Dispute Resolution and Investor Protection

Protecting your investment is paramount, and Turkey has made significant strides in providing robust dispute-resolution mechanisms for foreign investors.

Key aspects:

• Option to stipulate foreign law in contracts, subject to Turkish public policy
• Recognition of international arbitration
• Bilateral Investment Treaties (BITs) provide additional protection
• Membership in the International Centre for Settlement of Investment Disputes (ICSID)

Understanding these protections and how to leverage them is crucial for safeguarding your investments in Turkey.

Conclusion: Navigating Turkey’s Foreign Investment Landscape

Turkey’s foreign investment laws offer a welcoming environment for international capital, balanced with protections for national interests. From the foundational Foreign Direct Investment Law to the nuanced regulations on real estate, employment, and taxation, navigating this complex landscape requires expert guidance.

As Akkas CPA & Turkish Accounting Firm, we’ve been at the forefront of assisting foreign investors since 2017. Our deep understanding of Turkish law, combined with our international perspective, positions us uniquely to guide your investment journey in Turkey.

Whether you’re considering establishing a new business, investing in real estate, or expanding your existing operations in Turkey, our team is here to ensure your venture is not just compliant, but optimized for success in the dynamic Turkish market.

Contact us for Foreign Investment Services in Turkey

Turkey’s Foreign Direct Investment Law provides equal treatment for domestic and foreign investors, while streamlined company establishment procedures and real estate acquisition regulations facilitate market entry.

However, navigating the complexities of employment laws, tax implications, and investment incentives requires expert guidance. That’s where Akkas CPA & Turkish Accounting Firm comes in.

Since 2017, our team of seasoned professionals has been helping foreign investors optimize their ventures in Turkey. From tax planning to dispute resolution, we provide comprehensive support to ensure your investment thrives in Turkey’s dynamic market.

Contact Akkas CPA & Turkish Accounting Firm today to unlock the full potential of your investment in Turkey. Let us be your trusted partner in navigating the complexities of Turkish foreign investment laws, ensuring your business thrives in this vibrant and opportunity-rich market.