Briefly, how is a Turkish-domiciled company taxed?

The general corporate tax rate in Turkey is flat 20% over taxable profit. However, this rate has been increased to 22% for the years 2018, 2019 and 2020.

What about dividend distributions?

Dividends distributed to foreign shareholders are taxed at the minimum of either 15% or the rate set in the Prevention of Double Taxation treaty between Turkey and the country which the shareholder is a resident.

Can I repatriate dividends to parent country?

Yes, there is no restrictions on transferring money out of Turkey.

Can I distribute all of the profit?

No, Turkish commercial code has a set of regulations that requires the company to set aside two levels of profit reserves before distributing dividends.

What is the VAT rate in Turkey?

The general VAT rate is 18%. However, certain goods and services are taxed at 8% or 1%.

I am a foreigner and I (or my company) have paid Turkish VAT. Can I (we) reclaim it back?

It depends on the goods or services you have purchased, whom you purchased from, and the type of document you have to prove it. Contact us for an assessment.

Our Turkish subsidiary has made a lot of profit. Can we send a consulting/expense sharing invoice to bring back some of the profits into the parent country?

You are allowed to invoice your Turkish subsidiary as long as the invoice is issued in exchange for a true delivery of goods or rendering of services. Value of any invoice, especially those between related parties, should be at arm's length. Turkey has adopted OECD's transfer pricing regulations

We would like to incorporate our subsidiary with minimum capital and then finance it with a shareholder loan. Is this possible?

Yes, but if the shareholder loan is denominated in a currency other than TRL, than loans to related parties in excess of three times the equity of the company are deemed to be "thin capitalization" and are to be treated as capital, not loan. This means you cannot deduct foreign exchange losses or interest from taxable income.

We would like to pay a Turkish resident periodical salary in exchange for his/her services. Do we need to establish a company for this?

No, you do not. You only have to register with social security authority and pay related social security premiums.

We would like to pay a Turkish resident periodical salary in exchange for his/her services. What will be the tax burden of such a move?

Salaries obtained by a Turkish resident from a foreign employer is exempt from income taxes provided that they are paid in foreign currency and that the foreign employer does not already have a tax registration in Turkey.

We have a Turkish subsidiary that needs to report its operations using our own reporting template. Can you help?

Yes, we have more than 10 years of experience in preparing/converting local accounting output to tailor-made reports as required by the parent company in IFRS or US GAAP.

Are there any restrictions on foreign shareholders when incorporating a company in Turkey?

No, foreign and local shareholders are treated alike. The only difference is related to the paperwork for identification of foreign shareholders that need to be obtained from their respective countries.

What types of companies are possible to incorporate?

There are two types: limited and stock companies. Most favorable type by foreign investors is limited company.

Are there any taxation regime difference between limited and stock companies?

No, both are subject to the same tax regime and rates over their earnings and dividends.

What are the advantages of a limited company over a stock company?

* Smaller minimum capital

* Managed through an easier resolution process

What are the minimum capital requirements for limited and stock companies?

10.000 TRL for limited and 50.000 TRL for stock companies, but we sometimes recommend higher initial capital to avoid thin capitalization.

How long does it take to incorporate a company?

Once all documents are ready, it takes two days to complete.

Can both type of companies be managed by shareholders or board of directors only?

No, both companies need to also appoint a company manager

Can the company start operations once incorporated?

No, incorporation needs to be followed by registration with the tax authority.

What does registration with tax authority involve? How long does it take?

Registration with the tax authority involves an application for registration. After the registration, usually within a period of one or two weeks, a tax civil servant pays an initiation visit to company address to establish that the company is operational.

Is it possible to have our company established without any of the shareholders/directors/managers being in Turkey in person?

Yes and no. While legally all non-present parties can issue PoA's to us for us to represent and conduct the incorporation on their behalf, some tax offices insist that at least one manager be present during their initiation visit.

What standard documents does a company need to have?

A Turkish-domiciled company will be asked to present the following:

* a signature circular

* chamber of commerce registry

* tax registration label

* incorporation trade gazette copies

All official bodies like tax office and bank will request these above documents during registration.

What is a signature circular and how do we get one?

A signature circular is a document that shows the signature specimen of the real persons appointed to represent the company. It can be either issued in a notary in Turkey, or through an apostilled document in other countries, or by a Turkish embassy abroad.

Do I need to arrange for an address for the company?

Yes, the company needs to have an address and it should be able to receive any legal notifications at that address.

Do you provide services that cover all required steps for a turn-key company incorporation?

Yes. We offer separate solutions for complying with the requirements of each official body.

What are the costs and fees involved?

Costs and fees vary depending on the options selected by the client. Most incorporation-related costs are disbursed once, while some will be operating costs that will incur on a monthly basis as long as that service is used.