In the rapidly globalizing world, Turkiye has emerged as a significant marketplace for foreign companies aiming to expand their reach and capitalize on the country’s strategic benefits. This article discusses the importance of local business representation in Turkiye, providing a detailed guide for foreign companies.
The Strategic Advantage of Turkiye
Turkiye, with its strategic location and proximity to major markets, acts as a gateway to both European and Asian markets. The country’s dynamic population, large workforce, and government incentives create a conducive environment for investment. Turkiye is an active contributor to international platforms like the G-20, the OECD, NATO, and the Council of Europe, enhancing its strategic and political role in the region.
Turkiye’s double taxation avoidance and social security agreements with about 170 countries facilitate the movement of expatriates, fostering a friendly environment for foreign companies. It was among the top 10 countries that significantly improved its ease of doing business in recent years.
Establishing a Company in Turkiye
Turkiye’s law maintains a non-discriminatory approach towards international investors, providing equal rights and obligations to both local and foreign investors. International investors are encouraged to adopt a corporate governance approach that meets international standards, enhancing transparency in operations management.
The process of establishing a company in Turkiye is relatively straightforward, with the Trade Registry Directorates acting as ‘one-stop shops’ to facilitate the process.
Company Types under Turkish Commercial Code
Under the Turkish Commercial Code No. 6102, businesses can be established as an Incorporated company, a Limited company, an Unlimited company, a Limited Partnership, or a Limited Partnership divided into shares. The companies are categorized into:
- Capital Companies: These include joint stock companies and limited companies, where partners have limited liability.
- Sole Proprietorships: These include Collective and Limited Partnerships, where partners have unlimited liability.
Joint stock and limited companies are the most common types of companies in Turkiye due to their flexibility of corporate transactions and minimum shareholder liability for corporate-related debts.
Local Representation: Representative Office, LLC/JSC and Branches
Representative (Liaison) Offices
A liaison office is a non-commercial institution that explores market conditions, contacts individuals and organizations, examines the legal order of the country, and provides information about business opportunities to the parent institution.
To establish a liaison office in Turkiye, foreign companies need to apply to the Ministry of Industry and Technology. If approved, permits are issued for a period of three years, extendable for another three years. However, liaison offices are prohibited from economic activities and are closely monitored to ensure compliance.
Branches
Companies can establish branches in Turkiye, except in certain sectors like energy. Branches are established under the parent company and are limited to its field of activity and duration. A simple decision from the company’s governing body suffices for the establishment of branches, except in regulated markets. Branches do not have an independent personality from the parent company, and there is no minimum capital requirement to establish a branch.
On the other hand, Joint Stock and Limited Companies can carry out unlimited commercial activities, issue invoices, apply for grants, request profit transfers from abroad, and finance their own activities.
The Importance of Local Representation for Foreign Companies
Local representation is critical for foreign companies in Turkiye to effectively navigate the business landscape. It offers the following advantages:
- Understanding the local market: Local representatives provide valuable insights into consumer needs, preferences, and market trends.
- Building relationships: Local representatives can help build relationships with customers, suppliers, and other stakeholders.
- Compliance with local laws and regulations: Local representation ensures that the company complies with local laws and regulations.
- Language and cultural understanding: Local representatives can overcome language barriers and understand cultural nuances, improving communication and business operations.
Conclusion
Entering a new market like Turkiye can be challenging for foreign companies. However, with the right local representation, foreign companies can navigate the business landscape effectively and capitalize on the country’s strategic benefits. By understanding the different types of business entities and the importance of local representation, foreign companies can set the stage for success in Turkiye.
Here at BND Global, we provide comprehensive business representation services, helping foreign companies establish their presence in Turkiye. For more information, reach out to us at info@bndglobal.com
