Investment in Turkey
What are the benefits of investing in Turkey for foreigners?
Due to its rapidly growing young population, skilled workforce, and geographical location, Turkey is one of those countries preferred by foreign investors
What are the benefits of investing in Turkey for foreigners?
Foreign direct investors benefit in the same way from the opportunities offered by domestic investors. A direct investment takes place by founding a company, a branch, or by joining an existing company as a partner. In contrast, there is no incentive for foreign investors to invest indirectly through the purchase of stocks or bonds. For this reason, foreign investors can only benefit from the advantages offered by the state with long-term and direct investments.
Foreign investors can transfer their profits from sales, liquidation, compensation, licenses, and profits from other contracts abroad.
Additionally, foreigners looking to invest in Turkey can benefit from tax cuts, investment allocations, insurance premiums, and other government benefits.
Which companies can foreign investors set up?
Foreign investors can set up joint-stock companies, limited liability companies as well as partnerships in Turkey. Without a work permit of the natural foreign person, the establishment of a GmbH and AG is possible, but a partnership is not possible. A residence permit is not sufficient; Applying for a work permit and setting up a partnership is only possible after a 5-year stay.
How are foreign investors taxed?
The corporate income tax for limited companies and joint-stock companies in Turkey is 22%. If shareholders want the profit to be paid out, the company must also pay a settlement tax of 15% in this case. In addition, partnerships must pay income tax on the profits made in a year. The tax rate for partnerships is between 15-35%.
Turkey is one of those countries in which there is a ban on double taxation – i.e. a ban on paying the tax of a foreign investor both in his home country and in Turkey. With the increase in the number of members of this double taxation agreement, investing in Turkey has become easier.
In addition, the government grants tax exemptions for foreign investors for certain periods.
Reasons to Invest in Turkey
Mit dem Inkrafttreten des „Gesetzes über die direkten Investitionen von ausländischen Investoren“ im Jahre 2003 erfolgten verschiedene Vereinfachungen für ausländische Investoren in der Türkei.
Due to its qualified workforce, the rapidly growing young population, and the fact that it is at the interface between Asia and Europe, Turkey is one of those countries that are particularly preferred by foreign investors. With the effect from the entry into force of the “Law on Direct Investments by Foreign Investors” in 2003, various simplifications were made for foreign investors in Turkey.
In this letter there are 12 reasons to invest in Turkey:
- Customs Tax Exemptions
Foreign direct investors benefit in the same way from the opportunities offered by domestic investors. One of the benefits for foreigners who intend to invest in Turkey is the exemption from customs tax.
As part of the investment certificate, machines and equipment imported from abroad are exempt from customs tax.
- Value-added tax exemption (VAT)
As part of the investment certificate, machines and equipment imported from abroad are exempt from VAT.
- Support for Social Security Contributions (contribution from employer and employee)
If employees are employed as a result of the investment, the social security contributions – calculated above the statutory minimum wage – for employees and employers are paid by the state. This only applies to investments in the regions of Eastern Anatolia and Southeast Anatolia under the investment certificate. There is no upper limit for social security contributions; it is valid for 10 years.
- Land Use
For the investments specified in the investment certificate, the land is allocated to the investors by the provisions established by the Ministry of Finance.
Some of the grants not listed here can be found on the website of the Ministry’s Investment Assistance and Promotion Agency. (Link: https://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/Incentives.aspx)
- Transfer of Profit
Foreign investors can freely transfer profits from sales, liquidation, compensation, licenses, and profits from other contracts abroad.
- Double Taxation Exemption
In order to prevent foreign investors from having to pay taxes both in their home country and in Turkey, Turkey has concluded agreements with more than 80 countries. For example, if a German citizen makes an investment in Turkey and is active in Turkey, he only has to pay tax in Turkey. Because of this activity, he does not have to pay any taxes in Germany.
To avoid paying double taxes, Turkey concluded double taxation agreements with the following countries: Germany, Holland, Austria, Belgium, Switzerland, France, South Korea, Iran, the Republic of Turkey, Northern Cyprus, Russia, Singapore, Jordan.
- The Right to acquire Turkish Citizenship
With the entry into force of the law on January 12, 2017, foreigners investing in Turkey can acquire Turkish citizenship.
Therefore, foreign nationals who make investments over a certain amount in Turkey can acquire Turkish citizenship.
Foreign investors can acquire Turkish citizenship if they meet the requirements listed below:
- Investment of at least 500,000 US dollars
- Acquisition of property worth at least 250,000 US dollars (subject to the 3-year sales restriction)
- Creation of jobs for at least 50 people
- Investing of 500,000 US dollars in a Turkish bank for at least 3 years
- Purchase of government bonds worth the US $ 500,000 for at least 3 years
Foreign investors who meet one of these conditions can obtain Turkish citizenship by decision of the relevant ministry
- Simplification of the bureaucracy
Since the end of 2017, there has been a “one-stop-office” system for foreign investors. According to this system, a foreign investor who has decided to invest in Turkey can complete all formalities at the Istanbul Development Agency.
In other words, all permits, documents, and licenses can be handled from a single center. This system has also been used for domestic investors since 2018. In this way, foreign investors can start their activities as quickly as possible without bureaucratic obstacles.
- Stable growing economy
Turkey’s gross domestic product (GDP) of 231 billion US dollars in 2002 was increased to 784 billion in 2018, i.e. more than tripled.
Between 2002 and 2018 the average annual GDP growth rate was around 5.5% and continued the stable economic growth. It is the 13th largest economy and the 5th largest compared to the EU. The Turkish economy has received US $ 209 billion from foreign direct investment over the past 16 years.
- High rate of young population
With a total population of over 82 million people, the Turkish population consists of 32 million well-educated and highly cultured young people. Compared to other EU countries, this rate shows that Turkey has the largest young population.
- Qualifizierte und wettbewerbsfähige Arbeitskräfte
There are more than 800,000 graduates from 183 universities in Turkey each year. More than 32.3 million young, well-trained and motivated people are increasing their workforce every day.
11.Reformist investment climate
By removing the restrictions on foreign direct investors and creating a liberal investment environment for foreign direct investors in the last 20 years, Turkey is the second-largest reformist state among the OECD countries. A company can be set up in Turkey within 6.5 days. When offering the investment conditions to investors, these investors are treated equally in Turkey. Due to the strong industrial and service sector, there have been around 65,500 international corporations in Turkey as of 2018.
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