Foreign Partnership Structures

Frequently Asked Questions About Foreign Partnership Structures in Turkey

1. Can a foreign investor establish a company in Turkey?
2. How are foreign partnership structures legally defined in Turkey?
3. Which types of companies can foreign partners prefer in Turkey?
4. How is a foreign-partnered company established in Turkey?
5. What documents are required for establishing a foreign-partnered company in Turkey?
6. How long does the process of establishing a foreign-partnered company in Turkey take?
7. Can foreign investors establish joint-stock companies in Turkey?
8. Is the establishment of a limited liability company suitable for foreign partners in Turkey?
9. How do foreign partners participate in company management in Turkey?
10. Can foreign partners transfer shares in Turkey?
11. In which sectors are there foreign partnership restrictions in Turkey?
12. What are the tax obligations of foreign partners in Turkey?
13. Can foreign partners transfer their profit shares abroad in Turkey?
14. How do foreign-partnered companies open bank accounts in Turkey?
15. What are the Social Security Institution (SGK) obligations of foreign-partnered companies in Turkey?
16. How is the double taxation issue resolved for foreign partners in Turkey?
17. Do foreign-partnered companies have reporting obligations in Turkey?
18. How is a foreign-partnered company closed in Turkey?
19. How are rights protected when a foreign partnership ends in Turkey?
20. Why is legal support necessary when establishing foreign partnerships in Turkey?
21. How should foreign partnership agreements be prepared in Turkey?
22. What are the legal risks in foreign partnership structures in Turkey?
23. Which institutions audit foreign-partnered companies in Turkey?
24. How does KL Legal Consultancy provide support in the foreign partnership process in Turkey?

What Is the Legal Basis of Foreign Partnership Structures in Turkey?

Which legal regulations do foreign partnership structures in Turkey rely on?

Foreign investors establishing a company or becoming partners in an existing company in Turkey is explicitly possible and encouraged under the Turkish legal system. However, the exercise of these rights requires compliance with both corporate law and foreign capital regulations. Foreign partnerships in Turkey are primarily evaluated within the framework of the Foreign Direct Investment Law. This law envisages that foreigners have equal rights with local investors when establishing companies in Turkey.

Nevertheless, in practice, things are not always this straightforward. Although the legislation speaks of equal rights, in practice, foreign investors may face various administrative, financial, and legal obstacles. Particularly, foreign partners must be cautious regarding residency, declaration of capital structure, share transfers, banking transactions, and procedures conducted with public institutions.

Moreover, not every partnership structure provides the same level of advantage. Strategic matters such as which company type to choose, how partnership shares will be structured, and how representation in decision-making processes will be exercised must be managed not only with technical knowledge but also with experience.

At this point, working with a specialized Turkey foreigners law lawyer is vital. An expert lawyer does not only handle your company establishment procedures but also foresees the risks you may encounter in the future, protects you from potential tax liabilities, and ensures that a fully compliant structure with Turkish law is established. Especially if your investment is large or you have long-term business plans, starting this process without professional support can pose serious risks.

What Are the Types of Companies That Foreign Partners Can Establish in Turkey?

Which types of companies can foreign investors prefer in Turkey?

The types of companies that foreign investors can establish or become partners in Turkey are essentially the same as those available to Turkish nationals. However, the choice of company type should be carefully determined according to the investor’s objectives, capital structure, the sector in which they will operate, and partnership relations.

The most commonly preferred structures in Turkey are joint-stock companies and limited liability companies. Both are open to foreign partners and full ownership rights are possible. However, they involve significant differences in terms of capital obligations, management structure, auditing mechanisms, and decision-making processes. For example, share transfers are more flexible in joint-stock companies, whereas changes of partners in limited liability companies are subject to more complex procedures.

One of the common mistakes foreign investors make is choosing the company type merely for quick and low-cost establishment, only to find that this structure complicates their operations in the long term. Choices made without considering the company’s purpose, number of partners, targeted growth plans, and field of activity can cause serious managerial and legal problems later on.

Therefore, a detailed legal analysis must be conducted before company establishment. Preliminary meetings with experienced specialists in the field such as Izmir foreigners law lawyer or Karşıyaka foreigners law lawyer directly affect the structural decisions that determine the future of the company. Choosing the wrong company type can cause serious losses not only administratively but also fiscally and commercially.

How Does the Process of Establishing a Foreign-Partnered Company Work in Turkey?

How is a foreign-partnered company established in Turkey and what documents are required?

The establishment of a foreign-partnered company in Turkey involves similar steps to domestic companies technically; however, the bureaucracy and documentation for transactions involving foreigners are more complex and sensitive. Missing even the smallest document or improper preparation can lead to the rejection of the entire application process or months of delay.

The establishment process fundamentally consists of registration with the trade registry, tax office registration, obtaining a potential tax number, submission of notarized documents, and depositing capital into the company’s bank account. However, for foreign partners, additional documents such as notarized translations of the articles of association, sworn translations of passports, and powers of attorney must also be submitted. Moreover, the authority and position of the person or representative acting on behalf of the foreign company must be clearly documented.

While every stage of establishment is sensitive, the necessary procedures after the company’s foundation must not be neglected. If procedures such as SGK registration, employment declarations, and creation of e-notification addresses are not completed accurately, the company may face administrative sanctions shortly.

Working with an experienced specialist such as a Turkey foreigners law lawyer during this process ensures not only legal compliance but also that the procedures proceed quickly and without error. Especially an attorney experienced in communication with public institutions has a great advantage for foreign investors making an investment in Turkey for the first time. It should not be forgotten that mistakes made during company establishment may lead to significant tax and commercial damages later.

Are There Capital Share Limitations in Foreign Partnerships in Turkey?

Are the shares that foreign partners can hold in companies in Turkey limited?

The general rule in Turkey is that foreign investors have equal rights with local partners in companies. Within this framework, there is no legal restriction on the capital share ratio of foreigners in most sectors in Turkey. A foreign individual or company can establish a company alone with 100% capital or become a partner in a company.

However, this general freedom is subject to some exceptions. Especially if activities will be carried out in strategic sectors such as national security, energy, mining, media, and real estate or in border regions, foreign capital shares may be limited to certain ratios or subject to special permission requirements. These exceptions may be regulated directly by laws or Presidential decrees and may have significant effects depending on the area of investment.

Different institutions’ opinions and approvals may be required depending on the investment sector. Therefore, acting on the assumption that "it is not explicitly prohibited in the legislation" may lead to irreversible obstacles later. Administrative rejections, license cancellations, or suspension of the investment may result in serious consequences.

Detecting such situations in advance, correctly conducting sector analysis, and drawing the legal framework properly are critical to managing the process with an Izmir foreigners law lawyer or Turkey foreigners law lawyer. Expert consultancy ensures sound investment decisions and eliminates possible limitations beforehand.

What Are the Rights of Foreign Partners to Participate in Company Management in Turkey?

What are the management participation rights of foreign partners in companies established in Turkey?

Foreign investors have the same management rights as local partners in companies established in Turkey. These rights include voting, membership in the board of directors, company representation authority, audit authority, and other powers directly effective in management and decision-making processes. However, the use of these rights is shaped according to the company contract, and investors often join the process without paying sufficient attention to the contract.

Especially in structures with many partners, special articles may need to be included in the articles of association for shareholders to be effective in management. Technical details such as the number of board members to be appointed, voting ratios, and quorum requirements directly affect the partnership structure. If these elements are not clearly regulated, foreign partners may effectively become powerless in the company.

A frequently encountered problem in practice is: a structure initially established with equal shares can transform over time into a system where one party loses influence. The usual reason for this is poor planning of the management structure. To prevent such situations, the articles of association must be prepared in a detailed and legally protective manner.

At this point, consulting with a specialist lawyer such as a Turkey foreigners law lawyer or Karşıyaka foreigners law lawyer is vital not only for establishing the partnership but also for managing it sustainably and balanced. Foreign investors must ensure that they are not only "shareholders" but also "active managers" by establishing a strong legal framework from the beginning.

What Are the Tax Obligations of Foreign Partners in Turkey?

How are the earnings foreign partners obtain from companies in Turkey taxed?

Foreign partners are subject to Turkish tax legislation regarding earnings obtained from companies they establish or partner with in Turkey. In this context, the type of income and the way it is earned directly affect the type and rate of tax to be applied.

If the foreign investor receives dividends from the company, this income is taxed through withholding tax. The withholding tax rate is generally 15%, but this rate can be lower according to Turkey’s double taxation avoidance agreements signed with the relevant country. That is, special provisions may come into effect depending on the investor’s nationality. Payments made without carefully examining these agreements may cause unnecessary tax burdens or legal disputes.

Additionally, the income foreign partners receive from the company may be subject to declaration not only in Turkey but also in their own countries. This requires a comparative analysis of the tax legislation between the two countries. Especially eliminating the risk of double taxation is possible through proper tax planning.

It should be noted that tax applications are subject to audit as well as declaration. Tax authorities may subject foreign partnerships to detailed inspections from time to time. Discrepancies in documents, unexplained money transfers, or incorrect declarations may result in serious penalties.

Therefore, from the company establishment process onward, obtaining support from an Izmir foreigners law lawyer and preferably a consultant with knowledge in tax law reduces the foreign investor’s tax risks and makes their financial structure sustainable in Turkey.

Bank Account Opening and Financial Procedures for Foreign Partnerships in Turkey

What should foreign-partnered companies pay attention to when opening a bank account in Turkey?

For a foreign-partnered company to start operating in Turkey, it is mandatory to open an account in the name of the company with a local bank. However, this process is often not as easy and fast as foreign investors think. Banks conduct a rigorous examination process, especially for foreign-partnered structures; they thoroughly evaluate the nationality of the company partners, capital structure, field of activity, and identity information of the representatives.

In the initial stages of company establishment, a temporary bank account is opened to deposit the capital commitment. At this stage, banks cannot proceed with the account opening process without completion of notarized documents, the articles of association, and tax office procedures. Banks also conduct a comprehensive know-your-customer (KYC) process to assess the genuine business intent of the company.

The main difficulty for foreign investors is the internal control procedures applied by banks within the framework of compliance policies and international regulations. Especially investors from high-risk countries may be subjected to detailed inquiries, and the bank account opening process may be significantly delayed. This situation may prevent the actual start of company activities.

For all these reasons, planning the banking processes in advance, preparing documents correctly, and clearly presenting the investor’s identity are necessary. Otherwise, all commercial plans in Turkey may be put on hold.

During this process, working with a Turkey foreigners law lawyer or a consultant familiar with banking procedures ensures both the correct bank selection and the smooth completion of the application process. Steps taken without proper guidance may cause loss of time and money for the investment.

Auditing and Reporting Obligations of Foreign Partnerships in Turkey

What audits are foreign-partnered companies subject to in Turkey?

Foreign-partnered companies are subject to the same audits in Turkey as domestic companies in trade, tax, and labor law areas. However, structures involving foreign capital may be monitored more closely at times and face special reporting obligations. The purpose of these obligations is to ensure transparency and guarantee that foreign investors’ activities in Turkey are recorded.

Especially the company’s capital structure, foreign partnership ratio, and sector of activity directly affect certain audit mechanisms. Institutions such as tax offices, Social Security Institution (SGK), Ministry of Trade, and Banking Regulation and Supervision Agency (BDDK) may audit the company’s financial statements, transaction volume, and activity compliance at specific periods. These audits include not only book and declaration checks but also the conformity of the company’s actual activities with declarations.

Foreign-partnered companies are also obliged to submit annual notifications and updates of investment information regarding their activities to the Ministry of Trade. Failure to perform these reports within the designated periods may subject the company to administrative fines and even cause problems regarding the foreign partnership permit.

The most common mistake at this point is forgetting or underestimating the obligations after the company is established and operational. However, fulfilling these obligations completely and timely is the foundation of legal security for foreign-partnered structures.

Tracking these obligations and correctly managing the reporting processes with the assistance of an Izmir foreigners law lawyer or a professional experienced in financial audit processes provides a significant advantage for the company’s long-term sustainability.

Closure and Termination Process of Foreign Partnerships in Turkey

How is a foreign-partnered company closed and the partnership terminated in Turkey?

The closure of a foreign-partnered company in Turkey is a process that requires as much attention as its establishment. The decision to close is not only an administrative choice but also entails various obligations in terms of tax, trade, and labor law. Mistakes made during this process may lead to serious consequences such as the company remaining active in official records despite legal closure, the emergence of tax debts, or the continuation of partners’ legal liabilities.

The liquidation process of the company is initiated by a general assembly decision and registered with the trade registry. During the liquidation period, all company debts are paid, receivables collected, and relations with the tax office and SGK are terminated. It is impossible to close the company effectively without completing these procedures. Additionally, closure balance sheets and declarations prepared at the end of liquidation must be submitted to the relevant institutions.

When ending the partnership, issues such as share transfer, capital repayment, and asset distribution after liquidation must also be addressed in detail. Foreign partners may need to consider their obligations outside Turkey during this process.

The biggest risk is the incomplete notification or liquidation processes despite the closure of the company. This can cause debts, interests, or legal liabilities to arise even years later.

Proceeding through each stage of this process with a Turkey foreigners law lawyer or professional experienced in liquidation procedures reduces legal risks and ensures quick completion of transactions. Especially in multi-partner structures, since each partner’s liabilities must be calculated separately, legal consultancy is indispensable.

The Importance of Legal Support in the Foreign Partnership Structures Process

Why is it necessary to get support from an expert lawyer in foreign partnership structures?

Establishing foreign partnerships in Turkey is not only a commercial decision but also a legal process that requires careful planning. Every stage, from company establishment to determining the field of activity; from partnership agreements to fiscal structuring, involves legal risks. Failure to properly analyze these risks can cause losses to the investor not only financially but also in terms of reputation and operations.

The Turkish legal system may be foreign to foreign investors, and bureaucratic processes can seem complex. Even the simplest transaction, if not done in compliance with procedures, can disrupt the entire process. Especially strategic issues such as management rights, partnership shares, share transfers, and tax obligations must be structured by an experienced expert.

An expert Turkey foreigners law lawyer secures not only the investor’s current but also future legal position. Contracts prepared with legal support make the partnership structure clear and secure; management rights are explicitly defined, and disputes that may arise between partners are prevented from the outset. Additionally, ongoing processes such as tax obligations, annual reporting, and audit procedures are also managed properly.

For professional consultancy to ensure that all your transactions are conducted legally and completely in your foreign partnership process, you can contact KL Legal Consultancy. By communicating with our expert lawyers, you can grow your investment in Turkey under legal security and control all legal risks.