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Type of companies that can be established and taxation in Turkey

Type of companies that can be established and taxation in Turkey

Turkey, with its rapidly growing economy, qualified labor force, global and regional investment potential, geographical location and large consumer market, is one of the leading countries preferred, not only by Turkish but also foreign investors. With the 2003 ‘Foreign Direct Investment Law’, foreign investments and the number of companies established in the country have increased. Thus, foreign investors were granted the same rights and opportunities as domestic investors and were allowed to establish all types of companies permitted by the Turkish Commercial Code (TCC). It should be noted that Turkish citizens living or working abroad also benefit from the opportunities provided under this Law, which are of great interest not only to foreigners wishing to invest in Turkey, but also to Turks abroad.

They can establish companies in Turkey in accordance with the Foreign Direct Investment Law. Law No. 4875 allows foreign investors to have the same rights and obligations as local investors. According to this law, foreign investors can establish all types of companies specified in the Turkish Commercial Code and the types of ordinary companies specified in the Turkish Code of Obligations. In this respect, the types of companies that foreigners can establish in Turkey are as follows;

Sole Proprietorships: Collective Company, Limited Company, Ordinary Company and Cooperative Company

Capital Companies: Joint Stock Company, Limited Liability Company, Limited Partnership divided into shares

You can work with specialized consulting firms to get information about the process and taxation issues to be followed to establish a company in Turkey, and to help make investment decisions more accurately.

Companies’ activities of foreign investors operating in Turkey are taxed in Turkey. The tax system in Turkey include income tax, corporate tax, value added tax (VAT), similar to other European countries. In this regard, companies of foreign investors operating in Turkey must pay corporate tax in Turkey. The corporate tax rate may vary depending on the company’s income and the sector in which it operates. In order to avoid double taxation, Turkey has double taxation agreements with dozens of countries.

Income Tax: is a type of tax paid on income. The income of natural persons, i.e. institutionalized persons who can acquire rights and exercise authority in law, is subject to income tax. Income is the net amount of earnings and revenues (income-generating property) that a natural person earns in a calendar year. Income tax takes into account the individual’s specific situation and also generally includes a progressive tax tariff.

Corporate Income Tax is the tax paid by taxpayers on their earnings during a calendar year, depending on the earnings generated by the corporation. Taxpayers file a single Corporate Tax return with the tax office to which they are affiliated for their branches, offices, shops, production facilities, workshops and all workplaces affiliated to their organization.

Value Added Tax (VAT) is a type of tax that taxpayers, i.e. sellers, pay monthly on the added value they create. It is the increase in the value of a product or service until it reaches its buyer.

Companies located in Turkey are also obliged to submit an annual declaration and declare their income.

In addition, companies must pay social security contributions for their employees. Social security contributions, calculated on employees’ salaries, are mandatory for all companies operating in Turkey.

Turkey has signed double taxation avoidance agreements (DTAs) with some countries. These agreements are designed to prevent foreign investors from being taxed in their home countries. CVTAs are important to resolve double taxation issues related to the taxation of foreign investors in Turkey.