Establishing a Commercial Presence in Türkiye by Foreign Companies: Company Incorporation, Branch Structures and the Tax-Incentive Regime*

Ahmet SEYHAN**

Abstract

The establishment of a foreign-capital commercial presence in Türkiye should be structured by assessing, in combination, the equal treatment approach under the Foreign Direct Investment Law No. 4875, the corporate law framework under the Turkish Commercial Code No. 6102, trade registry practice, tax legislation and sector-specific licensing regimes. As a rule, foreign investors may incorporate companies under the same principles applicable to domestic investors; however, the choice of legal form is significant not only in terms of speed and cost of establishment, but also in terms of liability segregation, management flexibility, capital requirements, scope of activity, licensing obligations, profit repatriation and access to tax incentives. This article compares the establishment of a new joint stock company or limited liability company in Türkiye by foreign companies with the branch model of a foreign parent company; it also examines the principal practical issues relating to liaison offices, joint ventures, taxation, incentives and the need for legal advisory support.

Keywords: Foreign investment, company formation in Türkiye, company formation in Turkey, joint stock company, limited liability company, branch office, liaison office, corporate tax, investment incentives, MERSIS, E-TUYS.

Introduction

The manner in which foreign companies enter the Turkish market cannot be treated, in contemporary commercial law, as merely a technical registry filing. A foreign investor wishing to operate in Türkiye must simultaneously address commercial needs such as entering into local contracts, employing personnel, establishing banking and financing relationships, and completing licensing and permit procedures, while also managing the consequences arising from corporate law, private international law, tax law, employment law and investment incentive legislation. Accordingly, the expression “company formation” in Türkiye refers, in its narrow sense, to registration with the trade registry; in its broader sense, it denotes the construction of the legal architecture of the investment, the allocation of risk and the establishment of a sustainable compliance mechanism.

The analytical distinction between establishing a new company in Türkiye and operating through a branch of a foreign enterprise provides a useful starting point. Nevertheless, it would be incomplete to frame this distinction in absolute and one-dimensional terms, such as “a branch is fast and inexpensive, whereas a company is safer”. A branch may preserve the commercial identity and centralised control of the parent company, but it may also expose the parent company to direct liability risk. A newly incorporated company may provide liability segregation and local corporate credibility, but it also increases post-incorporation costs relating to accounting, management, tax, capitalisation, reporting and compliance. The appropriate model should therefore be determined by considering, in combination, the scale of the investment, the scope of activity, the intended duration of operations, any need for a local partner, the contractual network, number of employees, financing model, applicable double taxation treaty and the strategy for benefiting from incentives.

Legal Status of Foreign Investors in Türkiye

The principal normative basis for foreign direct investments in Türkiye is the Foreign Direct Investment Law No. 4875. The Law aims to encourage foreign direct investments, protect the rights of foreign investors and replace the former permit/approval system with a notification-based system. This approach means that, as a rule, a foreign investor may invest in Türkiye under the same rights and obligations applicable to a domestic investor. Indeed, the official investment guide states that the conditions applicable to company establishment and share transfers are the same as those applied to local investors, and that international investors may establish the company types regulated under the Turkish Commercial Code.

The principle of equal treatment does not mean that foreign investors are exempt from all administrative or sectoral restrictions. In sectors such as banking, insurance, capital markets, payment services, energy, mining, broadcasting, civil aviation, maritime, defence industry, healthcare and education, incorporation, operating permits, licences, qualified share transfer approvals or authorisations from regulatory authorities may be required. Therefore, from the perspective of a foreign investor, the initial legal review should focus not on the type of company in isolation, but first on whether the contemplated business activity is subject to special legislation.

The determination of whether an enterprise qualifies as a foreign company is particularly relevant in the branch model. In Turkish law, doctrinal debates on corporate nationality and the real seat of companies form the background for determining whether a foreign enterprise is entitled to establish a branch in Türkiye. Although various connecting factors have been discussed in doctrine for determining corporate nationality, including the nationality of founders, the place where capital is located, the control test, the place of incorporation and the administrative seat, the real seat approach is generally considered to hold a strong position under Turkish law.

Legal Structures Available to Foreign Companies in Türkiye

Under the systematic structure of the Turkish Commercial Code, commercial companies are classified principally as partnerships and capital companies. General partnerships and limited partnerships are partnerships, whereas joint stock companies, limited liability companies and partnerships limited by shares are capital companies. Commercial companies have legal personality. By contrast, an ordinary partnership is regulated under the Turkish Code of Obligations, lacks legal personality and is generally encountered in contractual joint venture structures.

Joint Stock Company

A joint stock company is a capital company whose capital is fixed and divided into shares, and which is liable for its debts only with its own assets. As a rule, the liability of shareholders is limited to the capital shares they have subscribed and is owed to the company. For this reason, a joint stock company is one of the strongest corporate options for foreign investors due to the flexibility of share transfers, its capacity to receive investment, its corporate governance structure, the possibility of creating share classes, its board of directors model and its potential for public offering.

The joint stock company is frequently preferred for multi-shareholder investments, cases where a foreign parent company intends to establish a separate subsidiary in Türkiye, sectors requiring licensing or interaction with regulatory authorities, corporate financing structures and investment models in which share transfers are contemplated. Nevertheless, the joint stock company structure requires more disciplined corporate compliance due to the general assembly, board of directors, share ledger, meeting and resolution procedures, independent audit requirements in certain companies and special authorisation conditions.

Limited Liability Company

A limited liability company is a capital company established under a trade name by one or more natural or legal persons, with fixed share capital divided into capital shares. As a rule, shareholders are not liable for the debts of the company; they are under an obligation to pay the capital shares they have subscribed and to fulfil any additional payment or ancillary performance obligations stipulated in the articles of association.

From the perspective of a foreign investor, the limited liability company is a practical option due to its simpler management structure, managers or board of managers model, adaptability to small and medium-sized operations and lower need for corporate formalities. Conversely, share transfers, amendments to the articles of association and exit mechanisms among shareholders may be more limited and more dependent on formal requirements than in a joint stock company. Accordingly, where the foreign investor intends to admit new investors, grant share options or grow with a capital markets perspective, a joint stock company will often appear more appropriate; where the intended structure is more closely held and operation-oriented, a limited liability company may often be more suitable.

Partnerships, Ordinary Partnerships and Joint Ventures

General partnerships and limited partnerships may theoretically be established by foreign investors; however, due to unlimited liability, the personal trust relationship among partners and their limited use in practice, they are rarely preferred in foreign-capital commercial investments. An ordinary partnership or a joint venture may be functional particularly in project-based works, tenders, construction and infrastructure projects, or where a specific business is to be carried out jointly. However, since an ordinary partnership lacks legal personality, matters such as asset segregation, transfer of participation, liability and representation must be regulated in detail by contract.

Branch Offices and Liaison Offices

A branch is an organisational unit created by a foreign-headquartered company to conduct continuous commercial activity at a particular location in Türkiye, without creating a new legal person separate and independent from the company’s own legal personality. A branch has no shareholders; it does not have separate legal personality; its duration is connected to the duration of the parent company; although there is no statutory capital requirement, a budget required by the activity must be allocated; and, as a rule, the branch acts within the objects and scope of activity of the parent company.

A liaison office differs from a branch. Foreign companies may open a liaison office in Türkiye with the permission of the Ministry of Industry and Technology, provided that the liaison office does not conduct commercial activity in Türkiye. Liaison offices are suitable for non-revenue-generating activities such as market research, representation, promotion, supplier follow-up or regional coordination; they may not be used for sales, invoicing or the direct generation of commercial income.

Legal Process for Incorporating a New Company in Türkiye

For a foreign investor, the company formation process requires not only the preparation of incorporation documents, but also the advance structuring of the legal and financial obligations that the company will face after incorporation. In practice, a sound incorporation process should include at least the following stages.

Pre-Structuring and Analysis of the Scope of Activity

Before incorporation, the investor’s scope of activity, NACE code, trade name, registered office, capital amount, shareholding ratios, management and representation model, need for a local manager or board member, scope of signature authorities, bank account and capital payment plan should be determined. At this stage, it should also be examined whether the sector requires a special permit, licence or approval from a regulatory authority. An incorrect or overly broad scope of activity may later create problems in tax, incentive, licensing and bank compliance processes; by contrast, an overly narrow scope of activity may reduce the commercial flexibility of the company.

Foreign Shareholder Documents and Authentication-Translation Procedures

For foreign individual shareholders, documents such as a passport, notarised passport translation, potential tax number and, where necessary, a residence permit may be required. For foreign legal entity shareholders, documents such as a certificate of activity or good standing, current registry extract, competent corporate body resolution, documents evidencing authorised signatories, approval for representation and incorporation, power of attorney and, where necessary, a resolution designating the natural person who will act on behalf of the legal entity on the board of directors of the company to be incorporated should be prepared. Documents executed outside Türkiye should undergo apostille certification or Turkish consular legalisation, together with notarised Turkish translation.

In incorporation procedures, the registration request may be submitted to the Trade Registry Directorate in writing or electronically; the request must be clear and the facts to be registered must be evidenced by documents. Where the foreign shareholder does not speak Turkish, or where the registration application is signed before the directorate, the presence of a sworn translator is important in practice. If a legal entity is appointed as a board member, the natural person who will act on behalf of that legal entity must also be registered and announced.

MERSIS, Articles of Association, Capital and Trade Registry Registration

Company formation procedures are conducted through MERSIS. The articles of association or company agreement are prepared in the system; the signatures of the founders are taken before a notary public or an authorised trade registry officer; relevant obligations concerning the company’s capital are fulfilled; the Competition Authority contribution is paid; and the registration application is submitted to the Trade Registry Directorate. While a certain portion of the cash-subscribed share price in a joint stock company must be deposited into a bank account before registration, the capital payment timetable differs for limited liability companies and, in practice, payment within a certain period after registration may be possible.

The company acquires legal personality upon registration with the trade registry. Following registration, trade registry announcement, notifications to the tax office and the Social Security Institution, certification of statutory books, issuance of signature circulars, activation of bank accounts, assessment of e-ledger and e-invoice requirements, workplace opening and operating licence requirements, work permits and compliance with personal data protection, employment law, consumer law or sectoral legislation should be completed. Certain information forms of foreign-capital companies are monitored electronically through the E-TUYS system.

Establishment of a Branch Office in Türkiye by Foreign Companies

The establishment of a branch in Türkiye by a foreign company is not merely a simple registration application filed with the trade registry. The process includes proving that the foreign company is validly incorporated and active in its home jurisdiction, submitting documents showing that the company satisfies the branch establishment requirements under its own governing law, appointing a fully authorised representative who will represent the branch in Türkiye, authenticating and translating foreign documents, and finally completing registration with the trade registry.

In branch establishment, the resolution of the competent body of the parent company approving the establishment of the branch, a certified copy of the company’s articles of association or constitutional documents, current trade registry records or a certificate of activity evidencing that the company is active and showing its current status, a resolution or power of attorney concerning the fully authorised representative in Türkiye, the representative’s identity and signature documents, and establishment notifications may be required. The Trade Registry Regulation requires the original power of attorney, together with its Turkish translation, to be submitted where the identities, addresses and authorities of the representatives are not expressly stated in the branch establishment resolution.

Registration of the branch enables the foreign company to act in Türkiye as a legally recognised commercial operating unit. However, a branch is not an independent legal person. The debts, contracts, employment receivables, tax obligations and legal disputes of the branch ultimately affect the legal sphere of the parent company. Therefore, although the branch model may provide advantages in terms of centralised control and rapid market entry, it may also directly expose the assets of the parent company to risks arising from activities in Türkiye.

The activities of the branch in Türkiye are subject to Turkish law; however, the status, internal functioning and representation rules of the parent company often derive from the law of its home jurisdiction. This dual-layered structure requires the foreign company to consider both its corporate decision-making procedures in its home jurisdiction and Turkish trade registry, tax, employment law and sectoral regulations simultaneously. For this reason, branch establishment should not be treated only as a registry filing; the validity of the parent company’s resolutions, chain of authority, limits of representation and obligations that will arise in Türkiye must be examined together before opening the branch.

Legal Assistance Available to Foreign Companies

The need of foreign investors for legal assistance in Türkiye is not limited to the preparation of incorporation documents. A sound advisory model should monitor the legal architecture of the investment from the pre-incorporation stage throughout the life of the operation. In this context, professional support should be obtained particularly in the following areas:

·  Determination of the investment model: comparison of the alternatives of a new company, branch, liaison office, joint venture, share transfer or acquisition of an existing company.

·  Preparation of corporate documents: articles of association, shareholders’ agreements, board of directors or general assembly resolutions, powers of attorney, signature authorities and limits of representation.

·  Management of apostille, consular legalisation, notarisation and sworn translation procedures for foreign documents.

·  Determination of sectoral permits and licences: regulatory authority applications, preliminary permissions, operating licences and notification obligations.

·  Tax and incentive planning: corporate tax, withholding tax, VAT, transfer pricing, double taxation treaties, investment incentive certificates and R&D/design supports.

·  Employment law and foreign personnel: employment contracts, work permits, payroll, Social Security Institution procedures, occupational health and safety and appointment of senior foreign executives.

·  Contractual and compliance architecture: distribution, agency, supply, licence, franchise, data protection, competition law, sanctions and anti-money laundering compliance.

At this point, legal advisory support and certified public accountancy support do not substitute for one another; they complement each other. A lawyer manages legal structuring, contracts, representation, liability and dispute risk, while a certified public accountant and tax advisor manage accounting records, tax returns, payroll, the financial aspects of incentive applications and operational obligations. Particularly in foreign-capital structures, a representation or tax planning error that is not addressed at the incorporation stage may later create significant costs in a share transfer, profit distribution, licence application or bank compliance review.

Taxation and Tax Advantages

The question whether foreign companies enjoy tax advantages in Türkiye should first be answered as follows: foreign investor status, by itself, does not provide a general tax exemption or automatic reduction. The principle of equal treatment does not mean that the foreign investor is subject to a heavier or lighter general regime than a domestic investor; rather, it means that the foreign investor has the same rights and obligations under the same legal conditions. Therefore, a tax advantage does not arise from the foreign character of the investor, but from the nature of the investment, field of activity, geographical region, export or production character, R&D/design nature, free zone status or coverage under an investment incentive certificate.

Joint stock companies and limited liability companies incorporated in Türkiye are corporate taxpayers. Foreign companies operating in Türkiye solely through a branch are taxed on income generated in Türkiye or attributable to the Turkish branch. The remittance of branch profits to the head office may also trigger withholding tax consequences; the applicable rate should be determined by assessing domestic legislation and the relevant double taxation treaty together.

According to the current table of the Revenue Administration, for the 2026 and 2025 fiscal periods the general corporate tax rate is 25 percent, except for specifically listed institutions. For banks, financial leasing, factoring, financing and savings financing companies, electronic payment and money institutions, authorised foreign exchange offices, asset management companies, capital market institutions, insurance and reinsurance companies, pension companies and companies that are parties to certain public-private partnership projects, the rate is shown as 30 percent. Reduced rate applications may also be available under the Law for export earnings and earnings derived from actual manufacturing activities by taxpayers holding an industrial registry certificate.

In terms of tax incentives, investment incentive certificates, VAT exemption, customs duty exemption, corporate tax reduction, social security premium supports, income tax withholding support, interest or profit share support, land allocation, R&D and design centre supports, free zone incentives and export-oriented supports may be assessed on equal terms for foreign and domestic investors. These incentives do not depend solely on the investment having foreign shareholders; they depend on satisfying the investment amount, region, sector, technology level, employment, export and documentation requirements prescribed by legislation.

For 2026, Presidential Decision No. 11257 is also significant. The Decision concerns the redetermination of certain rates in the Income Tax Law and Corporate Tax Law relating to international activities such as foreign participation income and service exports. This recent regulation may affect tax planning for companies to be established in Türkiye in structures involving regional service centres, software, engineering, architecture, design, data processing, call centres, foreign participations or intragroup services. Nevertheless, in order for such advantages to be applied, the nature of the income, the use of the service abroad, collection, recordkeeping, transfer pricing, double taxation treaty provisions and evidentiary requirements must each be examined separately.

From a tax perspective, the most important risk is identifying the existence of an incentive or exemption while neglecting its application conditions. For example, a service export claim must be examined together with questions such as whether the service is in fact a service used abroad, whether pricing between group companies complies with the arm’s length principle, whether the invoice, contract, bank collection and accounting record are consistent, and whether the relevant income arises in Türkiye or abroad. Therefore, there is no single answer to the question “company or branch” in terms of tax advantages; the correct answer depends on the transaction flow and tax residence analysis of the specific investment.

Key Risk Areas in Practice

A significant part of the problems faced by foreign investors in company incorporation or branch establishment in Türkiye arises from the failure to anticipate post-establishment obligations at the outset. For this reason, the following risk areas should be assessed separately at the beginning:

·  Chain of authority risk: failure to prepare resolutions of the foreign parent company, signature authorities and powers of attorney in compliance with both the law of the home jurisdiction and Turkish trade registry practice.

·  Scope of activity risk: drafting the scope of activity in the articles of association or branch resolution in a manner that is insufficient or excessively broad for incentive, licence or banking compliance purposes.

·  Liability risk: direct exposure of the parent company to contractual, tax and employment law obligations in Türkiye under the branch model.

·  Tax residence and permanent establishment risk: group service, management centre, server, personnel or representative structures giving rise to unexpected Turkish taxation.

·  Transfer pricing risk: failure to document goods, services, licence, interest, management fee and royalty transactions among the parent company, branch and Turkish subsidiary in accordance with the arm’s length principle.

·  Foreign personnel and work permit risk: failure to coordinate the work and residence permits of senior executives, technical personnel or foreign representatives with the operational plan.

·  Data protection and contract risk: overlooking cross-border transfers of customer, employee and supplier data in Türkiye, data processing agreements and obligations under the Turkish Personal Data Protection Law.

Conclusion

The principal models available to foreign companies wishing to conduct commercial activities in Türkiye are incorporating a new capital company, becoming a shareholder in or acquiring shares of an existing company, establishing a branch in Türkiye, or opening a liaison office without conducting commercial activity. There is no single model that is superior in all circumstances. The incorporation of a joint stock company or limited liability company provides independent legal personality, liability segregation, a local corporate identity and clarity in licensing and financing processes. A branch offers advantages in terms of rapid market entry, centralised control, absence of a capital requirement and the ability to operate under the identity of the parent company; however, it must be structured carefully due to the direct liability of the parent company and the challenges of compliance with local legislation.

In terms of tax advantages, foreign investor status by itself does not confer a privilege. In Türkiye, tax advantages arise not from the investment being foreign-capitalised, but from the satisfaction of conditions required for production, export, R&D, design, free zone activity, investment incentive certificates, service exports, foreign participation structures or special sectoral legislation. Therefore, the correct legal strategy for a foreign investor requires corporate law structuring and tax planning to be conducted together, rather than separately.

In our view, for foreign companies seeking a long-term and scalable commercial presence in Türkiye, the incorporation of a joint stock company or limited liability company is in most cases a safer and more sustainable model. Conversely, if the activity will be conducted in Türkiye as a direct extension of the parent company, if the investment remains at the market testing stage, or if central control is regarded as indispensable from a legal and commercial perspective, the branch model may be a reasonable alternative. In either case, legal, financial and tax structuring should be conducted before establishment; after establishment, trade registry, tax, employment law, incentive, data protection and sectoral compliance obligations should be monitored on an ongoing basis.

This article has been prepared for general informational purposes. In any specific investment project, specialised legal and financial advice should be obtained regarding the company type, capital structure, representation authority, tax and incentive planning, licensing processes and contractual liabilities.

Within the limits of the applicable professional rules governing legal services, Seyhan Partners provides cross-border legal advisory support to foreign investors and international corporate groups in relation to Türkiye-focused investment and commercial presence structures.

Although the Turkish legal framework does not create a separate company formation regime solely on the basis of the investor’s country of incorporation, companies based in Germany, France, Spain, the United Kingdom, Israel and Belgium should assess their Turkish market entry strategy together with the corporate approval rules of their home jurisdiction, document authentication requirements, applicable double taxation treaty, banking compliance expectations, sector-specific licensing obligations and the intended level of operational control in Türkiye.

Bibliography

*06.06.2026, www.seyhanpartners.com.

**Ahmet Seyhan, Attorney at Law | Founder of Seyhan+Partners | Ph.D. (c) in Private Law | Corporate, Contract Law & Cross-Border Legal Advisory.

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2. Turkish Commercial Code No. 6102, Arts. 124-125; Hamza Kaya, “Company Types in Our Legislation and Accounting of Foundation-Liquidation Procedures”, Turkish Business Journal, 2021, p. 24 et seq.; Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”.

3. Turkish Commercial Code No. 6102, Arts. 329, 573 et seq. For the frequent use of joint stock and limited liability companies by foreign investors, see also Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”.

4. Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, headings on company documents, MERSIS, potential tax number, capital and registration; Serhan Dinç, “Procedures to be Made by the Founders for the First Establishment of the Joint Stock Company and the Documents to be Given to the Chamber of Commerce”, Hukuk ve İktisat Araştırmaları Dergisi, 2022, p. 1 et seq.

5. Trade Registry Regulation; Implementing Regulation of the Foreign Direct Investment Law; Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, explanations on E-TUYS.

6. Güven Yarar and Kaan Karaaslan, “Yabancı Şirketlerin Türkiye’de Şube Açmasına İlişkin Bazı Değerlendirmeler” [Some Evaluations on the Establishment of Branches by Foreign Companies in Türkiye], Akdeniz Üniversitesi Hukuk Fakültesi Dergisi, 2025, pp. 367-394.

7. Turkish Commercial Code No. 6102, Art. 40/4; Law No. 6103 on the Entry into Force and Implementation of the Turkish Commercial Code, Art. 12; Trade Registry Regulation, Arts. 122-123.

8. Trade Registry Regulation, Arts. 122-123; Yarar and Karaaslan, 2025, p. 387 et seq.; Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, documents for branch registration.

9. Code of Civil Procedure No. 6100, Art. 224; Trade Registry Regulation; Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, explanations on apostille/consular legalisation and notarised translation of documents issued abroad.

10. Corporate Tax Law No. 5520, Arts. 3 and 30; Presidential Decision No. 9286 published in the Official Gazette dated 22.12.2024 concerning changes in certain withholding tax rates; Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, explanations on remittance of branch profits to the head office.

11. Revenue Administration, “Corporate Tax Rates for Fiscal Years 2026 and 2025”, accessed June 2026; Corporate Tax Law No. 5520, Art. 32.

12. Investment Office of the Presidency of the Republic of Türkiye, “Incentive Guide” and “Profitable Incentives”, accessed June 2026; relevant investment incentive and R&D/design legislation.

13. Presidential Decision No. 11257 published in the Official Gazette dated 30.04.2026 and numbered 33239: redetermination of certain rates under Arts. 22 and 89 of the Income Tax Law No. 193 and Arts. 5 and 10 of the Corporate Tax Law No. 5520.

14. Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, explanations on liaison offices; Implementing Regulation of the Foreign Direct Investment Law.

15. Investment Office of the Presidency of the Republic of Türkiye, “Setting Up a Business”, general explanations on nationality or special authorisation restrictions in certain sectors such as TV broadcasting, maritime and civil aviation; special sectoral legislation is reserved.