Company Incorporation in Turkey. LLC or Joint Stock or Branch in Turkey?

June 8, 2020

Most two-common type of companies in Turkey are joint stock and limited liability companies. We do not recommend but incorporating branch is also an option, more complex to incorporate though and have no significant advantage compared to LLC and JS.

 

In this text, we will compare LLC and JS mainly and provide all necessary documents to incorporate each.

 

Both can be incorporated with a single shareholder.

 

Joint Stock can be incorporated with a minimum capital of TRY 50,000 where LLC with TRY 10,000 (You do not need to make an upfront payment whilst incorporating LLC)

 

Main differences between a joint stock and a limited company are as follows;

 

1. SHARE TRANSFER

LLC; share transfer agreements are required to be signed at a notary and must be registered and announced at the Trade Registry and Trade Registry Gazette. 

Joint Stock Company; no notary is required for the share transfer agreement and no need to submit it to Trade Registry.

 

2. GAINS ON SHARE SALE

LLC; gains occurred during the sales of shares are subject to income tax for the shareholder

Joint Stock Company; if the shareholder holds the shares for more than two years all the gain on sales are exempted from income tax.

 

3. GETTING A PARTNER / INVESTOR TO COMPANY IN A TAX EFFICIENT WAY

An investor can join as a shareholder with emission premium (where shareholder pays more than cost of the share) in joint stock companies with zero tax but this is heavily taxed in LLC hence if you are intending to get an investor to your company, LLC is not beneficial at all.

 

4. RESPONSIBILITY TOWARDS DEBTS

LLC, shareholders are fully responsible based on their share percentage for the public debts if the company fails to pay them.

Joint Stock Company; board members are responsible for the public debts and not the shareholders.

 

5. ANNUAL MEETINGS

In both types of companies, it is required to have annual shareholders meeting but in limited liability companies, there is no penalty provision in Commercial Code for limited liability companies which do not realize their annual shareholders meeting.

 

GENERAL TAXATION IN TURKEY

a. Standard corporate income tax rate is 22% for the year of 2020. It is expected to go back to 20% next year.

b. General VAT rate is 18%. (There are also 8% and 1% tranches for certain goods and services)

c. Almost all signed agreement are subject to fiscal stamp tax.

d. Payroll taxes are consisting of three taxes; personal income tax, stamp tax and Social Security Premiums (Income tax brackets are 15%-20%-27%-35%-40%)

e. Turkey signed DTT (double taxation treaties) with 85 counties

 

Please do let us know if you need any further details regarding the differences between those company types.

 

DOCUMENTS NEEDED TO INCORPORATE A JOINT STOCK COMPANY IN TURKEY

1 - Incorporation Application Letter

2 - Incorporation Declaration Form

3 - Translated and notarized passport copies of the foreign shareholders or trade registry abstracts in case the shareholder is a legal entity abroad

4 - Potential tax number document of the foreign shareholder

5 - Notary approved AoA of the Company which is submitted through MERSIS database

6 - Signature declaration of the authorized persons of the Company (Board members)

7 - Founders Declaration

8 - Payment receipt of Competition Board Fee (%0.04 of the capital)

9 - Bank Letter stating the payment of the capital.

10 - Trade Registry Chamber Registration Form

11 - Acceptance letter from the board members who are not shareholders

12 - In case of a legal entity will be appointed to the board member then a resolution of the legal entity to appoint a real person representative.

13 - Trade registry abstract of the legal entity which is a board member of the company

14 - Power of Attorney from the Shareholder and Board members

 

DOCUMENTS NEEDED TO INCORPORATE A LIMITED LIABILITY COMPANY IN TURKEY

1 - Incorporation Application Letter

2 - Incorporation Declaration Form

3 - Translated and notarized passport copies of the foreign shareholders or trade registry abstracts in case the shareholder is a legal entity abroad

4 - Potential tax number document of the foreign shareholder

5 - Notary approved AoA of the Company which is submitted through MERSIS database

6 - Signature declaration of the Company Managers

7 - Founders Declaration

8 - Payment receipt of Competition Board Fee (%0.04 of the capital)

9 - Trade Registry Chamber Registration Form

10 - Acceptance letter from the managers which are not shareholder to the company to be incorporated

11 - In case of a legal entity will be appointed as a manager then a resolution of the legal entity to appoint a real person representative.

12 - Trade registry abstract of the legal entity which is a manager of the company

13 - Power of Attorney from the Shareholder and managers

 

DOCUMENTS REQUIRED TO INCORPORATE A BRANCH IN TURKEY

1 - Incorporation Application Letter

2 - Incorporation Declaration Form

3 - Translated and notarized trade registry abstracts of the foreign shareholder and their articles of association

4 - Potential tax number document of the foreign shareholder

5 - Signature declaration of the Representative in Turkey

6 - Founders Declaration

7 - Passport Copy and Residence document - notarized

8 - Trade Registry Chamber Registration Form

9 - Board resolution taken by foreign company foreseeing branch opening in Turkey and appointment of representative in Turkey.

10 - Declaration regarding the title, type, field of activity, capital etc must be prepared and notarized and apostilled.

11 - Power of Attorney from the Foreign Company to Representative in Turkey

12 - Branch name will end like this; […. Company Name] Merkezi [Home Country] İstanbul Merkez Şubesi

 

Please do let us know using our Contact Page if you need any further details and proposal for incorporating your company in Turkey

 

We are based in Istanbul and offering services in all Turkey.

 

 

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