TÜRKIYE GUIDE
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Expanding into Türkiye offers many opportunities for International companies. The Republic of Türkiye, which officially changed its name from ‘Turkey’ in June 2022, lies at the crossroads of Europe and Asia. The country is a bridge between the two continents with a regional prominence that makes it an obvious target for International Expansion. The bulk of Türkiye’s landmass is in West Asia, with a Black Sea coastline and borders with Georgia, Armenia, Azerbaijan (just 13 kilometres), Iran, Iraq and Syria. In its northwest corner, Türkiye has European borders with Greece and Bulgaria in the Balkan Peninsula, while the southern coastline runs alongside the Mediterranean and Aegean Seas.
Türkiye is within three hours by air of most major European cities and logistically well-placed for expansion into West Asia and further east. Expanding into Türkiye can bring excitement to the possibilities and significant stress to ensuring the entity with the country’s rigid legal structures and laws. Going at it without the proper support can increase the costs, time and risks involved. Ensuring compliance without sufficient knowledge of the country’s laws also adds stress to getting your new entity off the ground and ready to test new markets.
Global expansion is a step for any business, regardless of your goal. The opportunities that can come with an expansion can be inspiring as well as intimidating and confusing, especially when you consider all the registration procedures that need to be done and the documentation required. Each new market brings new challenges. These can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, primarily through our Employer of Record (EOR) framework. This can be best utilised when businesses are just beginning their expansion process and require more information before incorporating an entity and fully establishing themselves in that market.
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Türkiye – The Economy
The Republic of Türkiye straddles continents which makes it a prime target for expansion by foreign companies looking to widen their economic horizons.
Türkiye is often classified as a newly industrialised country by economists and political scientists, while Merrill, the World Bank, or The Economist describe Türkiye as an emerging market economy. The World Bank classifies Türkiye as an upper-middle-income country in terms of the country’s per capita GDP (€8,094 in April 2022).
Türkiye is a founding member of the Organisation for Economic Co-operation and Development (OECD) and the G-20 major economies (1999). Its nominal GDP peaked at €958 billion in 2013, ranking 16th in the world in that year, while its nominal GDP per capita peaked at €12,505 in 2013, ranking 64th.
The declining value of the Turkish Lira, especially during the ‘2018–2022 Turkish currency and debt crisis, significantly impacted the recent decrease in the country’s USD-based nominal GDP figures. High inflation continues to be a problem in the early 2020s. According to the International Monetary Fund’s estimates, Türkiye is forecasted to have the world’s 23rd-largest nominal and 11th-largest GDP by PPP by the end of 2022.
With a population of 84.6 million as of 2021, Türkiye is among the world’s leading producers of agricultural products, textiles, motor vehicles, transportation equipment, construction materials, consumer electronics and home appliances. Over the past 20 years, there have been significant developments in the financial and social aspects of Türkiye’s economy, such as increases in employment and average income since 2000.
Türkiye has recently slowed down in its economic progress due to considerable changes in external and internal factors and a reduction in the government’s economic reforms. Environmentalists have argued that the economy is excessively dependent on the construction and contracting sector.
Small and Medium-Sized Companies
In 2021, small and medium-sized enterprises (SMEs) accounted for 99.8% of the Turkish enterprises (2,948,457 companies), employed 10,425,133 persons and generated almost €55 billion.
SMEs have been significantly affected by the pandemic. All sectors except information and communication, which grew by 0.8%, decreased in SME value added. The contraction was particularly noticeable in the wholesale and retail trade sector, falling by 10%, and in the accommodation and food services sector, falling by 9.1%. SME value added also declined by 6.3% in the manufacturing sector.
In 2019, SMEs generated 52.6% of overall value added in the Turkish ‘non-financial business economy’, a slightly lower share than the EU average of 53.2%. The contribution of SMEs to total employment was 73.5%, significantly higher than the EU average of 65%.
|
Country |
Republic of Türkiye |
|
Capital |
Ankara |
|
No. of States/Provinces |
81 provinces for administrative purposes and 7 regions and 21 subregions for geographic, demographic, and economic purposes.
The seven regions are Eastern Anatolia, Central Anatolia, the Black Sea, the Mediterranean, the Aegean, Marmara, and Southeastern Anatolia. |
|
Principal Cities |
Istanbul, Izmir, Ankara, Bursa, Antalya |
|
Language |
Turkish |
|
Local Currency |
Turkish Lira (TRY) |
|
Major Religion |
Islam |
|
Date Format |
dd.mm.yyyy |
|
Time Zone |
Türkiye Time (UTC+3) |
|
Country Dial Code |
+90 |
|
Population |
84.1 million |
|
Border Countries |
Georgia (Northeast), Armenia, Azerbaijan and Iran (East), Iraq (Southeast), Syria (South), Greece and Bulgaria (Northwest). Cyprus is located off the South coast. |
|
Tax Year |
Calendar Year (1 January - 31 December) |
|
VAT & |
18% |
|
Minimum Wage |
TRY 7,603.43 gross/month (EUR 393.77 - USD 408.32)
TRY 5,500.35 net/month (EUR 284.85 - USD 295.37) |
|
Taxpayer Identification Numbers |
10 digits TIN (alpha group code: 3 digits, sequence number: 6 digits, control number: 1 digit) - All legal entities, unincorporated entities and individuals must obtain a TIN to undertake professional or business activities in Türkiye.
TIN is given to Legal Entities, Legal Entities having no tax liability, Foreign Nationals who do not have Foreign Identity numbers and Foreign Legal Entities |
|
Leading Sectors |
Services 60%, industry 32%, agriculture 7% |
|
Main imports |
Mineral fuels, machinery, vehicles, organic chemicals, gems and precious metals, pharmaceuticals, and aluminium. |
|
Main exports |
Vehicles, machinery, computers and electrical equipment, gems and precious metals, clothing and accessories, iron, steel, plastics, and mineral fuels, including oil. |
|
Main trading partners |
Germany, the UK, Italy, Iraq, the USA, Russia, and China |
|
Government Type |
Unitary presidential constitutional republic |
|
Current President |
Recep Tayyip Erdoğan |
The Main Sectors of the Turkish Economy
Telecommunications: It is an established sector which continues to demonstrate growth. Türkiye’s ambition to switch to 5G, likely to happen soon, is among the leading reasons why telecommunications are and will continue to be a key sector for investors.
Automotive manufacturing: This sector has kept growing before and during the pandemic. Since 2000, the total investment volume of global brands in the Turkish automotive industry has reached €16 billion. Türkiye is the world’s 14th and Europe’s 4th largest automotive manufacturer, with nearly 74% of its vehicle production targeting international markets. Further, Türkiye aims to develop its high-tech, electric vehicles and offer them to the market shortly.
Agriculture: It is an integral part of the economy. Half of the land is agricultural, employing 18% of the workforce and providing 10% of exports and 7% of GDP in 2020. There are half a million farmers. Türkiye is a major producer of wheat, sugar beets, milk, poultry, cotton, tomatoes, and other fruits and vegetables. As of 2021, Türkiye is the world’s largest producer of hazelnuts and apricots.
Steel production: Türkiye ranks 8th in the list of countries by steel production. Türkiye’s crude steel production reached a record high of 34.1 million tons in 2011. In 2013, total steel production was 29 million tonnes.
Construction and contracting sector: one of the leading industries in Türkiye. In the 2000s, the number of countries in which Turkish contractors worked increased considerably, and that caused the percentage of work in each country to decrease relatively. Nevertheless, the Russian Federation maintained the first rank (14.66%) and was followed by Romania (11.46%) and Kazakhstan (9.55%).
Tourism: In 2019, Türkiye ranked sixth in the world regarding international tourist arrivals, with 51.2 million foreign tourists visiting the country. Over the years, Türkiye has become a popular tourist destination for many Europeans, competing with Greece, Italy and Spain. Resorts in provinces such as Antalya and Muğla (located on the Turkish Riviera) have become very popular among tourists.
Banking and Finance: The Turkish banking sector is among the most robust and expansive in East Europe, the Middle East and Central Asia.
Medical Tourism: There are numerous private hospitals in Türkiye which have benefited from medical tourism in recent years. Six hundred sixty-two thousand eighty-seven patients were treated at Turkish hospitals in 2019 within the scope of health tourism, with around 60% of the income obtained from plastic surgeries. Health tourism generated revenues worth €1 billion in 2019 for the country’s economy.
Tax and Labour Authorities in Türkiye
- The Turkish Revenue Administration is a public institution of the Turkish Republic operating under the Ministry of Finance. The Revenue Administration is responsible for levying and collecting state taxes and respecting taxpayer rights within Constitutional Law and tax legislation framework.
- The Tax Communication Centre, affiliated with Revenue Administration, provides consulting services about tax-related issues, denunciation management and motor vehicle tax issues. It also provides consulting services to foreigners via e-Mail Service in English.
- Employment legislation is based on a mix of the Constitution of Türkiye (which officially changed its name from ‘Türkiye’ in June 2022), the Labour Code and the Code of Obligations. A series of supplementary Codes apply to Work Permits for Foreigners, Collective Bargaining Agreements (CBAs) and Workplace Health and Safety, as examples. Employment legislation applies equally to Turkish and foreign citizens.
Labour Contracts Law in Türkiye
General requirements
- Written employment contracts are legally required when employing foreigners; fixed-term contracts of at least one year’s duration; probation periods; those with a non-competition clause; on-call, teleworking, and temporary workers.
- Where written contracts are not mandatory, employers must provide a written agreement within two months of starting work. The agreement must detail working conditions and hours, salary and payment schedule, and termination conditions.
- Probation periods are generally for two months but can be extended to four months by CBAs.
- Written contracts must be in Turkish if both sides are Turkish. Otherwise, they can be drafted in dual languages according to the nationality of either party. The Turkish version holds in case of disputes.
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