The Republic of Türkiye, which officially changed its name from ‘Turkey’ in June 2022, lies at the crossroads of Europe and Asia as 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. It is an associate member of the European Union and a member of the European Customs Uni, and the G20 group, bringing together the world’s largest economies. International memberships include the United Nations, UNESCO, UNICEF, the World Bank, World Health Organisation, NATO and the Organisation for Economic Cooperation and Development. It also has a free trade agreement with the European Free Trade Association (EFTA). An Islamic nation, Türkiye’s memberships also include the Organisation of Islamic Cooperation and the Islamic Development Bank.
The World Bank identifies Türkiye as needing more Foreign Direct Investment (FDI) to improve global competitiveness and keep pace with other developing economies. Türkiye’s growth of 11% in 2021 was the highest among G20 nations, but the Lira was hit by depreciation, with the economy suffering inflation of over 60% for the year up to March 2022. Various sectors displayed growth, however. The banking sector expanded 24% year-on-year to the first quarter of 2022, and the ICT sector by 16%. The services sector is expected to see two-thirds of growth through 2022-23, fueled by increased tourism.
And there are a growing number of incentives. Türkiye provides cities with an ‘investment incentive’ environment for different sectors to encourage hi-tech investment, support business clusters and equalise regional differences. Incentives include VAT and customs duty exemption, tax incentives and interest, dividends, and insurance support.
Foreign companies planning to build on this potential for their international expansion plans can move by opening a subsidiary – which is essential for hiring staff in the country and running payroll. The popular choice is to open a limited liability company (Ltd.Şti.), which operates under the Turkish Commercial Code (TCC).
Since the TCC was implemented in 2012, registration has been handled through the Central Registration System (Merkezi Sicil Kayit Sistemi, MERSIS). Procedures and requirements include:
Opening a business in any overseas territory brings issues. Moving staff across the world involves complications surrounding Visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. Your business plan will have to deal with all these issues.
Türkiye is an attractive target for foreign investment, but there are always considerations regarding compliance with relevant legislation. In Türkiye, this revolves around the Labour Code, which lays down the obligations of employers and the protected rights of their employees. There are other issues, too. Where will you find manufacturers, offices and distributors?
There is a simple and effective alternative. By partnering with a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, you can plot a time-efficient and cost-effective route to locating and employing staff in Türkiye.
Finding an Office in Türkiye
Around 58 countries will have a business presence in Türkiye in 2022, with the US numbering 600 companies and China more than 350. It has 22 “free trade agreements”. It is ideally located, 95% in Asia and 5% in Europe, bordering the Black, Aegean and Mediterranean Seas, giving it a consumer market ‘reachability’ of around one billion. It has a stable developing economy and a rising middle class, with 50% of the population under 30 offerings a qualified labour force.
Many companies are attracted to having one foot in the West and another in West Asia, primed for commerce. Most small and middle-sized enterprises (SMEs) choose the limited liability subsidiary (LLC), whereas larger corporations might take the Joint-Stock Company (JSC) option. Setting up the company can only be achieved with a ‘legal address’ in Türkiye, whether a physical office – rented or purchased – or a virtual office, as this is registered with the official database of the Trade Registry. Locating an office comes before registering your business, as the office address is a registering requirement. Renting an office requires a Tax ID number, and the rent, lease or purchasing payment for the office should be debited through the business bank account, not a private one. The following information may assist you:
Istanbul is the city of choice for professionals, the financial hub and the largest city, and boasts top-quality conference centres and hotels. It has a booming jobs market and is a dynamic city for exports and imports, the service and food sectors, and manufacturing. Expatriates tend to be found in larger towns and on the Aegean and Mediterranean coastline.
Ankara is the capital and administrative centre. As with Istanbul, it is designated to be in Region 1 for ‘investment incentive support’, which means a minimum of around TRY 1 million capital funding to receive VAT, tax, and customs duty benefits. The main areas for investment are real estate, tourism, and industry. The city has a modern outlook, a well-developed transportation system, infrastructure and an international airport. The attraction for residents is the proximity of educational, health and government organisations and sophisticated residential areas such as Çankaya.
Antalya shines in the agricultural sector and has excellent tourism potential.
Izmir is a favourite among tourists and is the eco-friendly focus for many investors with the instigation of the Blue Flag Coordination Unit.
Bursa has seven ports, 18 industrial zones, a Free Zone (FZ) and a Technology Development Zone and is the fourth city in Türkiye for economic growth with investment in automotive, metal working machinery and furniture with growth in the rail, aviation and defence systems.
Kocaeli is known for its crucial industrial sector but also sees investments in textiles, agriculture, food, animal husbandry and manufacturing factories which can produce just about anything.
Business Clusters in Türkiye include:
The industrial cluster, SAHA for Defense, Aerospace and Space, as of 2022, is the largest in Europe, with over 800 companies and 22 universities. New developments exist in electronic warfare, land vehicles, munitions, and naval platforms.
In 2022, Teknopark Istanbul, established in 2010, introduced a funding campaign to support start-ups in the technology sector under the auspices of the Defense Industry Enterprise (SSB) and Istanbul Chamber of Commerce (ITO). It hosts over 400 companies and has initiated more than 2,600 national projects.
Free Zones in Türkiye
There are more than 21 Free Zones in Türkiye hosting over 1,900 companies – 500 being foreign-owned.
The advantages of expanding into the Turkish market include the following:
Challenges of expanding into the Turkish market include:
For more information, download our free guide or get in touch with our consultants here