SUBSIDIARY ENTITY SET UP IN TÜRKIYE

Foreign companies expanding operations can opt-in for a subsidiary entity set up in Türkiye and establish a foothold for ‘testing the market. This can be a risky move – costly both in time and money – with no guarantee that the effort and financial investment will bring success. Many international companies set their sights on the Republic of Türkiye, a nation at the crossroads of Europe and Asia with coastlines on the Black Sea and the Mediterranean – a prime location for further International Expansion.

The most popular choice for opening a subsidiary in the private sector is a limited liability company, which operates under the new Turkish Commercial Code (TCC). With the subsidiary in place – essential for hiring staff and managing payroll – the parent company can register employees with the Social Security Institution (Sosyal Güvenlik Kurumu, SSI or SGK) and the Turkish Revenue Administration (Gelir İdaresi Başkanliği GİB). Beware! If the move fails, companies face the added costs and hassle of closing their operation, selling property and paying off employees. These are unwanted distractions while you also concentrate on building business in the home territory. Expanding overseas is a significant step.

The sensible alternative is to use a Professional Employer Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to locate the finest local talent and administer your payroll in Türkiye. Your company will be up-and-running in days rather than weeks or months without any risks.

How to Set Up a Turkish Subsidiary?

The first decision for foreign companies planning a move into the Turkish economy is which business structure best suits their plans. The typical choice in the private sector is to open a subsidiary as a limited liability company, signified by the suffix Ltd. Şti. which operates under the new Turkish Commercial Code (TCC).

Establishing a subsidiary is essential before hiring staff and running their payroll, and since implementing the new TCC, all registration has been handled through the Central Registration System (Merkezi Sicil Kayit Sistemi, MERSIS).

Registration and other procedures include:

  • Register with MERSIS and check the availability of a unique company name; obtain a tracking number for registration and compile the subsidiary’s Articles of Association according to the template from MERSIS.
  • Attend Trade Registry Office or public notary to have Articles signed by shareholders, witnessed and notarized. The founders’ declaration is to be signed by the founders, witnessed and notarized.
  • The minimum share capital is TRY 10,000 (€548, US$556). However, 0.04% of the share capital must be deposited into a bank account as a fee for the Turkish Competition Authority (anti-monopoly fee).
  • A corporate bank account is needed before starting the registration process.
  • Provide all required and notarized documents to the Trade Registry Office with the MERSIS tracking number, and with the Registry’s approval, the company becomes a legal entity.
  • Registration of business address with MERSIS and the formation of the company must be published in the Trade Register.
  • Signatures of individuals authorized to represent the company are to be verified by a public notary or the Turkish Consulate.
  • The company must register with the Social Security Institution (Sosyal Güvenlik Kurumu, SSI or SGK), which can be done through MERSIS.
  • Register with the Turkish Revenue Administration (Gelir İdaresi Başkanliği GİB) to obtain the Tax Identification Number, TIN (Vergi Numarasi).

Once the subsidiary is incorporated, the new company must follow other procedures before it can operate payroll for its staff. These include:

  • At the latest, employees must be registered with the SSI one day before the first day of employment. Newly-established companies have one month after incorporation to register employees.
  • Register employees with the Revenue to verify their TIN.
  • Foreigners in Türkiye for more than six months must obtain a TIN via MERSIS.

Benefits of Setting Up a Turkish Subsidiary

The benefits of setting up a subsidiary in Türkiye include having a separate legal identity from the parent company and being treated the same as a local operation. The parent company’s liability is generally restricted to the invested share capital; neither is it responsible for any debts or liabilities of the subsidiary. Partners or managers are generally liable only for the value of their contribution, although they can be liable for public debts that the company cannot pay.

Türkiye’s location at the crossroads of Europe and Asia is ideal for further expansion throughout the region – both east and west – adding to the attraction for foreign companies to establish subsidiaries. Additionally, the subsidiary can ‘test the market’ by following its business ideas and entering into different areas of operation for the owning company. The subsidiary can also draw up its contracts and agreements with clients.

Other benefits for a subsidiary entity set up in Egypt include the following:

  • Easier to obtain potential benefits and incentives and enter into contracts with other Turkish companies.
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches.
  • Employees feel there is more stability and job security than from being with a branch.

However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Türkiye. By working with Bradford Jacobs and using our global Professional Employer Organisation (PEO) networks, your staff can be sourced, placed in their roles and be up and running within days instead of months. All the payroll, taxation and compliance difficulties are under control thanks to our Employer of Record (EOR) services. Meanwhile, your employees are totally under your control.

Subsidiary Laws in Türkiye

Subsidiaries established in Türkiye operate under the new Turkish Commercial Code (TCC) of 2012, bringing corporate legislation more in line with the European Union, of which Türkiye is an associate member. Among changes, the new Code allows a board of directors to comprise one individual instead of the previous minimum of three.

Incorporation and registration procedures for a limited liability company are generally completed through the Central Registration System (Merkezi Sicil Kayit Sistemi, MERSIS), which has been operational since the new Code came into force.

Incorporation procedures include the following categories:

Registration and Documentation:

  • Online via MERSIS, check availability of unique name, obtain MERSIS tracking number for incorporation and produce Articles of Association by the MERSIS template
  • Attend Trade Registry Office or public notary to have Articles signed by shareholders and witnessed; founders’ declaration to be signed by founders
  • Please provide all required and notarized documents to the Trade Registry Office with MERSIS tracking number, and with their approval, the company becomes a legal entity
  • Register with the Turkish Revenue Administration (Gelir İdaresi Başkanliği GİB) to obtain the Tax Identification Number (Vergi Numarasi, TIN)
  • Signatures of individuals authorized to represent the company are to be verified by a public notary or the Turkish Consulate

Accounts and Taxation:

  • The minimum share capital is TRY 10,000 (€548, US$556). However, 0.04% of the share capital must be deposited into a bank account as a fee for the Turkish Competition Authority (anti-monopoly fee)
  • A corporate bank account is needed before starting the registration process
  • In 2018, Law 585 abolished the need for an LLC to deposit 25% of the minimum share capital into the bank account during the first 12 months. However, 100% of the money is required within the first 24 months of operation. The bank states how much has been deposited into the appropriate trade registry office account.
  • The standard liability for Corporate Tax is 20%. However, the rate on income was 25% in 2021 and 23% in 2022 before reverting to 20% in 2023, depending on the legislation
  • Returns must be filed monthly, quarterly and annually

Management:

  • Companies can have a board of directors with one member instead of three before the new TCC
  • It is mandatory to hold a general meeting within three months of the end of the financial year
  • Any shareholder can ask for an audit if they think it necessary
  • Directors’ meetings need only be held as required
  • Management must maintain a shares ledger and minutes of meetings.

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