Establishment of Companies by Foreign Business People in Turkey

Turkey follows an open investment policy that allows foreigners to establish companies in the country. However, there are legal regulations that must be followed during the establishment phase. Depending on the type of company, the documents to be complied by foreign investors may vary according to their main functions, capital requirements, tax and legal regulations.

In this article, the permission of foreigners to establish a company in Turkey, the legal legislation they will comply with, the application stages and the necessary documents, the articles that will encourage foreigners to establish a company in Turkey and the advantages of doing business in Turkey for foreign investors will be discussed.

Application Stages and Documents

In order for a foreigner to open a company in Turkey, he/she must decide on the type of company at the first stage. It is generally recommended that the company be a joint stock or limited liability company.

In the next stage after the type of company, it will be important to decide on the title of the company. The title of the company must include the fields of activity of the company.For example  ECA AUTOMOTIVE, TOURISM, INDUSTRY, CONSTRUCTION (type of company) Company.

After this stage is passed, it is necessary to obtain a potential tax number for the company partners. This tax number can be obtained from the internet or from tax offices. However, what is important at this point is the need for an address statement.

After the potential tax number, the “articles of association” of the company must be prepared. This is very important as it will be the constitution of the company. It is recommended to prepare it in the presence of a lawyer and financial advisor.

 After this stage, transactions should be followed at the trade registry office in the provinces, and if exports or imports are to be made afterwards, transactions should be made in this regard as well. These transactions can be followed and completed in many cities, especially in Istanbul-Ankara-Izmir-Antalya, through Seyhan Law Office.

It is mandatory that commercial books are kept by a financial advisor after your company is established.

Incentives

Free Zone- Another way for foreigners to establish a company in Turkey is to invest in free zones created specifically for them. These regions provide many tax advantages for foreigners with lower tax rates, tax exemption, facilitated customs procedures, free foreign exchange transactions and tax exemption for domestic labor compared to other regions of Turkey. Izmir, Turkey’s oldest free zone, can be given as an example.

Easy company formation- Establishing a company in Turkey can be completed in a few days. You do not need to come to the country to establish a company in Turkey. You can solve all your company establishment processes in Turkey through Seyhan Law Firm.

An Attractive Investment Environment-Turkey’s economy is growing rapidly and offers an attractive environment to the world’s leading investors. Turkey, which has a strategic location between Europe, Asia and the Middle East, is an ideal place to do business. Turkey also offers a large domestic market and many opportunities to do business in the Middle East and Asia. The young population makes the country an attractive labor market.

Conclusion and Suggestions

Turkey has a great potential for foreign investors. The Turkish government continues to work to improve the investment climate. This will reduce the barriers for foreign investment to come to Turkey and create a more attractive environment for investment. Turkey attracts attention with its unique geographical location, high-quality workforce, advantageous investment environment and strong economy.

Partnering with local businesses to strengthen your company in Turkey, conducting market research by ensuring the active participation of people with experience in the Turkish market, and being familiar with customer needs, competitive factors, and other business activity-related components are the right steps to put you ahead of other companies.

INVESTING IN THE TURKISH STOCK MARKET AND TAXATION OF EARNINGS ON THE STOCK MARKET FOR NON-RESIDENT FOREIGNERS

The Turkish stock market is the market where many financial instruments are traded, including stocks, bonds, funds, futures contracts, and commodities. The Turkish stock market is at an important point among the world stock exchanges with its high liquidity and attractive investment opportunities.

Stock market indices in Borsa İstanbul are calculated by following the prices of stocks traded on the stock market in a certain range. Some of the indices traded in Turkey are BIST 100, BIST 50, BIST 30, BIST Bank, BIST Industrial and BIST Technology indices. The Turkish stock market is also noteworthy for the fact that companies in Borsa Istanbul are consistently profitable (due to fluctuations in exchange rates) while being quite affordable in USD terms. Considering the opinions about the Turkish Stock Exchange, mostly experts state that the rise may continue.( August 2023)

Advantages of Investing in the Turkish Stock Exchange

-High returns – Turkey’s growing economy offers opportunities for foreign investors.

-Attractive stocks- some Turkish companies traded on the stock exchange can be a lucrative investment for foreign investors.

-Capital increase

-Portfolio diversification

-The Turkish stock market offers a high return potential. In addition, investing in Turkish companies serves as a bridge between Europe, Asia and the Middle East.

Borsa Istanbul (BIST) became the best investment tool in Turkey with a return of105% in 2022.

What Should Be Considered When Investing in the Turkish Stock Exchange?

As with any stock market, the Turkish Stock Exchange is affected by global economic conditions. For this reason, global economic conditions should be followed when investing in BIST. So you can make your investment at the right time.

Stock market indices should be monitored. Tracking the performance of the exchange helps the investor make decisions. Tracking the performance of the exchange helps the investor to make decisions. Stock market indices reflect the overall performance of the stock market.

Company shares should be investigated. Before investing, it is important to conduct thorough research on Turkish companies. Gaining insight into company management, financial performance, and futures helps investors minimize their risk.

Taxation of Non-Resident Foreign Investors on the Turkish Stock Exchange

If a foreign person is not settled in Turkey, he/she is considered a limited taxpayer according to Article 6 of the Income Tax Law. Accordingly, taxation procedures will be carried out in a way that covers limited taxpayers. Article 6 of the Income Tax Law states that limited taxpayers are “taxed only on the earnings and revenues they earn in Turkey.” In Article 7 of the same law, the counting of securities as earnings or income in Turkey is subject to the condition that “the capital is invested in Turkey”.The earnings of the limited taxpayer investing in the stock market in Turkey will be taxed. Taxation of transactions made on the stock exchange is done on the spot therefor it is the final tax. When you trade on the exchange, the amount credited to your account is taxed income. In this information note, in the taxation of a foreigner who is not considered to be settled in Turkey while trading on the stock exchange, first the earnings obtained from the purchase and sale of shares will be evaluated, and then the earnings obtained with dividends will be evaluated:

1-Earnings from the Purchase and Sale of Shares Traded on BIST

Regarding the taxation of the earnings from the trading of shares on the stock exchange for limited taxpayers, it is necessary to first look at whether the share is an “investment partnership” share. If the share is not an investment trust share, the withholding tax rate has been determined as 0% according to the provisional article 67 of the Income Tax Law. If the share belongs to an investment trust, the holding period of the share is considered first. Withholding tax is not applied if the share has not been sold for more than 1 year. However, if the investment trust share is held for less than 1 year, 10% withholding tax is applied.

2-Dividend Income from Shares Traded on BIST

Companies whose shares are traded on the Borsa Istanbul may distribute dividends to their shareholders in line with the decisions taken at their general assembly. First of all, it should be noted that dividends are taxed before they are deposited into the accounts, they do not need to be declared. When companies traded on the Borsa Istanbul distribute dividends, the taxes on dividends are as follows: 0% if the share is an investment trust company share. If the share is not an investment trust company share, a 10% withholding tax is applied.

Seyhan Law Office

Note: What is written in this article is not investment advice.

Preparation of International Conventions

Contracts established by mutual declarations of will of the parties in accordance with each other, that is, by necessity and acceptance, become an international contract if they have an international element. The international element may arise in the debt relationship in which the dispute arises, if one or both of the parties are foreigners or if the place where the contract is made or the place of execution or the subject of the contract is born in a foreign country or the law applicable to the debt relationship is a foreign law. According to new opinions and practices in this field, contracts that do not have an element of foreignness in terms of their personal or geographical elements or that do not have contact with more than one legal system are also international in nature to the extent that they concern international trade or investment. Ultimately, whether each contract has an international character or not will be evaluated separately and objectively by the judge according to the criteria of person, place and time. The judge shall act in accordance with the rules of state law (lex fori), of which they are a member, in determining the foreign contact.

The choice of law in international contracts should be clearly regulated in a way that does not allow interpretation and hesitation. When making a choice of law, a compatibility must be ensured between the provisions of the contract and the law chosen to apply to the contract. Contracts other than those stipulated by the law to be made in a special form or official form are not subject to any form requirement. However, the main elements of the contract should be regulated in detail. Because the preparation of international conventions in writing and in detail will also minimize the problems of conflict of laws. Because resorting to national legal systems in matters not regulated in the contract will cause a real conflict of laws in cases where the material legal systems to be taken as a basis in the solution of the dispute issue have different regulations. In this respect, the name of the contract is very important, because in case of a dispute, those provisions will be applied. If it cannot be determined, “protocol” should be written.

During the regulation of international contracts, the parties must mutually use the articles in a common sense in the language in which the contract is written. Otherwise, a conflict of language and interpretation will arise.Therefore, in the beginning part of the contract, the parties should list what the terms used in the contract mean in the contract article. ,

The competent authority for the resolution of disputes that may arise in international contracts can also be determined by the parties. The contracting parties may authorize a state court by including a jurisdiction agreement, or they may conclude an arbitration agreement.

AI, Law and Speeding Up the Judicial Procedures

AI, Law and Speeding Up the Judicial Procedures

The humankind has always engaged in the debates regarding issues of unemployment and technological advancements. For example, during the industrial revolution there were those who argued that the machines would replace humans in the workforce and thus would lead to mass unemployment and social depression or even the end of humanity. Nevertheless the enormous effect of the industrial revolution is obvious, as is the fact that it did not lead to the human extinction and even led to an increase in wealth and prosperity. Similarly, now we are witnessing important technological developments and simultaneously led to the reoccurrence of the debate caused by the industrial revolution. Especially in recent years such developments as the blockchain technology and WEB 3.0 tech, the AI too has shown a stunning growth in recent years.

Recently the OpenAI developed an AI with an extremely high capacity named ChatGPT 4, this led to reoccurrence of this subject. The expectations are that by 2030 all of the human work will be done by the AI. Though it is not year clear in the less developed countries, this might lead to concerns about mass unemployment.

The book called “The Rise of Robots” by Martin Ford, quotes Milton Friedman: Friedman once was advising a company in Asia and when he was walking in the project field, he saw that the workers were using shovels, and that there was no tractor or a bulldozer to be seen. When he asked why this was the case, the answer he received was that it is an “employment project”. Friedman replied, “well, then let workers use the spoons instead”. (By the way, when I was reading this anecdote, I thought of the inflation of the salaries of the government officials. Turkey is already giving its government officials spoons to work if you know what I mean.)

As in Friedman’s joke, it makes little sense to get anxious about the unemployment-like issues resulting from technological developments. I think that these issues should be argued about but these arguments shouldn’t lead to anxiety. This is because similar anxieties surrounded the Industrial Revolution and in the end, despite a short period of depression, the humanity mastered those machines and learnt how to use them, this led to the rise of new professions and prosperity. Obviously we’ll find a way of using the abilities of robots to increase our wealth as well. This will lead to a period of change and transformation, maybe to a very serious change, however in the very end, if we’ll be able to adopt and make the necessary changes, this would benefit the humankind. The PriceWaterHouseCoopers published a report in which it states that by 2030 the AI will lead to a 15.7 trillion dollars growth in the global GDP. Lots of reports on the AI show that it could lead to an increase in wealth. Obviously, the ways of earning money, financial system etc. will fundamentally change.

As Martin Ford notes in his book (The Rise of Robots), “historically we thought of the machines as of tools, now they will become the autonomous workers.” However, in the short term the need for humans will preserve itself to a certain extent. Soon enough, people won’t sit into a car with no driver, they won’t trust a robot without a doctors supervision and won’t enter a plane with no human pilot in it.

Concerns regarding AI are not limited to unemployment and depression that is looming over the humankind. Concerns about AI may also include, security of the personal data, supervision of the AI and the energy consumption. The source of all concerns is that humans aren’t smart enough to supervise an AI. Among the most interesting ideas regarding AI is the idea of AI being supervised by an AI. These highly sophisticated bots and robots truly have an enormous capacity.

The above mentioned concerns regarding the AI may affect our lives in the short term and many of these are true. First of all, the research regarding the security of the personal data should be conducted in cooperation between the lawyers and computer scientists. Especially in the developing countries such as Turkiye, the precautions in regard to the security of personal data should be more common. On the other hand the fact the the AI algorithms are open-source means that the transparency of the research and data sharing will be important in the sense of security. Already, although attempts in this regard are insufficient, I’m sure that the necessary regulations will be adopted. In regard to this issue, Darrel M. West in his article “Six Steps to Responsible AI in the Federal Government” said:

There’s a consensus that a set principles regarding the transparency, justice, personal data security, human safety and explainability of the activities should be set. Almost all of the ethics experts and advocates of the policies regarding technologies underline the importance of these factors and support the usage of just, safe and understandable algorithms.”*

On the other hand, in Turkiye the subject isn’t researched anywhere other than the Istanbul Barr IT Commission and several academicians. I must say that Turkiye is behind on this issue just as it is in the sense of the personal data protection law.

Usage of the AI in Law and Advise About National Judiciary Informatics System

As those who follow the issue will know, recently there was an attempt to use the AI as a lawyer in court but wasn’t allowed to proceed in the United States. The accused person made the AI prepare the defense for him and used it in court. In the end, when the defendant could’ve gotten a smaller punishment he got the bigger one as his defense was insufficient. This AI has also helped lots of other people, however the developer received lots of complaints from the customers who thought that they were deceived.

You can easily access the details of this event with a little research.

To avoid writing too much here and making the article boring, I would like to sum it up:

The AI could be used as a good assistant attorney or paralegal. However, it is definitely not at a point where it could function as a lawyer. On the other hand, using the AI to find the case law for the complaint, prepare the evidence is possible thanks to AI. The article in the brookings edu by John Villasenor named “How AI will revolutionize the practice of law” talks about usage of the AI in law:**

Villasenor says that though the AI won’t replace lawyers, it will facilitate their jobs, can allow them to do some of the work at a lower cost and write the complaints using AI, this may lead to an increased access to justice by allowing people with smaller incomes to use services of the lawyers. According to Villasenor, judges too may use AI. AI may facilitate the evaluation and research of the evidence etc.

In my opinion, more sophisticated AI might be used for account expertise and some of the other expertise. Thus, expert evaluation that takes months will be obtained faster, thus speeding up the judicial procedures.

If so, I would like to finish this article with a proposal:

After the elections in Turkiye, the new Minister of Justice whose name is yet unknown, must consider the National Judicial Network Project 2.0 and develop its functions. First things first, national judicial network project 2.0 should include the natural language processing technology. Both lawyers and ordinary citizens should be able to search for case law in the new system, using AI. Additionally, speeding up the judiciary procedures by speeding up the expert report preparation and evaluation process. “Counting” segment should be introduced to use the accounting experts. The existing reports might be erroneous, the lawyers and the judges are checking the accounts. For sure the judicial procedures can become faster thanks to AI.

Attorney Haldun Barish

References:

* Darrel M. West, Six Steps to Responsible AI in the Federal Government,   https://www.brookings.edu/research/six-steps-to-responsible-ai-in-the-federal-government/

** Villasenor John, “How AI will revolutionize the practice of law”, Mart 2023, https://www.brookings.edu/blog/techtank/2023/03/20/how-ai-will-revolutionize-the-practice-of-law/

Diğer Bazı Kaynaklar:

Ford Martin, Robotların Yükselişi, Kronik Kitap, 11. Baskı, 2022

Chul Han Byung, Şeffaflık Toplumu, Metis, Ekim 2022

https://www.istanbulbarosu.org.tr/komisyonlar.aspx?ID=1&DESC=BILISIM-HUKUKU-KOMISYONU-YAPAY-ZEKA-CALISMA-GRUBU

Consultancy Service to Companies in Turkey

The definition of compliance is “the action of complying with a command,” or “the state of meeting rules or standards.” In the corporate world, it’s defined as the process of making sure your company and employees follow all laws, regulations, standards, and ethical practices that apply to your organization and industry.The keyword here is prevention. Our advocates prevent any problems before you face with judicial procedures,which cause prestige loss.

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