Business Law in Turkey
Business Law in Turkey is governed by a blend of Turkish civil law and commercial law, influenced by European legal systems, particularly the German and Swiss legal frameworks. The country's legal system offers a well-regulated environment for both domestic and foreign businesses. Turkey is a member of several international organizations and treaties, which impact business operations, such as the World Trade Organization (WTO) and various European Union agreements.
1. Legal Framework and Sources of Business Law
The Turkish legal system is primarily based on civil law principles, with statutes, regulations, and case law forming the foundation of business law. Key sources of business law in Turkey include:
- Constitution: The Constitution of Turkey (1982) is the supreme law of the land and provides the foundation for all legal rights and obligations, including business and commercial activities.
- Turkish Commercial Code (TCC): The Turkish Commercial Code (2012) is the main statute governing corporate governance, business operations, and commercial transactions in Turkey. The TCC regulates the formation and dissolution of businesses, company structures, trade practices, and commercial contracts.
- Turkish Civil Code: The Turkish Civil Code (2001) regulates personal rights, property law, contracts, and inheritance matters, which indirectly affect business operations, especially in relation to partnerships, ownership, and dispute resolution.
- Labor Law: Labor laws, including the Labor Code (4857), regulate employment practices, workers’ rights, wages, working conditions, and dispute resolution.
- Tax Law: Turkey has comprehensive tax regulations which include corporate taxes, VAT, personal income taxes, and other levies.
2. Types of Business Entities
Turkey offers several business entity structures, catering to different types of businesses and investment needs. The main types include:
- Sole Proprietorship (Şahıs Şirketi): A business owned and operated by a single individual who has full personal liability for the business’s debts and obligations.
- Limited Liability Company (Limited Şirket - Ltd. Şti.): A widely-used company structure for small and medium-sized businesses. Shareholder liability is limited to the amount of capital they contribute. The minimum capital requirement for an Ltd. Şti. is TURKISH LIRA 10,000.
- Joint Stock Company (Anonim Şirket - A.Ş.): This structure is used for larger businesses, especially those wishing to issue shares and raise capital. Shareholders’ liability is limited to their shareholding in the company. The minimum capital required for an A.Ş. is TURKISH LIRA 50,000.
- Collective Partnerships (Kollektif Şirket): Partnerships where all partners share unlimited liability for the company's debts and obligations.
- Limited Partnerships (Komandit Şirket): This involves two types of partners: one with unlimited liability and the other with limited liability.
- Branch Office: Foreign investors may establish a branch office of their overseas company in Turkey, subject to the relevant regulations.
- Representative Office: A representative office does not engage in commercial activities but can conduct marketing and liaison functions for foreign companies.
3. Company Formation and Registration
Starting a business in Turkey involves several steps:
- Choose a Business Name: The business name must be unique and registered with the Turkish Trade Registry.
- Notary and Founding Documents: For companies like Ltd. Şti. and A.Ş., founding documents, including the articles of association, must be notarized.
- Capital Requirement: For an Ltd. Şti., the minimum required capital is TURKISH LIRA 10,000; for an A.Ş., the minimum capital is TURKISH LIRA 50,000.
- Trade Registry: Businesses must register with the Trade Registry of the Ministry of Customs and Trade. The registration process includes submitting company documents, providing details of shareholders and directors, and paying the registration fees.
- Tax Identification Number (TIN): All businesses must obtain a Tax Identification Number from the Revenue Administration.
- Social Security Registration: Employers are required to register their employees with the Social Security Institution (SGK) for social insurance purposes.
- Opening a Bank Account: Companies must open a business bank account in Turkey to deposit their capital and operate.
4. Corporate Taxation
The Turkish taxation system for businesses involves various taxes, including:
- Corporate Income Tax: The standard corporate income tax rate in Turkey is 20%. However, there are some tax incentives available for certain sectors (e.g., technology, R&D, and renewable energy). The government has also introduced reduced tax rates for certain small businesses or companies in special regions.
- Value-Added Tax (VAT): Turkey imposes VAT at various rates, with a standard VAT rate of 18%. Some products and services are exempt from VAT or subject to a reduced rate of 8% or 1%.
- Withholding Tax: There are withholding taxes on dividends, interest, and royalties, generally ranging from 10% to 20%, depending on the type of payment.
- Personal Income Tax: Turkey imposes income taxes on individuals, including business owners and employees. The rates range from 15% to 40% depending on the income bracket.
- Customs Duties: Importing goods into Turkey is subject to customs duties, which vary depending on the type of goods and trade agreements Turkey has with other countries. Turkey is a member of the Customs Union with the European Union, which allows for reduced tariffs on trade between the two entities.
- Special Taxes: Certain goods and services, such as luxury items, tobacco, and alcohol, may be subject to special consumption taxes.
5. Labor and Employment Law
Labor law in Turkey is governed by the Labor Code (4857) and other regulations, and is designed to protect workers while also allowing flexibility for businesses. Some key provisions include:
- Employment Contracts: Employers must provide written employment contracts to their employees. These contracts should outline the job position, salary, benefits, and other terms of employment.
- Working Hours: The standard working week in Turkey is 45 hours. Overtime work is compensated at higher rates.
- Minimum Wage: Turkey sets a national minimum wage that all employers must comply with. The minimum wage is revised annually by the government, and as of 2025, it is TURKISH LIRA 10,000 per month (gross).
- Annual Leave: Employees are entitled to 14 days of paid annual leave after working for one year. The leave increases with seniority.
- Social Security: Employers and employees contribute to the social security system, which covers pensions, health insurance, and unemployment benefits.
- Termination of Employment: The Labor Code provides protection for employees against unfair dismissal. Termination can occur for just cause, but employers must follow due process and provide severance pay in many cases.
- Trade Unions: Employees have the right to form trade unions, and there are regulations governing collective bargaining, dispute resolution, and strike action.
6. Intellectual Property (IP) Law
Turkey has a robust system for protecting intellectual property (IP) rights, including trademarks, patents, copyrights, and industrial designs:
- Trademarks: Trademarks can be registered with the Turkish Patent and Trademark Office for protection. Registered trademarks are valid for 10 years, with the option for renewal.
- Patents: The Patent and Trademark Office also grants patents for inventions. Patent protection lasts for 20 years from the filing date.
- Copyright: Copyright law protects literary, artistic, and musical works. Protection lasts for the life of the author plus 70 years.
- Industrial Designs: Industrial designs can be registered to protect the aesthetic aspects of products, with protection lasting for 5 years, renewable for up to 25 years.
- Trade Secrets: Trade secrets and confidential business information can be protected through non-disclosure agreements (NDAs) and other contracts.
7. Foreign Investment and Business Environment
Turkey is open to foreign investment, and the government has created a favorable environment to attract international businesses. Key aspects of foreign investment law include:
- Foreign Direct Investment (FDI): Foreign investors can own and operate businesses in Turkey, and there are no restrictions on foreign ownership in most sectors, except for certain strategic industries like defense and telecommunications.
- Investment Incentives: The government offers incentives, such as tax exemptions, land allocation, and financial support, particularly in certain regions or for investments in priority sectors like technology, energy, and manufacturing.
- Investment Promotion Agency: The Presidency of the Republic of Turkey Investment Office (under the Ministry of Industry and Technology) provides support to foreign investors, helping them navigate legal, regulatory, and financial requirements.
8. Dispute Resolution
Disputes in Turkey are primarily resolved through the court system or alternative dispute resolution (ADR) mechanisms:
- Courts: Commercial disputes are typically handled by Commercial Courts in Turkey, which specialize in business-related issues. The Turkish court system operates under civil law principles.
- Arbitration: Arbitration is a widely used alternative dispute resolution method, and Turkey is a signatory to the New York Convention on the enforcement of arbitration awards. The Istanbul Chamber of Commerce and the Turkish Union of Chambers and Commodity Exchanges (TOBB) also provide arbitration services.
- Mediation: Mediation is encouraged for labor and commercial disputes, and a formal mediation process has been established in Turkey for labor disputes.
9. Environmental Laws
Turkey has established laws and regulations to protect the environment and regulate businesses with respect to environmental issues:
- Environmental Impact Assessments (EIA): Businesses are required to conduct EIAs for projects that may have significant environmental impacts, such as large infrastructure, manufacturing, and construction projects.
- Waste Management: Businesses must adhere
to regulations on waste disposal and recycling, especially hazardous materials.
- Air and Water Quality: Industrial operations are subject to air and water quality standards, and companies must obtain permits from the relevant authorities for activities that may affect environmental quality.
Conclusion
Business law in Turkey provides a solid and supportive environment for local and foreign businesses. The legal framework is well-structured, covering everything from company formation to taxation, labor, intellectual property, and dispute resolution. While the Turkish market offers opportunities, businesses should carefully navigate the regulatory landscape, including compliance with tax obligations, employment laws, and intellectual property protections.
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