Güçlü

The Legal Framework and a Practical Roadmap under Law No. 4875 on Foreign Direct Investment

Introduction: From a Permit Regime to a Notification Regime

The position of foreign capital under Turkish law underwent a fundamental shift in 2003. Until that date, Law No. 6224 on the Encouragement of Foreign Capital had established a structure making foreign investment conditional upon the prior permission and approval of the administration. Law No. 4875 on Foreign Direct Investment, published in the Official Gazette of 17 June 2003, expressly set out in its Article 1 the aim of "transforming the permit and approval system into a notification system."

This choice is the key to understanding the legal position of a foreign investor in Türkiye today: as a rule, an investment is not the subject of an administrative permit; the investor establishes its corporate structure through the same procedure as a domestic investor, and its obligation towards the administration is essentially one of notification.

Drawing on Law No. 4875 and the guide titled "Establishing a Company in Türkiye" published by the Directorate General of Domestic Trade of the Ministry of Trade, this article addresses the legal framework a foreign investor will encounter in Türkiye in a comprehensive manner — from conceptual definitions to incorporation procedure, from alternative structuring options to the "qualified service centre" regime introduced into the legislation in 2026.

I. Who Qualifies as a "Foreign Investor"?

Article 2 of the Law introduces two fundamental definitions with a view to alignment with international standards.

A foreign investor is a person making foreign direct investment in Türkiye who is:

• a natural person holding the nationality of a foreign country, or a Turkish citizen resident abroad;
• a legal entity established under the laws of a foreign country, or an international organisation.

The second limb is frequently overlooked in practice: Turkish citizenship does not automatically place a person outside the scope of the Law. Capital brought into Türkiye by a Turkish citizen resident abroad also constitutes foreign direct investment and benefits from the guarantees the Law provides.

Foreign direct investment, in turn, covers two types of transaction carried out through certain economic assets. As regards those assets, the Law draws a twofold distinction:

In terms of transactions, foreign direct investment means (i) establishing a new company or opening a branch, or (ii) becoming a shareholder in an existing company through the acquisition of shares outside the stock exchanges, or through acquisitions on the stock exchanges providing a shareholding of at least 10% or voting rights at the same ratio.

This 10% threshold is critical in drawing the line between portfolio investment and direct investment: acquisitions made on the stock exchange that fall below the threshold do not qualify as foreign direct investment within the meaning of the Law.

II. Guarantees Afforded to the Investor

Article 3 of the Law sets out the principles applicable to foreign direct investment in the form of a catalogue of guarantees.

1. Freedom to invest and national treatment. Unless otherwise provided by international agreements and special legislative provisions, foreign investors are free to make foreign direct investment in Türkiye, and foreign investors are subject to equal treatment with domestic investors. The Ministry's guide confirms the same principle: the establishment of a company in Türkiye by foreign natural and legal persons is subject to the same rules as for domestic investors.

However, the reservation that "international agreements and special legislative provisions are reserved" creates an area of restriction that cannot be disregarded in practice. Limitations and shareholding ceilings laid down in special legislation continue to apply to the acquisition of immovable property by companies with foreign capital, radio and television broadcasting, cabotage rights, civil aviation, maritime transport and certain regulated sectors. For this reason, sector selection should not stop at the general principle of freedom; the relevant special legislation must be reviewed.

2. Protection against expropriation and nationalisation. Foreign direct investments may not be expropriated or nationalised under the legislation in force unless the public interest so requires and unless compensation is paid. The provision transposes into domestic law the two classic conditions of international investment law: public purpose and compensation.

3. Freedom of transfer. Net profits, dividends, proceeds of sale, liquidation and compensation, amounts payable under licence, management and similar agreements, and principal and interest payments on foreign loans, arising from the activities and transactions of foreign investors in Türkiye, may be transferred abroad freely through banks or special financial institutions. Freedom of exit and profit repatriation — perhaps the single most decisive factor in an investment decision — is thus guaranteed at the level of primary legislation.

4. Dispute resolution and arbitration. For the settlement of disputes arising from investment agreements subject to private law, and of investment disputes arising from public service concession contracts and terms concluded by foreign investors with the administration, recourse may be had — in addition to the competent and authorised courts — to national or international arbitration or other dispute resolution mechanisms, provided that the conditions set out in the relevant legislation are met and the parties so agree.

5. Valuation of non-cash capital. The valuation of contributions in kind is carried out within the framework of the provisions of the Turkish Commercial Code. Where the securities of companies established in foreign countries are used as an investment instrument, the valuations of the authorities competent to determine value under the legislation of the country of origin, of experts appointed by the courts of that country, or of international appraisal institutions, are taken as a basis. This provision offers a practical solution for cross-border contributions in kind by relaxing the requirement for a court-appointed expert in Türkiye.

6. Employment of foreign personnel. Work permits for foreign personnel to be employed in companies, branches and entities established under the Law are issued by the Ministry of Labour and Social Security. The remaining sentences of the provision were repealed by Law No. 6735 on International Labour Force, and the procedures and principles governing work permits are today administered entirely under Law No. 6735 and its secondary legislation.

7. Liaison offices. Companies established under the laws of foreign countries may be granted permission to open a liaison office on condition that they do not engage in commercial activity in Türkiye. The prohibition on commercial activity is a constitutive element of this structure; it is suitable for a presence limited to market research, promotion and coordination, not for revenue-generating operations.

A parenthesis: the annulled subparagraph (d). Subparagraph (d) of Article 3 of the Law was annulled by the judgment of the Constitutional Court dated 11 March 2008, No. E. 2003/71, K. 2008/79. The acquisition of immovable property by companies with foreign capital is today governed by Article 36 of Land Registry Law No. 2644 and the related regulation, subject to governorship and commission procedures. It would be erroneous to read the text of the Law and infer freedom in this area.

III. Notification Obligation and the Competent Authority

Article 4 of the Law requires foreign investors to notify the administration of statistical information concerning their investments, within the framework of the procedures and principles determined by regulation. The final sentence of the article contains an important protection for the investor: such information may not be used as evidence for purposes other than statistical purposes.

Although the term "Undersecretariat" in the text refers to the Undersecretariat of Treasury, following the administrative restructuring of 2018 the duties and powers relating to foreign direct investment were transferred to the Ministry of Industry and Technology (Directorate General of Incentive Implementation and Foreign Investment). Notifications are made electronically through the E-TUYS system by an authorised user. Indeed, Additional Article 1, added to the Law in 2026, expressly confers implementing authority on the Ministry of Industry and Technology.

IV. Choice of Company Type

Under the Turkish Commercial Code there are five company types in Türkiye: the joint stock company, the limited liability company, the general partnership (kollektif şirket), the limited partnership (komandit şirket — in ordinary form and in the form of a partnership limited by shares), and the cooperative. The joint stock company, the limited liability company and the partnership limited by shares are capital companies; the ordinary limited partnership and the general partnership are partnerships. Since partners in partnerships bear unlimited secondary liability for the debts of the company, these types are effectively not used in foreign investment practice.

According to Ministry figures, approximately 82% of companies are limited liability companies, 13% joint stock companies and 4% cooperatives; general and limited partnerships together account for around 1%.

The real choice facing a foreign investor is therefore between the joint stock company and the limited liability company:

Critical warning — the compliance deadline of 31 December 2026. The figures of TRY 50,000 (joint stock) and TRY 10,000 (limited liability) appearing in the Ministry's guide were raised, with effect from 1 January 2024, to TRY 250,000 and TRY 50,000 respectively by Presidential Decree No. 7887, published in the Official Gazette of 25 November 2023. More importantly, under Provisional Article 15 added to the Turkish Commercial Code, existing joint stock and limited liability companies whose capital remains below these amounts shall be deemed dissolved unless they increase their capital by 31 December 2026. For non-public joint stock companies within the registered capital system, failure to reach the TRY 500,000 threshold results in being deemed to have exited that system. Foreign investors with existing participations in Türkiye should review this timetable as a matter of urgency.

A note on share transfers. The fact that share transfers in a joint stock company are not subject to registration and announcement materially accelerates subsequent changes in shareholding structure and exit scenarios. In a limited liability company, by contrast, each transfer is registered with the trade registry following notarisation and a general assembly resolution. The joint stock company is the rational choice for structures with multiple shareholders and anticipated transfer activity; the limited liability company for closely held structures with lower capital.

V. The Incorporation Process: Four Stages

According to the Ministry's guide, where the required documents are submitted to the relevant trade registry directorate, incorporation may be completed within one hour, and company incorporation is exempt from stamp duty and fees. The trade registry is maintained by 238 trade registry directorates operating within the chambers of commerce under the supervision and control of the Ministry of Trade. Incorporation procedures are carried out electronically through the Central Registry System (MERSİS).

Stage 1 — Preparation of the articles of association and certification of founders' signatures. The process begins with the creation of a free membership account on MERSİS. Turkish citizens are added as shareholders or authorised signatories using their identity numbers, and foreigners using their passport numbers. A precondition applies to foreigners: they must first obtain a tax number from the tax office and then register themselves with MERSİS by applying to a trade registry directorate. In practice, this is the step at which time is most frequently lost, and the incorporation timetable should allow for it.

The articles are prepared in Turkish, and the company's prospective tax number is automatically assigned by MERSİS. Certification of signatures is carried out, for limited liability companies and cooperatives, at the trade registry directorate of the place where the company's registered office is located; for other companies, application may be made either to that directorate or to any notary public. As the articles are transmitted electronically to notaries by MERSİS, there is no need to attend the notary with a physical printout.

Stage 2 — Preparation of signature declarations. Signatures to be affixed under the company's trade name by persons authorised to represent it are approved by the competent authority. In Türkiye this may be done at any trade registry directorate.

Stage 3 — Payment of the Competition Authority share and cash capital. An amount equal to 0.04% of the company's capital is paid as the Competition Authority share; this may be paid at the trade registry directorate together with the other incorporation formalities, without a separate visit to a bank. In joint stock companies, at least 25% of the shares subscribed in cash must additionally be deposited, before registration, into a bank account opened in the company's name.

Stage 4 — Application for registration. Upon the founders' application to the registry directorate with the relevant documents, registration is completed. In the incorporation of joint stock and limited liability companies and cooperatives, the commercial books to be kept are certified by the trade registry directorate and delivered to the relevant party following registration. Incorporation formalities may be carried out through a representative authorised by power of attorney — which, for investors located abroad, opens the way to completing the process without travelling to Türkiye.

Principal documents to be submitted for registration of a joint stock company: articles of association with certified founders' signatures; document evidencing that at least 25% of the cash capital has been deposited with a bank; document evidencing payment of the Competition Authority share; where a contribution in kind is made, the valuation report prepared by a court-appointed expert, a letter from the relevant registry confirming the absence of any restriction, and the document evidencing annotation; the permit or favourable opinion letter for companies whose incorporation is subject to permission; written declarations of acceptance of office by board members who are not shareholders; where a legal entity sits on the board, a notarised copy of the competent body's resolution designating the natural person; and signature declarations of persons authorised to represent and bind the company.

For a limited liability company the list is largely parallel; the differences are that no capital blocking document is required and that declarations of acceptance of office are sought from managers who are not shareholders.

VI. Alternatives to Incorporation

Entry through share acquisition. Rather than incorporating directly, foreign investors may invest by acquiring shares in a company already established in Türkiye; they may equally exit the shareholding by transferring those shares to others. In sectors requiring operating permits, an established client portfolio or licences, this route is often faster than incorporation from scratch.

Opening a branch. Branches in Türkiye of commercial enterprises whose head office is located outside Türkiye are registered in the same way as domestic commercial enterprises, subject to the provisions of the law of their own country concerning trade names. A fully authorised commercial representative resident in Türkiye must be appointed for such branches. Registration requires a letter from the competent authority evidencing that the conditions sought by the law of the country of origin have been satisfied, certified copies of the company's current registry records and articles of association, the resolution of the competent body to open the branch, and a comprehensive declaration signed by the officers of the head office — all together with their Turkish translations.

The decisive factor in choosing between a branch and a subsidiary is the liability regime: because a branch does not constitute a separate legal entity, its obligations attach to the assets of the head office.

Liaison office. Opened by way of permission, on condition that no commercial activity is carried out. Suitable for the exploratory phase preceding market entry.

Transfer of registered office. The registered office of a commercial company established in a foreign country may be transferred to Türkiye; the provisions on incorporation apply to registration, and trade registry directorates are obliged to examine whether the company's articles of association comply with, or have been adapted to, Turkish law. In the opposite direction, the registered office of a company established in Türkiye may also be transferred abroad; in that case, however, a demanding set of documents protecting creditors is required: the written consent of all creditors, or documents evidencing that all receivables have been paid or secured, together with letters from the tax office and the Social Security Institution confirming the absence of debt.

VII. The New Regime: The Qualified Service Centre (Additional Article 1)

Additional Article 1, added to Law No. 4875 by Article 6 of Law No. 7582 dated 21 May 2026 and entering into force on 4 June 2026, creates a new status intended to attract the regional management and support functions of multinational groups to Türkiye. This is the most striking structural change the Law has undergone since 2003.

Definition and qualifying conditions. A qualified service centre means a capital company which:

• operates actively in at least three different countries;
• is established to provide services to a related company or group of companies; and
• derives at least 80% of its annual revenue from related companies or the group of companies abroad.

Partnerships fall outside the scope of the status.

Activities within scope. The Law groups the activities into two categories. The first comprises financial consultancy, strategic management consultancy, risk management, cash and liquidity management, funding and borrowing transactions, investment and capital structure planning, budgeting, financial reporting and analysis, international accounting and compliance, audit, digital transformation and technology consultancy, investment and data analysis, legal consultancy, promotion, brand management, human resources and training services, together with coordination and management services relating thereto. The second comprises coordination and management services relating to activities such as sales, after-sales support, technical support, research and development, outsourcing, testing of newly developed products and laboratory services.

An important limit for the legal profession. While bringing legal consultancy within scope, the legislature inserted an express reservation in parentheses: legal consultancy relating to domestic activities or to Turkish law may be provided only by procuring it from an attorney or attorney partnership entitled to provide services under Attorneyship Law No. 1136. In other words, qualified service centre status does not create an exception piercing the monopoly provisions of the Attorneyship Law; the centre may pass on advice concerning Turkish law to group companies only by sourcing it from an attorney or attorney partnership. International groups planning a structure in Türkiye must design their domestic legal advisory flow with this restriction in mind.

Qualified service personnel. Employees who directly perform the activities within scope, other than support staff, are deemed qualified service personnel. The distinction is not merely definitional; it determines the personal scope of the tax advantage set out below.

Incentives. Law No. 7582 designed the status together with tax advantages:

• Income tax exemption: the portion of the wages of qualified service personnel employed at qualified service centres not exceeding three times the gross minimum wage is exempt from income tax. For centres located in industrial zones approved by the President and for those operating in the Istanbul Finance Centre with a participant certificate, this is applied as five times the gross minimum wage.
• Corporate income tax deduction: 95% of the earnings derived from abroad by entities operating as qualified service centres, exclusively within the scope of those activities, may be deducted; for those operating in the relevant industrial zones and in the Istanbul Finance Centre Region, the rate is 100%. These deductions may also be offset against the domestic minimum corporate income tax base.

Implementation. The Ministry of Industry and Technology is authorised to determine the procedures and principles governing the implementation of the article, after obtaining the opinions of the Ministry of Treasury and Finance and the Ministry of Trade. As the regime is very recent, secondary legislation and administrative practice should be monitored closely.

VIII. After Incorporation: Audit and Dissolution

Audit. Capital companies operating in certain sectors, and capital companies exceeding the threshold values in at least two of the criteria of total assets, annual net sales revenue and number of employees, are subject to independent audit. In addition, the Ministry of Trade has audit authority over the transactions of all commercial companies within the scope of the Turkish Commercial Code. A notable protection also exists in terms of minority rights: if a request for the appointment of a special auditor is rejected at the general assembly, shareholders representing at least one tenth of the capital (one twentieth in publicly held companies) may apply to the court within three months for the appointment of a special auditor. For foreign shareholders in a minority position, this is a functional tool against information asymmetry.

Liquidation. A company that comes to an end enters liquidation; it retains its legal personality until the conclusion of liquidation and uses its trade name with the addition of the phrase "in liquidation". A binding requirement applies here for foreign investors: at least one of the liquidators must be a Turkish citizen and resident in Türkiye. Creditors are invited by three announcements made at one-week intervals, and the remaining assets may not be distributed until six months have elapsed from the date of the third announcement. This timetable should be factored into exit planning.

Conclusion

The system established by Law No. 4875 makes three fundamental promises to the foreign investor: freedom (investment is not, as a rule, subject to permission), equality (the principle of national treatment) and protection (conditions on expropriation, freedom of transfer and access to arbitration). The procedural framework set out in the Ministry's guide is the practical counterpart of those promises: an incorporation process conducted through MERSİS, exempt from fees, capable of being carried out by power of attorney and, in theory, completed within one hour.

The real risk, however, accumulates not in the wording of the Law but in the detail surrounding it: the sectoral implications of the reservation for "special legislative provisions", the immovable property regime that replaced an annulled subparagraph, the capital figures in published guides that are no longer current together with the compliance deadline expiring on 31 December 2026, and finally the qualified service centre status whose secondary legislation has yet to take shape. A decision to invest in Türkiye requires all of these layers to be read together.

This article has been prepared for general information purposes only and does not constitute legal opinion or advice. The monetary thresholds, rates and periods referred to are subject to legislative change. Legal advice should be sought in relation to any specific matter.

Sources: Law No. 4875 on Foreign Direct Investment (Official Gazette 17/6/2003, No. 25141, including Additional Article 1 added by Law No. 7582) — Republic of Türkiye Ministry of Trade, Directorate General of Domestic Trade, "Establishing a Company in Türkiye" — Turkish Commercial Code No. 6102 — Presidential Decree No. 7887 (Official Gazette 25/11/2023, No. 32380) — Law No. 7582 Amending Certain Laws (Official Gazette 4/6/2026, No. 33270).