Doing Business in Turkey

Do you want to expand your business into Turkey or hire employees there? Here are some key things you need to know about a Turkey expansion.

Turkey Economy Overview

Currency

Turkish Lira (TRY)

Working hours

45 hours/week

Public/bank holidays

14 public holidays

Capital

Ankara

Languages

Turkish

Population

85 million

Minimum hourly salary

42.43 TRY per hour

Tax year

01 Jan-31 Dec

Date format

DD/MM/YYYY

Misclassification penalties

Misclassification of employees as independent contractors can result in significant penalties, including back taxes, social security contributions, and fines.

Fun fact

Istanbul, although not the capital, is the largest city in Turkey and spans two continents, Europe and Asia.

Turkey is located at a strategic intersection between Europe and Asia and is home to the world’s 11th-largest economy. Turkey enjoys desirable access to a combined European, Middle Eastern, North American, and Central Asian markets, averaging a 5.4% growth in GDP over the last decade. The country’s economic expansion has largely been driven by increases in private consumption and government initiatives to promote investment in Turkey’s renewable energy sector. Despite an earthquake impacting 11 provinces in September 2023, the country’s 33.3 million strong labor force has remained resilient, with unemployment staying consistently low at 9.1%. Owing to recent geopolitical tensions following Russia’s invasion of Ukraine, inflation rates have again risen. However, prudent fiscal management and liberal FDI policies could have the potential to significantly mitigate these risks and help maintain Turkey’s reputation for economic stability.

Table of Contents show

Overview of Turkey's Economy

Turkey’s access to large domestic and regional markets has secured its economic position in the face of geopolitical tensions.

Recent contractions in GDP growth rates have largely been due to sanctions imposed on its largest trading partner, Russia. However, following commitments to stability and reform as outlined in the published Medium-Term Program for 2024-2026 (MTP), Turkey’s growth is once again forecast to increase by 4% in 2024 and 4.5% in 2025. The services sector continues to dominate the Turkish economy, having attracted over half the total contribution of FDI in 2023 at $284M.

Sector	Opportunity
Renewable Energy	Lucrative opportunities for investors to help Turkey meet its net zero carbon production target by 2053
Agriculture and Food	Encouragement of investment into the $78 billion market to secure Turkey’s position as a global player in plant products and exports

The Turkish government acknowledges that FDI is critical to continuous economic growth. As a result, Turkey has one of the most liberal regimes in the OECD (Organisation for Economic Co-operation and Development), offering many incentives, protecting investors, and placing very few restrictions on companies contributing to Turkish economic development. Of Turkey’s 85.2M population, over half are under the age of 33.5 years, providing investors with Europe’s largest pool of young and dynamic skilled workers.

Taxes

Employer tax: 2.5%

Social Security Contribution

20.5% (including 14% for pension, 2% for unemployment, 2% for health insurance, and other minor contributions)

Unemployment Insurance

Employee tax: 15%

Social Security Contribution

14%

Unemployment Insurance

Income tax

Turkey has a progressive tax system for individual income:

Gross income

up to 70,000 TRY
70,001 and 150,000 TRY
150,001 and 550,000 TRY
550,001 and 1,900,000 TRY
over 1,900,000 TRY

Progressive tax rate

Business Regulation in Turkey

In an effort to increase FDI, Turkey has taken significant action to simplify and streamline administrative procedures. The establishment of a one-stop shop through the Trade Registry Directorates located in the Chamber of Commerce enables businesses to complete the incorporation process in a single day. Moreover, the government website allows businesses to easily explore possible investment opportunities and navigate legislative requirements.

Companies can choose to register as JSC, LLC, general partnerships, limited partnerships, joint ventures, or as a branch office. Businesses are required to submit their memorandum and articles of association electronically via the MERSIS platform (Central Registry Record System). Notarised copies of the articles of incorporation and founders’ passports must be submitted upon registering, and a minimum of 25% of the required share capital should be deposited in a bank account. The minimum share capital required for LLCs and JSCs is 10,000 TRY and 50,000 TRY, respectively. Companies that choose to incorporate using a branch office are not required to deposit any shared capital.

The CIT rate for most businesses other than banks and finance companies is 25%. VAT rates range from 1% to 20% depending on the value of the goods imported, and other taxes, including property and consumption tax, also apply. Government initiatives to boost foreign investment have prompted a range of tax incentives, including VAT and customs duty reductions and exemptions. Businesses operating in Turkey also benefit from double taxation prevention agreements signed with 86 countries.

The main legislation that protects employers and employees in Turkey from exploitation and discrimination is the Turkish Labor Law. This legislation mandates that workers are only required to work for a maximum of 45 standard hours. Any arranged time exceeding this will be classed as overtime and compensated at a higher rate. Workers are entitled to 14 days of paid annual leave, which increases to 20 days if they have worked in the same organization for five or more years. The law also stipulates that employees who have been contracted for up to six months must be notified of their termination within two weeks; the notification time required increases proportional to the duration of employment. Companies that fail to comply with taxation or labor laws are liable for penalties.

Benefits of Doing Business in Turkey

Turkey’s 5.1M hectares of arable land provide huge potential for agriculture. The country’s high yield and high-quality wheat production have made it the world’s largest exporter of flour. Now, owing to recent developments in agricultural machinery, this potential has further increased, creating new opportunities for foreign investment within the sector. Turkey also benefits from high-technology fruit and vegetable processing industries, allowing it to be a leading player in producing and exporting hazelnuts, apricots, figs, and cherries. Following the recent earthquakes, a need for agricultural resilience has been exposed. Profitable opportunities can be found in supporting agricultural machinery and strengthening the country’s resistance to external shocks.

Surrounded by the Black, Mediterranean and Aegean seas, Turkey also enjoys a strong aquaculture industry. After fishing production reached record highs in 2022 totalling 849,500 tons, a further impressive 18.6% growth was realized in 2023, mainly driven by the Turkish Salmon species. Government initiatives to prioritize sustainable fishing and prevent overfishing forecast profitable future prospects for Turkish fisheries and for foreign investment contributing to the industry.

Continued government support for renewable energy investment has also inspired many incentives for FDI contributing to green energy capacity. Turkey currently holds the 6th largest electricity market in Europe, with a capacity of 106GW. Today, 56% of this capacity is provided by renewable energy sources, including hydroelectric, solar, wind, and geothermal power. This percentage is expected to increase to 64.7% by 2035 in line with green strategies. Owing to carbon zero targets, foreign investors can benefit from a variety of incentives specific to the energy sector.

Business Expansion Options in Turkey

Companies should choose a business structure that best suits their expansion strategy. Common methods of incorporating a foreign business in Turkey include establishing a subsidiary or branch office.

Employer of Record (EOR)

A Turkey Employer of Record (EOR) is similar to a Turkey PEO, except the HR provider becomes the legal employer of the Turkey team, rather than just the co-employer. The Turkey EOR ensures workers have compliant local contracts, and onboards them to a local payroll.

Often the terms “Turkey PEO” and “Turkey EOR” are used interchangeably.

Learn more about EOR in Turkey

Professional Employer Organization (PEO)

Thanks to the government’s establishment of a one-stop-shop, the incorporation process has been made significantly easier. However, there are still great benefits to be gained from contracting a third party service experienced with setting up a business in Turkey.

PEOs manage company HR functions, hire local talent, and ensure compliance. Owing to their local expertise, these services can ensure that potential penalties are avoided by regularly updating companies about changes to local legislation. Additionally, PEOs enable companies to seamlessly hire and onboard local talent, significantly expediting the talent acquisition process and, therefore, saving the company precious time and resources.

Subsidiary Incorporation

The preferred method of incorporation for most businesses is as a subsidiary. This structure allows the foreign company to act independently of the parent company and benefit from Turkish double taxation prevention agreements.

Subsidiary forms such as LLCs are required to deposit a minimum share capital of 10,000 TRY if private and 50,000 TRY if public. There are no restrictions pertaining to the nationalities of directors or shareholders, but companies must have at least one founder and a board of directors. Subsidiaries are taxed as independent local companies, and as such, the parent company is not liable for the actions of the subsidiary. Additionally, subsidiaries are free to conduct their operations according to Turkish culture, tailoring their management to meet the demands of the Turkish market.

Branch Registration

Branch offices are viewed as extensions of the parent company and must conduct their operations according to the parent company’s regulations. There is no minimum share capital required when establishing a branch office, and companies will only be taxed on income generated in Turkey. Specific licensing requirements will apply when registering a branch office, and the parent company will be liable for any debts incurred.

Business Opportunities in Turkey

Turkey’s economic stability, positive attitude towards FDI, and abundance of lucrative investment opportunities have made the country an exciting proposition for businesses wishing to expand.

Business Opportunity	Reason
Manufacturing	Turkey has a well-established manufacturing sector, with particular strengths in automotive, textiles, and electronics. The country’s strategic location, competitive labor costs, and access to key markets in Europe, the Middle East, and Central Asia make it an ideal base for manufacturing operations.
Renewable Energy	As Turkey works towards its goal of achieving net zero carbon emissions by 2053, there are significant opportunities for investors in the renewable energy sector. The country has abundant solar, wind, and geothermal resources, and the government offers attractive incentives for renewable energy projects.
Agriculture and Food Processing	Turkey is a major producer and exporter of agricultural products, with a particular focus on fruits, vegetables, and livestock. The country’s large agricultural sector, coupled with growing demand for processed and packaged food products, creates opportunities for businesses involved in food processing and agribusiness.
Tourism and Hospitality	With its rich cultural heritage, stunning natural beauty, and well-developed tourism infrastructure, Turkey is a popular destination for tourists from around the world. The country’s tourism sector presents opportunities in areas such as hotel and resort development, tour operations, and medical tourism.
Technology and Startups	Turkey has a growing technology sector, with a particular focus on mobile applications, e-commerce, and gaming. The country’s young and tech-savvy population, coupled with government support for innovation and entrepreneurship, create a favorable environment for technology startups and investment.

The government’s prioritization of reform and sustainability has helped cultivate a strong investment climate. Additionally, streamlining administrative processes through implementing a one-stop shop has meant that incorporating a business has never been so simple.

Whether companies are looking to expand alone or optimize expansion benefits through the contraction of a PEO/EOR, Turkey consistently proves to be both a productive and profitable location for such a business venture.