Foreign Direct Investment Law

Turkey's regulatory environment is extremely business-friendly. You can establish a business in Turkey irrespective of nationality or place of residence. It is possible to establish a company in just one day by applying to the relevant trade registry office with the required documents and tax registry. According to UNCTAD World Investment Prospects Survey between 2008-2010, Turkey is the 15th most attractive destination for Foreign Direct Investment (FDI) in the world because of its booming economy.

As of the end of 2016 the number of internationally capitalized companies in Turkey surpassed 50 thousand and the net investment reached USD 12 billion in the same year. The top sector among foreign companies operating in Turkey is wholesale and retail trade, comprising 32 percent of foreign companies. The real estate sector, at 16 percent, comes in second. Half of these companies are EU-based, and half of them are established in Istanbul.

Turkey's investment legislation is simple and complies with international standards. Recent amendments to the existing Law improved Turkey's investment environment, encouraging foreigners to invest in the country.

Article 1. The objective of this Law is to encourage foreign direct investments; to protect the rights of foreign investors; to define investment and investor in line with international standards; to establish a notification-based system for foreign direct investments rather than screening and approval; and thus regulate the principles to increase foreign direct investments through established policies. This Law establishes the treatment to be applied to foreign direct investments.

Article 2. The terms used in this Law shall have the following meanings:

1) Foreign investor:
a) Real persons who possess foreign nationality and Turkish nationals resident abroad,
b) Foreign legal entities established under the laws of foreign countries and international institutions, who make foreign direct investment in Turkey.

2) Foreign direct investment:
a) Establishing a new company or branch of a foreign company,
b) Share acquisitions, where the foreign investor owns 10 percent or more of the shares or voting power, by means of, but not limited to the following economic assets:
i) Assets acquired from abroad by the foreign investor:
- Capital in cash in the form of convertible currency bought and sold by the Central Bank of Turkey,
- Stocks and bonds of foreign companies (excluding government bonds),
- Machinery and equipment,
- Industrial and intellectual property rights;
ii) Assets acquired from Turkey:
- Reinvested earnings, revenues, financial claims, or any other investment-related rights of financial value,
- Commercial rights for the exploration and extraction of natural resources.

3) The Undersecretariat: The Undersecretariat of Treasury.

Article 3.

1) Freedom to invest and national treatment unless stipulated by international agreements and other special laws:
a) Foreign investors are free to make foreign direct investments in Turkey,
b) Foreign investors shall be subject to equal treatment with domestic investors.

2) Expropriation and Nationalization
Foreign direct investments shall not be expropriated or nationalized, except for a public purpose and upon compensation in accordance with due process of law.

3) Transfers
Foreign investors can freely transfer abroad: profits, dividends, proceeds from the sale or liquidation of all or any part of an investment, amounts arising from license, management and similar agreements, and reimbursements and interest payments arising from foreign loans through banks or special financial institutions.

4) Access to Real Estate
Companies may freely acquire real estate or limited rights through a legal entity in Turkey established or with participation by foreign investors, provided such acquisitions are permitted for Turkish citizens.

5) Dispute Settlement
For the settlement of disputes arising from investment agreements subject to private law and disputes arising from conditions and contracts made with the administration and under which concessions concerning public services are granted, foreign investors can apply either to the authorized local courts, or to national or international arbitration or other means of dispute settlement, provided that the conditions in the related regulations are fulfilled and the parties agree thereon.

6) Valuation of Non-cash Capital
Non-cash capital is valued within the regulations of Turkish Commercial Law. However, stocks and bonds of companies residing abroad will be accepted as foreign capital share of foreign investors and the values determined by the courts of the home country, or other relevant authorities in the home country, or any other international institutions performing valuations will be accepted.

7) Employment of Expatriates
Foreign personnel working permits are issued by Ministry of Labor and Social Security for foreign personnel to be employed in the companies, branches and entities established within the scope of this Law.

In a Regulation to be prepared jointly by the Undersecretariat of Treasury and the Ministry of Labor and Social Security, according to Article 23 of the Law on Foreign Personnel Working Permits No. 4817 dated 27 February 2003, the companies and entities with foreign capital which shall be in the context of the Regulation, the definition of the key personnel in the scope of the Regulation and other special procedures and principles concerning the work permits of key personnel will be determined.

Provisions stipulated in Article 14, paragraph 1, sub-paragraph (b) of Law No. 4817 will not be applicable to personnel to be employed within the context of this Regulation. The conditions under which the provisions stipulated in paragraph 1 of Article 13 of Law No. 4817 are to be applied to key foreign personnel employed will be specified in the Regulation.

8) Liaison Offices
The Undersecretariat is authorized to permit foreign companies established under the laws of foreign countries to open liaison offices, provided that they do not engage in commercial activities in Turkey.

Article 4. Taking into account the development plans, annual programs, general economic status of the country, trends in international investments and the opinions of related public institutions and private sector professional organizations, the Undersecretariat is authorized to determine the general framework of policies concerning foreign direct investments, and for this purpose, participate in the activities of other organizations. The consent of the Undersecretariat shall be taken before any amendment or enactment of a regulation related with foreign direct investments.

For the purpose of establishing and developing an information system related to foreign direct investments, the Undersecretariat is authorized to request statistical information on investments from all public institutions and private sector professional organizations.

Foreign investors shall submit the statistical information on their investments according to the procedures and principles to be determined by a regulation to be enacted by the Undersecretariat. Such information cannot be used as evidence or for any means other than for statistical purposes.

Article 5.

a) Existing Companies with Foreign Capital
All companies with foreign capital established pursuant to Law No. 6224 dated 18 January 1954 shall be subject to this Law, reserving their granted rights.

b) Regulations
The implementing procedures for this Law will be determined in a regulation to be prepared by the Undersecretariat within one month of the publication of the present Law.

c) Repealed Provisions
The Law for Encouragement of Foreign Capital No. 6224 dated 18 January 1954 is repealed. The references made to Law No. 6224 and its regulations and amendments are considered as referring to this Law.

d) Any alteration concerning the articles of this Law is only regulated by means of amending and appending provisions to the present Law.

Provisional Article

1. The provisions of the decrees, communiqués and circulars in effect, which are in conformity with this Law, shall remain in force until new regulations to regularize the implementation of this Law take effect.

Article 6. This Law shall come into force on the date of its publication.

Article 7. The Council of Ministers is entrusted with the enforcement of this Law.

• Source: The Republic of Turkey, Prime Ministry Investment Support and Promotion Agency (ISPAT)