Company Formation and Accounting in Turkey: A Guide for Foreign Investors

Turkey has become an attractive destination for foreign investors looking to establish businesses due to its strategic location, growing economy, and favorable government policies. This blog post aims to provide valuable insights into the legal framework surrounding company formation and accounting practices in Turkey, specifically tailored for foreign individuals and entities interested in opening and operating businesses in the country. Accounting in Turkey

Overview of Company Formation in Turkey

Types of Companies

Foreign investors can choose from several types of legal entities when establishing a business in Turkey:

1. Limited Liability Company (LLC): This is the most common form for small to medium-sized businesses. It offers limited liability to its owners and requires a minimum capital of 10,000 Turkish Lira (TRY).
2. Joint Stock Company (JSC): Suitable for larger enterprises, a JSC requires a minimum capital of 50,000 TRY. It allows for the issuance of shares and can attract more investors.
3. Branch Office: Foreign companies can establish a branch office in Turkey, which operates under the name of the parent company. This type does not require a minimum capital but is subject to different regulations.

Legal Requirements for Company Registration

To register a company in Turkey, foreign investors must follow these steps:

1. Name Registration: The proposed company name must be unique and registered with the Turkish Trade Registry.
2. Drafting Articles of Association: This document outlines the company structure and regulations.
3. Opening a Bank Account: A bank account must be opened to deposit the required initial capital.
4. Obtaining Tax Identification Number: This is necessary for tax purposes.
5. Registration with the Trade Registry: Once all documents are prepared, the company can be officially registered.
6. Publication in the Trade Registry Gazette: This step is required to inform the public of the new company’s existence.

Accounting Practices in Turkey

Regulatory Framework

In Turkey, businesses must comply with the Turkish Accounting Standards (TAS) and the Turkish Financial Reporting Standards (TFRS). This framework ensures transparency and accountability in financial reporting.

Financial Reporting Obligations

All companies must maintain proper accounting records and submit annual financial statements to the tax authorities. Key components include:

1. Balance Sheet: A snapshot of the company’s financial position at a specific date.
2. Income Statement: This report summarizes the revenues and expenses incurred during a specific period.
3. Cash Flow Statement: This statement outlines the cash inflows and outflows from operational, investing, and financing activities.

Hiring Professional Accountants

For foreign investors, understanding the Turkish accounting system can be challenging. It is advisable to hire a professional accountant or an accounting firm with experience in local regulations to ensure compliance and efficient management of financial resources.

Conclusion

Establishing a business in Turkey offers numerous opportunities for foreign investors. By understanding the legal requirements for company formation and adhering to the accounting practices in place, investors can navigate the process more efficiently. Comprehensive services are available to assist foreign entrepreneurs in setting up and managing their businesses in Turkey, from registration to ongoing accounting support. If you are considering expanding your business into Turkey, our team is here to help you with every step of the journey.