Company registration in Turkey

Turkey has a fairly simple and common tax system. Resident companies pay taxes on their worldwide income, while non-resident companies only pay taxes on their local income in Turkey. A company is recognized as a resident if it has a legal address or local management in Turkey.

Corporate tax is set at 20%. It is paid on optimized profits, which means operational expenses are deducted from the revenues. The financial sector, including banks and insurance organizations, faces an increased rate of 25%.

Value Added Tax (VAT) has a standard rate of 20%, while other rates depend on the category of goods or services (1%, 10%). VAT is not applicable when receiving payments from abroad; it is only considered when working with Turkish companies. VAT reports are submitted monthly.

Dividends are taxed at 15%. Dividends from Turkish companies are exempt from taxation, and there are also certain exemptions for foreign dividends based on bilateral agreements.

Royalties are subject to a 20% tax rate.

It's important to note that companies are required to pay taxes even when they are not engaged in any activities or earning income. Thus, Turkey has established minimum tax contributions, sometimes referred to as stamp duties, which are paid by legal entities with zero balance:

• VAT: 190 lira per month.
• Corporate tax: 1000 lira every 3 months.
• Annual corporate tax: 700 lira per year.
• Chamber of Commerce and Industry fee: 700 lira per year.
• Excise tax for accountant/lawyer services: 20% every 3 months.

The country imposes certain restrictions on currency transactions. Specifically, rules and limits on currency exchange for individuals and legal entities are regulated, and there are restrictions on the ownership, sale, and transfer of foreign currency for investment purposes.

Additionally, currency loans are available only to companies, and all transactions between Turkish residents must be conducted in the national currency.

Moreover, all Turkish banks report currency operations and accounts in foreign currency.

Turkey has an extensive range of double taxation agreements, which significantly reduce the tax burden. Agreements have been signed with 87 countries, including Ukraine.

Please note the following features regarding company registration in Turkey. The founding documents, including the articles of association and the minutes of the founding meeting, must be prepared in the form of a notarial deed. Usually, a local notary handles the preparation and formalization of these documents.

After registering the legal entity with the Trade Registry of Turkey, the company must undergo the procedure of tax registration and obtain a taxpayer identification number (Vergi Kimlik Numarası) from the tax office (Gelir İdaresi Başkanlığı).

It is also important to know that after opening a bank account in a Turkish bank, the company must provide proof of the account opening to the local tax office.