The Turkish Commercial Law encourages foreign investors by allowing them to set up various types of companies when registering their business. The holding company is an attractive option to consider when starting a business in Turkey because it allows foreign investors to own shares in a local company. Below, our consultants for opening a business in Turkey explain the main regulations under which it is possible to set up a holding company. We can also assist foreign investors who want to start holding companies in Turkey.
| Quick Facts | |
|---|---|
| Legal entities used | Limited Liability Company, Joint Stock Company |
Incorporation method | With the Turkish Trade Register |
Incorporation time | Around 3 weeks |
| Advantages | Easy online incorporation |
| Precautions | 1 Director required |
| Shareholding structure | At Least 1 shareholder |
| Minimum Capital | TRY 10,000 |
| Taxation | 25% corporate tax rate |
| Control | Foreign ownership available |
| Accounting and Reporting | Annual tax return, audits |
| Number of double taxation treaties | 82 |
| Legislation | Turkish Commercial Code, Law on Support of FDI |
Special permissions | Issued by the Ministry of Customs and Trade in Turkey |
What is a pure holding? | The type of holding company that only participates in other existing companies |
| Transforming a partnership into a holding company in Turkey | Available option |
| Required documents for opening a holding company in Tukey | Articles of Association comprising information about the company name, shareholders, operations, authorized capital amount, business policies, etc. A formal application for opening a holding company in Turkey is required by the registration authority. |
| Granted exceptions for holding companies in Turkey | Must allocate 5% of the profits for a general legal reserve until reaching 20% of the paid capital. |
| The use of legal reserves | Capital increase, profit distribution, etc. |
| Issuing bonds through a holding joint company (YES/NO) | YES |
| Can be subject to tax optimization (YES/NO) | YES |
| Financing holding companies in Turkey | Available options: – direct investment, – bond issuance, – bank lending, etc. |
| Planning a holding company in Turkey | Through a business model, objectives, business strategies, specific developments, and more |
| Corporate bank account required (YES/NO) | YES |
| Tax exemptions for holding companies in Turkey | No taxes imposed on dividends received from foreign subsidiaries, if held for a minimum of one year. |
| Other financial recommendations | Accounting and reporting obligations |
| Why choose our Turkish specialists in company formation? | We can manage the process of registering a holding company in Turkey at affordable prices. |
What is a Turkish holding company?
A holding company, usually known as a parent company, is allowed to own shares in one or more companies called subsidiaries. The main role of a Turkish holding company is to control its subsidiaries and make sure they have enough capital. The holding, however, cannot undertake any commercial activity.
Foreign investors are allowed to open holding companies in Turkey by registering one of the following types of structures:
- commercial partnership;
- limited liability company;
- joint stock company;
- commandite company;
- collective company.
Holding companies are usually registered as limited liability companies. The minimum capital required to register a limited liability company in Turkey is 10,000 TRY, while for a joint stock corporation the minimum amount required is 50,000 TRY.
Requirements to register a holding company in Turkey
The creation of a holding company in Turkey relies on respecting the provisions of the Company Law. Apart from choosing a suitable business form, the following steps must be completed upon the creation of a Turkish holding:
- reserving a trading name that respects the conditions imposed by the Turkish law;
- drafting and notarizing the Articles of Association of the holding company;
- setting up the corporate bank account and depositing the share capital in accordance with the type of structure selected;
- filing the documents with the Trade Register and obtaining the Certificate of Registration;
It is important to note that just like in the case of other business forms, the holding company must also have a registered address in Turkey. However, its subsidiary or subsidiaries can be located outside the country.
The holding company in Turkey must have at least one founder, an individual or another legal entity. If the holding company is founded by just one individual, his/her name, place of residence, and citizenship must be officially recorded and announced as part of the company incorporation process in Turkey.
If you want to open a company in Turkey and need information on the formalities that need to be completed, our local consultants are at your disposal with details.
We invite you to read about the benefits of Turkish holding companies in the scheme below:
Why is the joint stock company more suitable for a holding in Turkey?
Turkish holding companies are more likely to take the form of joint stock companies because these benefit from more flexible regulations than private limited liability companies. Also, joint stock companies are more suitable for large projects, such as those of holdings which usually own shares in various subsidiaries engaged in various activities.
Changing the company type into a holding
Aside from the regular process of opening a company in Turkey, a holding company can also be established through another method.
This refers to turning an existing company into a holding company. One can completely change the company’s articles of association so that it focuses solely on holding activities.
Please note that only pure holding companies are currently allowed in Turkey. Mixed holdings, which combine holding activities with commercial activities, are no longer permitted. Therefore, it is no longer possible to amend the company’s articles of association to include holding activities as part of the company’s objectives.
Our team can help you open a holding company in Turkey through this method if you are interested.
Regulations for a financial holding company
There are specific regulations for a parent company to be classified as a financial holding company in Turkey.
Firstly, the parent company must be established as a joint-stock company and must have at least one subsidiary operating as a credit institution. However, if the parent company has more subsidiaries, more than 50% of them must be credit institutions or financial institutions.
Additionally, the parent company must allocate more than 50% of its paid-up capital to these financial subsidiaries. Our partner accountants in Turkey can help with the financial requirements.
The financial subsidiaries of the holding company in Turkey must constitute at least 40% of the total assets of the parent company and all its subsidiaries, averaged over the last three years.
No single financial subsidiary should have assets that account for 95% or more of the total assets of all the financial subsidiaries combined.
Our specialists in company incorporation in Turkey can explain more about the requirements for financial holding companies.
Special regulation for the creation of holdings in Turkey
Compared to other types of companies in Turkey, the holding must also respect the regulations imposed by the Ministry of Customs and Trade. Under these provisions, a holding company registered as a joint stock company in Turkey must comply with the special regulations imposed upon changes related to the share capital or amendments to the Articles of Association.
Before registering a holding company in Turkey, shareholders must obtain permission from the Internal Trade General Directorate department within the Ministry of Customs and Trade. Among them there are: the company’s Articles of Association, the signatures of the shareholder(s) in a notarized form, and where the incorporator is another company, their business permits or other authorizations they operate under.
When making amendments to the Turkish holding company’s Articles of Association, there are several documents that must be filed with the Ministry of Customs, among which a resolution passed by the Board of Directors, the amended Articles of Association, and a letter through which the consent for the changes is requested.
Our Turkish company formation agents can offer more information on the requirements related to the regulations imposed by the Ministry of Customs and Trade in relation to the creation of a holding company.
Special share capital provisions on Turkish holding companies
It is important to note, that holdings registered as joint stock companies in Turkey that have not deposited the entire share capital upon incorporation are required to retain 5% of their annual profits until at least 20% of the share capital is reached.
Once the 20% of share capital is reached and the profit in the limit of 5% is paid to the shareholders, 10% of the amount of money to be distributed to those who own shares in the company must be added to the legal reserve of the holding company.
In case the holding company registers losses, Turkish Law allows for less than 50% of the legal reserve to be used for recovering the loss or as a precaution against unemployment and other consequences.
Our company registration representatives in Turkey can offer more information on the requirements related to setting up a holding company.
Here is a video presentation about holding companies in Turkey:
Liability of board members in holding companies
Board members of holding companies in Turkey have restricted liability for the actions of subsidiaries. Holding companies generally participate in other companies, and do not engage directly in commercial activities.
If the subsidiary faces financial losses from the actions or decisions of the company’s board members, they are liable to the degree to which their fault can be proven. To establish the liability of the holding company’s board members, there must be a direct connection between them and the damages that occurred.
The holding company’s board members are less likely to be held responsible if the subsidiary operates independently and makes its own decisions.
Please note a holding company in Turkey can also be part of a group of companies. To be considered a group of companies, one must meet the following requirements:
- There must be at least two subsidiaries and one parent company;
- The parent company must control the subsidiaries through majority shareholding, voting power, or board member influence.
In this case, special rules apply to the group’s board members’ liability.
Our specialists in company formation in Turkey can explain more about the liability of the board members.
Taxation of holding companies in Turkey
Even if they do not engage in commercial activities, holding companies will be taxed as follows:
- with the corporate tax which is applied at a rate of 25%;
- with a withholding tax on the distribution of profits which is levied at a rate of 15%;
- a dividend tax which is levied at a rate of 10% only when dividends are distributed to non-resident natural persons and non-resident companies;
- lower rates are available under Turkey’s double tax treaties (Turkey has signed around 82 such agreements).
If you want to open a holding company in Turkey and need assistance, our agents can help you with the preparation and filing of all the documents required.
Why set up a holding company in Turkey?
Holding companies are the most efficient tax minimization solutions for foreign investors doing business in Turkey. Because of its network of double taxation agreements, Turkey can provide for tax exemptions or deductions on dividend payments received by foreign owners of shares in Turkish companies, such is the case of holding companies. Moreover, the holding company offers enhanced protection of assets for its shareholders. Foreign enterprisers are not required to hire staff for their holding company in Turkey, as it will only require a manager or a director who will oversee the subsidiary or subsidiaries’ activities.
Statistics about companies in Turkey
If you are interested in setting up a company in Turkey, no matter the business structure, these statistics can give you an idea about the country’s business environment:
- Approximately 3.8 million enterprises were registered in Turkey in 2022;
- Approximately 198,600 companies were engaging in e-commerce activities in Istanbul;
- Over 131,700 new companies were created in 2023.
Other than our company formation services, we can also assist entrepreneurs with payroll in Turkey.
For more information about the advantages of setting up a holding company in Turkey, you can refer to our company formation representatives. You can also contact us for assistance with the company registration procedure.