WHO IS A FOREIGN INVESTOR?

In the Turkish legal system, the concept of a foreign investor refers to natural persons who directly invest in Turkey, holding citizenship of foreign countries, Turkish citizens residing abroad, legal entities established according to the laws of foreign countries, and international organizations. Regarding Turkish citizens residing abroad, there is no requirement for them to be citizens of the host country; Turkish citizens who reside abroad and can prove their residence with a work or residence permit are considered foreign investors for the purposes of the Direct Foreign Investments Law.

PRINCIPLES REGARDING DIRECT FOREIGN INVESTMENTS

Unless otherwise provided by international agreements or special legal provisions, foreign investors are free to make direct foreign investments in Turkey. Foreign investors shall be treated equally with domestic investors. Direct foreign investments cannot be expropriated or nationalized unless required by public interest and without compensation being paid. The net profits, dividends, sales, liquidation and compensation amounts arising from the activities and transactions of foreign investors in Turkey, amounts to be paid for licenses, management, and similar agreements, as well as principal and interest payments of foreign loans, may be freely transferred abroad through banks or private financial institutions. The determination of non-cash capital is based on the provisions of the Turkish Commercial Code. If securities of companies established in foreign countries are used as investment instruments, the evaluations of competent authorities designated by the country of origin or appointed experts or international evaluation organizations designated by the courts of the country of origin shall be taken into account.

Employment of foreign personnel in companies, branches, and establishments established may be realized through work permits granted by the Ministry of Labor and Social Security.

WAYS OF INVESTING IN TURKEY BY FOREIGN INVESTORS

The Direct Foreign Investments Law defines in general terms the things that could be instruments for direct foreign investment and does not limit them to cases listed in the law. Thus, it is intended to pave the way for the recognition of different investment instruments as direct foreign investments resulting from the development of the economy and technology. In addition, the ways in which the capital brought by foreign investors is used are also clearly regulated. Foreign investments defined in the law are subject to a two-fold classification, namely those brought from abroad by the foreign investor and those provided domestically by the foreign party. Investments brought from abroad by the foreign party in the law are defined as cash capital in the form of convertible currencies traded by the Central Bank of the Republic of Turkey; company securities excluding government bonds; machinery and equipment; industrial and intellectual property rights; and direct foreign investments brought from abroad. Those provided domestically by the foreign party are the profits, revenues, monetary receivables, or other rights related to investments provided domestically. In addition, rights related to the exploration and extraction of natural resources are defined as direct foreign investments provided domestically.

Foreign investors can establish a new company in Turkey through the economic values mentioned in the law or open branches of their companies based abroad in Turkey. The Turkish Commercial Code does not impose any restrictions on the citizenship of the partners of companies to be established in Turkey. Foreign investors are free to establish companies regulated in the Turkish Commercial Code and ordinary partnerships regulated in the Turkish Code of Obligations. It should be noted here that partnerships established on the basis of contracts under names such as consortium, joint venture, or partnership, which do not possess the distinct characteristics of partnerships regulated in the Turkish Commercial Code, shall be considered as ordinary partnerships for the purposes of the implementation of the Direct Foreign Investments Law. Additionally, there is no obstacle to the establishment of a company in which only foreigners are partners. In practice, foreign entrepreneurs prefer to establish companies with Turkish partners to facilitate the legal and administrative processes. Foreign investors can also open branches of their companies based abroad in Turkey. The provisions of the Turkish Commercial Code regarding the opening of branches are applied.

In addition to the above, foreign investors can invest in an existing company as a partner through the acquisition of shares outside the stock exchanges. It is possible for a foreign investor to become a partner in an existing company through acquisitions from stock exchanges, providing at least a 10% shareholding or equivalent voting rights.

Attorney Tolga Güner KONCAGÜL