Turkey 2015 (English & Chinese)

Yeşim Bezen, Zekican Samlı, Uğur Sebzeci, Can Özilhan and Onur Okşan

Bezen & Partners

a. What are the key sectors in your jurisdiction that attract, or to which the government is seeking to attract, COI?

As of December 31 2014 there were 41,398 companies in Turkey which had foreign shareholders, 646 of which were COIs. The number of COIs was 112 in 2003 which increased to 540 at the end of 2013. This number gradually increased to 646 in 2014. The exceptional increase in the number of COIs illustrates the dramatic increase in Chinese investors' interest in Turkey.

Chinese investors have a wide range of investment fields in Turkey. They have a leading role in the mining sector. China is the third highest investor in the Turkish mining sector after Germany and the United Kingdom. Chinese investors have also focused on commercial trading, manufacturing, hotels and restaurants, sales, transportation, agriculture, maintenance and repair of motorised goods, construction, telecommunications and the generation and distribution of energy in Turkey.

The investment incentive scheme (see Section 4) introduced in 2012, among others, provides incentives for large-scale investments.

Large scale investment can be in relation to refined petroleum products, production of chemical products, harbour and harbour services, automotive OEM, automotive supply industries, production of railway locomotives and cars, transit pipeline transportation services, electronics production, production of medical, high precision and optical equipment, production of aircraft and spacecraft and/or related parts or production of machinery and mining. Large scale investments benefit from VAT exemption, customs duty exemption, tax reduction, contribution to investment by the State, social security premium support, land allocation and income tax withholding allowance.

In line with the Turkish government's 2023 targets for the centennial of the Republic, the sectors identified for large-scale investments provide a good guideline of where the government is seeking to attract foreign direct investment (FDI), including COI. If the target projects can be realised, they are expected to generate a trade volume of approximately US$1 billion between China and Turkey.

b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?

Turkey attracted US$12.9 billion of FDI in 2013, a 38% increase from the previous year. According to the United Nations Conference on Trade and Development, Turkey, with an inbound FDI figure of US$12 billion, is the 19th highest FDI recipient country.

The bilateral trade volume between Turkey and China reached US$28 billion (Rmb175.2 billion). Also, statistics from the PRC Ministry of Commerce shows that Chinese non-financial FDI reached US$178 million (Rmb1.11 billion) in the first six months of 2014. This is an increase of 47.2%.

In order to attract US$80 billion of FDI per year by 2023, the Turkish government has incorporated the Republic of Turkey's Prime Ministry Investment Support and Promotion Agency (ISPAT) with the goal of providing assistance to investors before, during and after their entry into Turkey through a one-stop shop approach. The importance given to COI is illustrated by the fact that ISPAT provides assistance to potential investors in, among other languages, Chinese.

a. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?

Joint stock companies and limited liability companies continue to be the most common forms of legal entities for foreign investors. Chinese investors have chosen to facilitate their investments generally through limited liability companies. 602 of the entities which were incorporated by Chinese investors were limited liability companies, whereas 44 of them were incorporated as joint stock companies.

The procedures for the establishment and operation of these types of entities are quite similar and generally take around six business days once the required documentation is in place.

b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?

With the enactment of the Foreign Direct Investment Law (No 4875) (FDI Law) in 2003, foreigners and Turkish nationals have been subject to equal treatment. Accordingly, with the exception of a small number of special sectors, foreigners are subject to the same rules with respect to their investments as Turkish nationals/entities.

However, operationally, once a Chinese investor intends to employ foreigners, each foreign employee is required to obtain a work permit if the employee does not fall within the exceptional cases provided by the relevant legislation.