Brief Information on Turkish Economy

and Investment Climate in Turkey

Turkish Economy

Population: 73 million.

Gross National Product: USD 400 billion.

Breakdown of GNP: Services: %65.2, Industry: %25.6, Agriculture: %9.2.

GNP Per Capita: USD 5.477.

Growth Rate: 6% in 2006.

Foreign Trade Volume: USD 222 billion.

Exports: USD 85 billion. 52% to EU 25 countries.

Imports: USD 137 billion.

Tourism Revenues: USD 17 billion.

Foreign Direct Investment: USD 20 billion.

EU Accession Country.

Customs Union with EU.

Private Sector Oriented Economy.

Privatization Revenues: USD 8.2 billion (2005), USD 8 billion (2006).

Foreign Investment Legislation

Equal treatment for domestic and foreign companies

Companies established with foreign capital in Turkey are regarded as Turkish companies, and therefore entitled to benefit from the same rights and exemptions that are granted to domestic companies engaged in the same field of activity. Foreign companies also have the same obligations with the domestic companies. For example, a general corporate tax rate of 20% (on corporate profits) applies to both domestic and foreign capital companies.

No pre-entry or pre-establishment screening requirements

Foreign investors are not required to obtain an additional permit or approval while setting up their business in Turkey.

Notification

Foreign investors are required to notify the Undersecretairat of Treasury after their establishment. They are also required to give information about changes in capital, transfer of shares and activities in the specific period of time through information forms.

Unrestricted foreign ownership

100% foreign ownership is permitted for formation of new businesses and acquisition of existing businesses with the exception of a few specific sectors, which are subject to and regulated by separate/special laws.

No obligation to choose a specific company form

Foreign entrepreneurs can choose any form of company allowed in the Turkish Commercial Code while setting up an enterprise in Turkey.

The transfer of funds

Foreign investors have freedom to freely transfer profits, dividends, the sale and liquidation proceeds, compensation payments, payments received in relation to license, know-how, technical assistance, management or franchise arrangements and reimbursements and interest payments arising from foreign loans through banks.

Acquisition of real estate

Companies may freely acquire real estate through a legal entity established or participated by foreign investors in Turkey, provided such acquisition are permitted for Turkish citizens.

Dispute settlement

For the settlement of disputes, foreign investors can apply either to the authorized local courts, or to national or international arbitration.

Valuation of non-cash capital

Non-cash capital is valued in accordance with the provisions of the Turkish Commercial Code. In case that stocks and bonds of companies residing abroad are used as foreign capital share of foreign investors, the values determined by the relevant authorities in the home country, or by the experts designated by the courts of the home country, or any other international institutions performing valuations will be accepted.

Work permits for key expatriates

Foreign investors can employ expatriates. Work permits for expatriates are issued by the Ministry of Labor and Social Security.

Opening a liaison office

Foreign companies can open a liaison office in Turkey provided that these offices do not engage in any commercial activities in Turkey.

Setting Up a Company

-Submitting the notarized Articles of Association

-Depositing 0.4% of the capital at the Central Bank or a state bank.

-Completing the Company Establishment Form and register with Trade Registry Office.

Major Company Forms:

-Limited Liability Company: 2-50 shareholders, minimum capital of YTL 5000, no Board of Directors, can not be in insurance and banking sector.

-Joint Stock Company: 5 or more shareholders, minimum capital of YTL 50,000, at least 3 Board Directors, Capital Market Board regulation applies to 250 shareholders, banks must have 5 Directors and a minimum capital of YTL 50,000,000.

Investment Incentives

-Incentives are for the new investments.

-Minimum investment requirement:

-YTL 200.000 in priority development regions,

-YTL 400.000 in non-priority development regions.

-General incentive instruments:

            -Exemption from customs duties.

            -Value Added Tax (VAT) exemption.

            -Support on interest.

-Additional incentives for Least Developed Regions:

-Incentive on income tax: for companies employing 30 workers, until 2009, 80% exemption, 100% in OIZs or IZs.

            -Insurance premium incentive for employers: for companies employing 30 workers, until 2009, 80% exemption from employer’s share, 100% in OIZs or IZs.

            -Energy support: for companies employing 30 workers, maximum 50% of the electricity cost, minimum 20%, increases with the number of employees, 50% in OIZs or IZs and 40% in others.

-Free land allocation: project must be in LDR, employment of 30 workers, must go on 5 years under these conditions.

-Additional Incentives in Special Investment Zones

-Technology Development Zones

            -Organized Industrial Zones

            -Industrial Zones

For further information, please visit: http://www.invest.gov.tr