Most of what a foreign group needs advice on in Turkey is not strategy. It is a sequence of concrete decisions — how to enter, how to fund the entity, how to price transactions with the parent, how to employ people, and how to get profits out — each of which has a Turkish answer that differs from the one the group is used to, and each of which is expensive to reverse.
This page sets out those decisions in the order they arise and points to the specific service that answers each. The common thread is that they interact: the entry structure determines the funding options, the funding determines the transfer pricing exposure, and the incentives taken determine what happens when profits are repatriated.
The Decisions, in the Order They Arise
| Decision | What turns on it |
|---|---|
| Entry structure | Company, branch or liaison office. Determines liability, whether royalties and interest to the parent are deductible, and what can be done at all — a liaison office cannot invoice |
| Entity type | Joint stock or limited liability. Determines capital, how shares transfer, whether an exit is taxable, and whether shareholders answer for unpaid public debts |
| Funding | Equity or intra-group debt. Debt from a related party above a 3:1 ratio to equity is treated as disguised capital, and the interest becomes non-deductible and is recharacterised as a dividend |
| Cross-border charges | Management fees, royalties, cost allocations and interest, all priced at arm’s length and documented, with withholding and treaty relief assessed separately for each |
| Currency and capital movements | Restrictions on contracting in foreign currency between residents, conditions on borrowing from abroad, repatriation obligations on export proceeds and a levy on deferred-payment imports |
| Incentives | Which regime applies after the 2025 overhaul, and whether the benefit survives the domestic minimum corporate tax |
| People | Employment through the entity, an employer of record, or secondment, with work permits and social security agreements determining what is possible |
| Exit | Repatriation of profits, sale of shares, restructuring or liquidation — each with a different tax outcome that is largely fixed by decisions taken at entry |
Disguised capital. A group that funds its Turkish subsidiary with an intercompany loan rather than equity may find that interest above the 3:1 threshold is not deductible and is treated as a distributed dividend. The exposure accumulates quietly and appears in the first tax inspection.
Permanent establishment. Staff working in Turkey for the parent, a liaison office that negotiates, or a dependent agent concluding contracts can each make the foreign company a taxpayer here on the attributable profit, assessed back over the open years.
Incentives against the minimum tax. Corporate tax cannot fall below 10% of profit before deductions and exemptions, so a reduced rate or an exemption may be worth materially less than the headline suggests. The calculation belongs before the application.
Where Advice Is Actually Needed
Structuring and transactions
Entry structure and entity type are covered under our company formation pages. Where an existing structure has to change — a branch converted into a company, entities merged, a business line carved out — the work sits under corporate restructuring, and the tax consequences of each route differ enough that the choice should be modelled rather than assumed.
Where the transaction involves buying or selling, the sequence is due diligence, then valuation, then structuring the deal itself. Doing them in a different order tends to produce a price agreed before the liabilities are known.
Related-party transactions
Every charge between the Turkish entity and the group — management fees, royalties, cost allocations, interest, goods purchased from a group supplier — is a related-party transaction. Each must be priced at arm’s length, supported by documentation, and reported annually with the corporate tax return. The interaction with disguised capital and with withholding tax means these are not three separate questions but one.
Currency and capital movements
Turkey regulates foreign currency more closely than most of the jurisdictions foreign investors come from. Contracts between residents generally cannot be denominated in foreign currency, borrowing from abroad is subject to conditions, export proceeds must be brought into Turkey within prescribed periods, and deferred-payment imports attract a fund levy. Financing decisions taken without checking these produce contracts that have to be renegotiated.
Getting profits out
Dividends to a foreign parent are subject to withholding, reduced under the applicable treaty where a residency certificate is obtained in time. A branch is taxed on its profit and again when that profit is transferred to the head office, producing the same combined burden as a company distributing a dividend. Where the parent’s own jurisdiction offers a participation exemption, the conditions attached to it — a minimum tax burden in Turkey, a minimum holding, a repatriation deadline — decide whether the profit arrives exempt or taxed.
Which Service Answers Which Question
| If the question is | The service is |
|---|---|
| How should we enter, and as what | Company formation, with branch and liaison office alternatives |
| Are we handling the tax position correctly | Tax advisory |
| Should we buy this company, and at what price | Due diligence, then business valuation |
| How do we combine, split or convert entities | Corporate restructuring |
| How do we execute the transaction | Mergers and acquisitions |
| Can we reduce the tax burden on this investment | Investment incentives |
| What has to be filed with the registry | Trade registry procedures |
| Are our figures reliable enough to rely on | Independent audit and the reporting framework that comes with it |
How We Work
- A defined question with a written answer, rather than open-ended retainer time
- Options set out with the exposure attached to each, not a single recommendation
- The Turkish position and the group’s position addressed together
- Work coordinated with the group’s own advisers rather than duplicating them
- Local counsel engaged where the question is legal rather than fiscal
- Implementation carried through to the filing, not handed back as a memo
Most engagements begin as a specific question — whether a structure creates a permanent establishment, whether a charge from the parent will be accepted, whether an incentive survives the minimum tax — and the answer determines whether anything further is needed. That is usually a better starting point than a broad review.
Frequently Asked Questions
What do foreign companies most often need advice on in Turkey?
What is disguised capital and why does it matter?
Can a foreign company operate in Turkey without an entity?
Do incentives still reduce tax after the minimum corporate tax?
Are there restrictions on foreign currency in Turkey?
How are profits repatriated from Turkey?
Do you work alongside our existing advisers?
How does an engagement usually start?
As the Ozbek CPA team, we advise foreign groups on entering and operating in Turkey — entry structure and entity choice, funding and disguised capital, transfer pricing on charges from the parent, permanent establishment exposure, foreign currency and capital movement rules, investment incentives against the minimum corporate tax, and planning the repatriation of profits. Contact us.
