The first decision in a Turkish acquisition is not price but form: whether the buyer takes the shares or takes the business. That choice determines what liabilities travel with the deal, whether accumulated losses survive, what the seller pays on exit, and whether value added tax and stamp duty arise at all. It is also the decision most often made by default rather than by analysis.
This page covers the structuring choice and its tax consequences, the merger control clearance that is mandatory and suspensory, what happens to employees, and the sequence a transaction actually follows in Turkey.
Share Deal or Asset Deal
Everything downstream follows from this. A share deal buys the company with everything in it; an asset deal buys selected assets and leaves the company behind. Neither is generally better — they allocate risk and tax differently, and the parties want opposite things.
Share deal
- What passes
- The company entire Known and unknown liabilities included
- Accumulated losses
- Stay with the company
- Permits and contracts
- Continue Subject to change of control clauses
- Value added tax
- Share transfers are outside the charge
- Usually preferred by
- The seller
Asset deal
- What passes
- Only what is listed Liabilities left behind, with limits
- Accumulated losses
- Remain with the seller and are lost to the buyer
- Permits and contracts
- Must be reassigned or reapplied for
- Value added tax
- Arises on the assets transferred
- Usually preferred by
- The buyer
An asset deal is chosen to avoid inheriting the target’s history. Two mechanisms limit how well it works. Where a business is transferred as a going concern, employment relationships pass to the acquirer by operation of law along with accrued employee entitlements. And public receivables attach to the business itself in defined circumstances, so unpaid taxes and premiums can follow the assets rather than staying with the seller.
The practical consequence is that an asset deal reduces exposure to commercial claims but does not eliminate exposure to employees or to the tax authorities. Due diligence on those two areas is required whichever form is chosen.
What the Seller Pays on Exit
This is the part most M&A pages leave as a bullet reading “income or corporate tax”, and it is where the structuring decision is usually won or lost.
| Seller | What is sold | Treatment |
|---|---|---|
| Individual | Joint stock company shares with printed certificates, held more than two years | Outside the scope of capital gains taxation |
| Individual | Joint stock company shares with no certificates issued, or held under two years | Taxable as a capital gain |
| Individual | Limited liability company participation | Taxable regardless of holding period |
| Resident company | Participation held at least two full years | Part of the gain may be exempt, subject to the conditions on the reserve and the use of proceeds |
| Resident company | Participation held under two years | Fully taxable as corporate income |
| Non-resident company | Shares in a Turkish company | Turkish taxation of the gain, subject to the applicable treaty; several treaties limit or remove it |
| Any seller | Assets rather than shares | Gain taxed at the company level and value added tax arises on the transfer |
The exemption available to an individual selling joint stock company shares depends on the company having issued printed share certificates and on those certificates having been held for more than two years. Issuing them costs a board resolution and a printing job.
A company that never issued them cannot rely on the exemption however long the shares were held, and cannot fix it at the point of sale because the two-year period runs from issue. This is the single most expensive omission in Turkish private company exits, and it surfaces in the tax section of the first draft share purchase agreement.
For a corporate seller, the participation exemption on a share sale carries conditions that operate after the transaction: a portion of the gain must be set aside in a reserve and kept there, and the proceeds must be collected within the stated period. A sale structured without regard to those conditions can qualify on paper and fail in the following years.
Where a Tax-Neutral Route Exists
Not every combination has to be a sale. Where the commercial objective is to combine or reorganise rather than to extract value, the Corporate Tax Law provides routes that pass assets at book value with no tax arising: transfer, full division, partial division and share exchange. Each attaches conditions, and losses survive only on the first two.
The distinction matters at the start because the two families are mutually exclusive in a single step. A transaction structured as a sale is taxed as a sale; one structured to meet the transfer conditions is not taxed at all. These routes are set out in full on our page on corporate restructuring in Turkey.
Merger Control: Mandatory, Suspensory and Enforced
Where the turnover thresholds are met, clearance from the Competition Authority is not a formality to be completed alongside closing. It is a condition of the transaction taking legal effect.
A transaction that requires clearance and is completed without it is legally ineffective until the Authority decides. The share transfer does not take effect, the buyer does not validly acquire control, and everything built on the closing is exposed.
Separately, a fine is imposed calculated on the annual gross turnover of the parties, and it is assessed for the period from closing to clearance. Both consequences follow from the same act, and neither is discretionary in the way commercial parties often assume.
Two alternative tests bring a transaction within the filing requirement, one based on the combined Turkish turnover of the parties with a minimum for at least two of them, and one based on the Turkish turnover of the target together with the worldwide turnover of another party. The figures are set by communiqué and are revised periodically, so the thresholds in force at signing should be checked rather than carried over from an earlier deal. Separate rules apply to acquisitions of technology undertakings, where the Turkish turnover element may not be required at all.
Sector approvals sit alongside merger control rather than replacing it. Banking, insurance, energy, telecommunications, media and capital markets transactions require clearance from their own regulator, and those processes run on their own timetables.
How a Transaction Runs
- Letter of intent and exclusivityPrice expectation, structure, exclusivity period and confidentiality. Mostly non-binding, but the exclusivity and confidentiality provisions bind and are the parts worth negotiating properly.
- Due diligenceFinancial, tax, legal and employment. The tax review determines whether the deal can be a share deal at all, and the employment review determines what passes either way. Findings feed the price, the warranties and the indemnities rather than sitting in a report.
- Valuation and structuringThe form is fixed here: share or asset, single step or restructuring first, and how the price will be paid. The seller’s exit tax and the buyer’s future basis are modelled together, because what one saves the other usually pays.
- Transaction documentsShare purchase or asset transfer agreement, disclosure letter, shareholders’ agreement where the seller stays in, and the corporate resolutions. Conditions precedent are drafted around the clearances identified at diligence stage.
- Regulatory filingsCompetition Authority where the thresholds are met, plus any sector regulator. Filings are prepared in parallel with the documents rather than after signing, because they set the outer limit on the timetable.
- Signing and conditionsSigning with closing conditional on clearances being obtained. The period between the two is where gun-jumping risk sits: the buyer must not exercise control before the decision.
- Closing and registrationShare transfer effected in the manner the company’s form requires, entries made in the share ledger, and registry filings completed where the form requires them. For a limited liability company this is a notarised deed and a registry filing; for a joint stock company it is endorsement and delivery.
- Post-closingNotifications, tax filings arising from the transaction, and the conditions that continue afterwards — the reserve requirement on an exempt gain, the continuation requirement where losses were taken over, and any earn-out mechanics.
Four to six months from letter of intent to closing is typical for a mid-sized private transaction with no regulatory complication. Where sector approval is required, the regulator’s timetable governs and the rest of the schedule arranges itself around it.
Employees
Employment relationships pass to the acquirer by operation of law where a business or part of a business is transferred. The employee’s accrued rights carry over with their length of service, and the transferor and transferee are jointly liable for entitlements that arose before the transfer, within the period the legislation sets.
- Contracts transfer without new agreements being signed
- Length of service and accrued entitlements carry over
- Transfer alone is not a valid ground for termination
- Joint liability applies to pre-transfer entitlements
- Where the transfer follows a merger or division, employees may object and the contract then ends at the end of the notice period
- Collective agreements in force continue to apply
- Severance exposure should be quantified at diligence, not at closing
- A share deal changes nothing for employees, because the employer does not change
The last point is worth isolating. In a share deal the employing company is the same company before and after, so nothing transfers and no objection right arises. In an asset deal the employer changes, and the whole body of transfer protection engages. That difference alone sometimes decides the structure.
Simplified Merger
Where ownership is already concentrated, the Commercial Code removes several steps. Two situations are distinguished and they are not the same.
| Situation | What falls away |
|---|---|
| The acquirer holds all voting shares of the transferring company, or all the companies are under the same control | Merger report, and the general assembly resolution is not required |
| The acquirer holds at least 90% of the voting shares | The same simplifications, conditional on offering the minority an exit payment and on the minority not incurring additional obligations |
| Below 90% | The full procedure applies: report, inspection rights, and general assembly resolutions at the required majorities |
The simplification is procedural. It does not change the tax analysis: a simplified merger still has to meet the transfer conditions to be tax-neutral, and a group that uses the simplified route without checking those conditions has saved paperwork and created a tax liability.
Documentation
| Document | Function |
|---|---|
| Letter of intent | Structure, price expectation, exclusivity and confidentiality; mostly non-binding except on those last two |
| Share purchase or asset transfer agreement | The operative document; conditions precedent, warranties, indemnities and the price mechanism |
| Disclosure letter | Qualifies the warranties against what diligence revealed; determines what the buyer can later claim for |
| Merger or division agreement and plan | Where the transaction is a combination rather than a purchase |
| Latest balance sheet and interim accounts | The figures the exchange ratio or price adjustment rests on |
| Corporate resolutions | Board and general assembly approvals at the majorities the form requires |
| Shareholders’ agreement | Where the seller retains a stake: governance, transfer restrictions, drag and tag rights |
| Regulatory filings | Competition Authority notification and any sector application, with the supporting turnover data |
Common Mistakes
- Choosing share or asset by habit rather than analysis. The form determines liabilities, losses, the seller’s exit tax and whether value added tax arises.
- Discovering at signing that no share certificates were issued. The individual seller’s exemption depends on them and the two-year period runs from issue, so it cannot be fixed at that point.
- Closing before competition clearance. The transaction is legally ineffective until the decision and a turnover-based fine applies.
- Assuming an asset deal leaves everything behind. Employment relationships transfer by operation of law and public receivables can follow the business.
- Treating the participation exemption as complete at closing. The reserve and collection conditions operate in the years after the sale.
- Using the simplified merger route without testing the transfer conditions. Procedural simplification does not make a merger tax-neutral.
- Leaving change of control clauses to post-closing. Permits, licences and key contracts should be reviewed before signing, not after.
- Exercising control between signing and clearance. Integration steps taken in that window are the classic gun-jumping finding.
Frequently Asked Questions
Should we buy the shares or the assets of a Turkish company?
Does an asset deal leave the target’s liabilities behind?
How is an individual seller taxed on selling shares in a Turkish company?
Is competition clearance mandatory in Turkey?
What are the merger control turnover thresholds?
What happens to employees in a Turkish acquisition?
When can the simplified merger procedure be used?
How long does an acquisition take in Turkey?
As the Ozbek CPA team, we work on the financial and tax side of acquisitions in Turkey — modelling share against asset structures on the full tax position of both parties, financial and tax due diligence, quantifying employment and public receivable exposure, structuring the price mechanism and post-closing conditions, and the filings that follow completion. See also our pages on due diligence, business valuation and corporate restructuring. We work with counsel on the transaction documents and the regulatory filings. Contact us.
