Investment legislation of Turkey offers equal treatment to all investors in addition to its simplicity and compliance with international standards. The backbone of the investment legislation is made up of the Encouragement of Investments and Employment Law No. 5084, Foreign Direct Investments Law No. 4875, the Regulation on the Implementation of the Foreign Direct Investment Law, multilateral and bilateral investment treaties, and various laws and related sub-regulations on the promotion of sectoral investments.
1. Legal Framework of Foreign Direct Investment
Activities for foreign direct investment are carried out within the scope of the Foreign Direct Investments (FDI) Law No. 4875. Purpose of the Foreign Direct Investments (FDI) Law No. 4875:
The FDI Law defines foreign investors and foreign direct investments. In addition, it explains important principles of foreign direct investments, such as freedom to invest, national treatment, expropriation and nationalization, freedom of transfer, national and international arbitration and alternative dispute settlement methods, valuation of non-cash capital, employment of foreign personnel, and liaison offices. The Regulation on the Implementation of the FDI Law consists of specifying the procedures and principles outlined in the FDI Law. The aim of the FDI Law regarding the work permits for foreigners is:
2. Bilateral Agreements
2. a. Bilateral Agreements for the Promotion and Protection of Investments
Bilateral Agreements for the Promotion and Protection of Investments were signed from 1962 onwards with countries that show the potential to improve bilateral investment relations. The basic aim of bilateral investment agreements is to establish a favorable environment for economic cooperation between the contracting parties by defining standards of treatment for investors and their investments within the boundaries of the countries concerned. These agreements aim to increase the flow of capital between the contracting parties while ensuring a stable investment environment. In addition, by having provisions for international arbitration, they aim to prescribe ways to successfully settle disputes that might occur among investors and the host state. Turkey has signed Bilateral Investment Treaties with 98 countries. However, Turkey is a dualist country, where an international treaty has to be ratified and promulgated to become part of the national legal system. Within this regard, 86 Bilateral Investment Treaties out of these 108 have gone into effect so far.
86 Bilateral Agreements
Afghanistan, Germany, United States, Argentina, Albania, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium-Luxembourg, United Arab Emirates, United Kingdom, Bosnia and Herzegovina, Bulgaria, Djibouti, Czech Republic, China, Denmark, Indonesia , Estonia, Ethiopia, Morocco, Philippines, Finland, France, Gambia, Guinea, Guatemala, South Korea, Georgia, Croatia, India, Netherlands, Iran, Spain, Israel, Sweden, Switzerland, Italy, Japan, Qatar, Kazakhstan, Kyrgyzstan, Kosovo, Kuwait, North Macedonia, Cuba, Latvia, Libya, Lithuania, Lebanon, Hungary, Malaysia, Malta, Mexico, Egypt, Mongolia, Moldova, Mauritius, Uzbekistan, Pakistan, Poland, Portugal, Romania, Russian Federation, Senegal, Serbia, Singapore, Slovakia, Slovenia, Syria, Saudi Arabia, Tajikistan, Tanzania, Thailand, Tunisia, Turkmenistan, Ukraine, Oman, Jordan, Vietnam, Yemen, Greece, Zambia.
Source: Ministry of Industry and Technology
2. b. Double Taxation Prevention Treaties
Turkey has signed Double Taxation Prevention Treaties with 86 countries. This enables tax paid in one of two countries to be offset against tax payable in the other, thus preventing double taxation.
Germany, United States, Albania, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belgium, Belarus, United Arab Emirates, Bosnia and Herzegovina, Brazil, Bulgaria, Algeria, Czech Republic, China, Denmark, Indonesia, Estonia, Ethiopia, Morocco , Philippines, Finland, France, Gambia, South Africa, South Korea, Georgia, Croatia, India, Netherlands, England, Iran, Ireland, Spain, Israel, Sweden, Switzerland, Italy, Japan, Canada, Qatar, Kazakhstan, Kyrgyzstan, Kosovo , Kuwait, Turkish Republic of Northern Cyprus, Latvia, Lithuania, Lebanon, Luxembourg, Hungary, Macedonia, Malaysia, Malta, Mexico, Egypt, Mongolia, Moldova, Norway, Uzbekistan, Pakistan, Poland, Portugal, Romania, Rwanda, Russian Federation, Serbia and Montenegro, Singapore, Slovakia, Slovenia, Sudan, Syria, Saudi Arabia, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, Oman, Jordan, Vietnam, Yemen, New Zealand, Greece.
Source: Ministry of Treasury and Finance
2. c. Social Security Agreements
Turkey has signed Social Security Agreements with 34 countries. These agreements make it easier for expatriates to move between countries. The number of these countries will increase in line with the increased sources of FDI.
Germany, Albania, Austria, Azerbaijan, Belgium, Bosnia-Herzegovina, Czech Republic, Denmark, France, South Korea, Georgia, Croatia, Netherlands, England, Sweden, Switzerland, Italy, Canada and Quebec Province, Montenegro, Kyrgyzstan, Turkish Northern Cyprus Republic, Libya, Luxembourg, Hungary, Macedonia, Moldova, Mongolia, Norway, Poland, Romania, Serbia, Slovakia, Tunisia.
Source: Social Security Institution (SSI)
3. Customs Union and Free Trade Agreements (FTA)
Turkey concludes similar agreements on the basis of mutual benefit with the countries with which the EU has concluded Free Trade Agreements (FTA), both in parallel with the tendency to establish FTA networks in international trade and within the framework of the Customs Union.
Developing our foreign trade with FTAs, neighboring and surrounding countries; Ensuring that our exporters can compete on equal terms with their competitors in foreign markets, especially with the entrepreneurs of EU countries; It is important in terms of increasing the international competitiveness of our country through mutual investments and joint ventures. In this context, our country is not obliged to accept the content of the FTAs signed by the EU exactly, and our country's sensitivities are taken into account in the negotiations.
To date, 38 FTAs have been signed by our country, and 11 of them have been terminated due to the EU membership of these countries. Of the remaining 22 STAs (EFTA, Israel, Macedonia, Bosnia and Herzegovina, Palestine, Tunisia, Morocco, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Mauritius, South Korea, Malaysia, Moldova, Faroe Islands, Singapore, Kosovo, Venezuela) and the United Kingdom) are currently in force.*
The Lebanese, Sudanese and Qatari FTAs will enter into force following the completion of their internal approval processes.
Within the framework of updating the existing FTAs and expanding their scope, the protocols signed for updating the Serbian FTA entered into force on 1 June 2019, Turkey-Bosnia and Herzegovina revised FTA on 1 August 2021, Turkey-EFTA revised FTA on 1 October 2021. However, the approval processes of the Protocols that revised the Turkey-Montenegro FTA are still in progress. In addition, it is aimed to conclude the negotiations with Georgia and Malaysia soon and to start negotiations with Moldova and North Macedonia in a short time. On the other hand; Negotiations with 5 countries (Ukraine, Japan, Thailand, Somalia and Indonesia) are actively continuing within the scope of FTA negotiations, which have been officially started with 17 countries/country groups. Efforts are being made to accelerate the processes in question with other countries/country groups that are in the negotiation process (Mexico, Peru, Colombia, MERCOSUR, Ecuador, Cameroon, Chad, Gulf Cooperation Council, Democratic Republic of Congo, Seychelles, Djibouti and Pakistan). In addition, an attempt was made to start FTA negotiations with 9 country/country groups (USA, Canada, India, Vietnam, Central American Countries, African Caribbean Pacific Countries, Libya, Algeria and the Republic of South Africa).
The Customs Union Agreement between Turkey and the European Union has been in force since 1996. This agreement allows trade between Turkey and EU countries without any customs restrictions. The Customs Union between the EU and Turkey is a step towards Turkey's full EU membership.
*The Partnership Agreement Establishing a Free Trade Area Between Turkey and Syria was suspended on 6 December 2011
Source: Ministry of Trade