SECTION 1: General outlook
1.1 Please summarise the broad trends and patterns in
Chinese investment into your jurisdiction, citing any recent
China is among Turkey's top trade partners. Turkey's imports
from China reached $23.4 billion in 2017. Turkish exports to
China amounted to about $2.1 billion in the same period,
resulting in substantial trade imbalance in favour of China.
Policy makers of both countries seem to recognise the
importance of Chinese direct investment into Turkey to work
towards an equilibrium yielding greater benefits for both
The project that seems to be stirring up most excitement is
the One Belt One Road Initiative. The project route goes
through Turkey, a natural gateway for Asian exports with its
proximity to European markets, as did the historical Silk Road.
In 2015, Cosco Pacific of China acquired majority shares in
Kumport, the third largest port in Turkey with substantial
container handling capacity to serve the industrialised area
surrounding Istanbul. This $940 million acquisition was the
largest Chinese direct investment into Turkey to date and
complements the 21st Century Maritime Silk Route.
Chinese direct investment has also targeted sectors such as
energy, mining, banking, internet and technology, agriculture
and tourism. The China Development Bank has recently lent $600
million to Ziraat Bank of Turkey. Another sign of Chinese
confidence in Turkey's development was ICBC's participation in
the bond issuance for financing the Elazığ City
Hospital PPP project, a landmark social infrastructure project
that is part of Turkey's large pipeline of healthcare PPP
1.2 How would you summarise your jurisdiction's attitude
towards Chinese investment?
Turkey has taken important steps in recent decades to
encourage foreign investors in a non-discriminatory manner. The
Foreign Direct Investments Law paved the way by removing
minimum investment requirements, and facilitating issuance of
residence and work permit to foreign employees. Turkey favours
Chinese investment, as China is Turkey's second trade partner
globally (after Germany) and the largest source of imports to
1.3 What is your outlook for Chinese investment into your
jurisdiction over the next 12 months?
In 2016, Turkey ratified the Agreement Between the
Government of the Republic of Turkey and the Government of the
People's Republic of China for Cooperation in the Peaceful Uses
of Nuclear Energy. Turkey is planning to commission its first
nuclear power generation unit in Akkuyu by 2023, to be followed
by nuclear power plants to be built in Sinop and a third plant
planned to be built in Kırklareli province located in
Northwestern Turkey. China is pronounced as a strong candidate
to invest in the construction and operation of this pipeline of
nuclear power plants in Turkey, which is planned to account for
15% of the total power generation capacity by 2030.
Significant Chinese investment in renewable energy,
transportation infrastructure, mining, the automotive sector
and logistics are also expected in the near future. Chinese
investors may also benefit from Turkish businesses' resources
and experience in markets such as the Middle East, Africa and
the CIS as a co-investor with a strong track record.
SECTION 2: Investment approval
2.1 Explain the process and timings for foreign investment
In principle, there is no approval requirement for foreign
investors. Foreign investors and local Turkish investors are
treated indiscriminately, apart from a few regulated sectors,
where foreign control is restricted (further explained under
There is a national security screening process applicable to
the acquisition of real property by Turkish companies
controlled by foreign shareholders in proximity to certain
designated areas (i.e., military forbidden zone, military
security zone and private security zone). The review must be
concluded within 60 days following filing for the same.
2.2 Briefly explain the investment restrictions for any
specially regulated/restricted sectors, including whether the
government is entitled to any special rights in those
A limited number of regulated sectors are subject to certain
foreign control or ownership restrictions. The most notable
examples are domestic shipping, broadcasting and aviation
The only instance of a golden share in a privatised entity
is Turk Telekom, the telecoms company enjoying a natural
monopoly over landline and broadband internet services due to
its ownership of the infrastructure. The golden share grants
the Turkish treasury negative control rights despite its
minority shareholding stake. The government also has monopoly
rights in certain other businesses, such as the exploration and
production of boron.
2.3 Which authority oversees competition clearance?
The independent regulatory authority overseeing competition
clearance is the Turkish Competition Authority (Rekabet
Kurumu) (TCA). All decisions of the Competition Board, the
decision making organ of TCA, are subject to judicial review by
administrative tribunals if challenged.
2.4 Briefly explain the merger clearance process.
M&A transactions that cause a change in control and have
a significant impact on the product or services markets are
subject to the approval of the TCA, in the case that the
relevant parties' turnovers exceed certain thresholds.
Transactions are to be notified to the TCA before the
ultimate transfer of control, which is usually made after
signing and prior to closing of the contemplated share or asset
After the merger clearance filing has been submitted, the
TCA has 30 days (Phase I) to either approve the transaction, or
to issue a letter of preliminary objection, in which the
Competition Board will declare that the proposed transaction
will be investigated further in a Phase II review. In Phase II,
the case handlers are equipped with full investigative powers,
including the possibility to make on-the-spot inspections.
Phase II may last six months following the inception of the
Phase II and may be extended for an additional period of up to
Any supplementary information requested by the TCA suspends
the 30 day period and the clock restarts upon submission of the
requested information. In practice, this procedure to ask for
additional information or documents is used quite often by the
TCA, especially when the case handlers consider that the case
does not necessarily need a Phase II review, but more time is
needed to complete their evaluation. Where the TCA does not
take any action concerning a transaction within 30 days after
the submission of the complete notification, the proposed
transaction is deemed to be approved by the TCA.
A case that does not raise significant competition concerns
takes six to eight weeks to pass through the TCA's review.
2.5 Are there approval requirements when a foreign investor
increases or exits its investments?
There are pre-closing regulatory approval requirements for
change of shareholding structure in companies active in certain
sectors such as banking, financial services, energy, oil and
gas, mining, insurance, broadcasting, aviation, and
telecommunications. However, these approval requirements are
applicable to both foreign and local investors.
SECTION 3: Investment techniques
3.1 What are the most common legal entities and vehicles
used for Chinese outbound investment in your jurisdiction?
Chinese investors, like most other foreign investors, can
establish a joint stock corporation (JSC) or a limited
liability partnership (LLP) or acquire shares in an existing
JSC or LLP, as the liability of shareholders is limited to
their capital contribution in these frequently used limited
liability company forms. Legal representatives of both LLPs and
JSCs (board members of JSCs and managers of LLPs) and
shareholders of LLPs can be held liable for unpaid public debts
(such as tax, social security premiums of employees or fines
owed to public authorities) of the company that cannot be
collected from the company. This potential shareholder exposure
in the case of LLP, leads the majority of investors to opt for
3.2 What are the key requirements for establishment and
operation of these vehicles which are relevant to China
JSCs and LLPs can be established with a single partner or
shareholder and with a minimum share capital of TRY50,000
($12,500) or TRY10,000, respectively. For both types of
companies, one-quarter of the share capital must be paid before
registration and the remainder must be paid within 24
The incorporation or establishment procedures for a JSC and
an LLP are very similar and include the following steps:
- Preparation of the company's articles of
- Registration of the company with the
relevant trade registry office;
- Announcement of incorporation or
establishment in the Turkish Trade Registry Gazette.
Once the articles of association of the company are signed
and notarised and the company has obtained a potential tax
number, it can establish a bank account, which is required for
depositing one-quarter of the share capital of the company.
All companies must register with the trade registry of the
city where the company will have its headquarters, by
submitting its notarized articles of association along with
other requisite documentation.
SECTION 4: Dispute resolution
4.1 Does your jurisdiction have a bilateral investment
protection treaty with China or other jurisdictions commonly
used for investing into the country?
A bilateral investment protection treaty (BIT) was signed
between Turkey and China on November 13 1990 and has been in
force since August 20 1994 to promote greater economic
cooperation. Turkey has executed 94 BITs so far and 75 of them
are in effect.
4.2 How eﬃcient are local courts' enforcement and
dispute resolution proceedings, and are there any procedural
idiosyncrasies foreign investors must be aware of?
The new Civil Procedure Code (CPC) No. 6100 entered into
force in 2011 with an agenda to increase the speed and overall
efficiency of procedure.
In order to initiate legal proceedings in Turkey, foreign
legal or natural persons have to provide a security at the
court's discretion pursuant to Article 48 of the Code on
Private International Law and Law of Civil Procedure (Law No.
5718). Turkey and People's Republic of China has executed a
bilateral treaty named Agreement on Judicial Assistance in
Civil, Commercial and Penal Matters on 27/09/1994 providing
mutual exemption from security payment.
Recently, alternative dispute resolution procedures have
gained significance in Turkey. Obligatory mediation was adopted
for employment disputes, which makes it mandatory for the
parties to try to settle through mediation before resorting to
4.3 Do local courts respect foreign judgments and are
international arbitration awards enforceable?
The conditions of enforcement of a foreign judgment in
Turkey are governed by the Law No. 5718, which provides that
the competent Turkish court shall render enforcement without
re-examination of the merits if it satisfies the following
- the judgment must be final and binding
without any possible recourse to appeal;
- de facto or de jure
reciprocity must exist between Turkey and the country
rendering the judgment;
- the subject matter of the judgment must
not fall under the exclusive jurisdiction of Turkish courts
such as real estate matters;
- due process must be respected and the
right to be heard should be respected;
- the judgment must not be contrary to a
pending case with same Parties and same subject matter or to
a former foreign judgment that satisfies the same criteria
which is enforceable in Turkey; and
- the court decision shall not contradict
Turkish public policy.
In terms of enforcing foreign arbitral awards, the New York
Convention has precedence and is treated as part of the Turkish
domestic legal system. Turkey ratified the Convention with two
reservations, which means that the enforcement of foreign
awards will be subject to the Convention if the award was
rendered in another signatory state and the relevant dispute is
defined as commercial under the Turkish Commercial Code. The
People's Republic of China (PRC) also ratified the Convention
on January 22 1987.
4.4 Are local judgments and arbitration awards from your
jurisdiction generally enforceable in other jurisdictions?
Turkey has entered into BITs with many countries, including
the PRC (September 8 2016), for the reciprocal recognition and
enforcement of judgments on civil and commercial matters.
As stated above, Turkey is party to the New York Convention
that enables recognition and enforcement of Turkish decisions
or awards in other contracting parties' jurisdictions.
SECTION 5: Forex controls and local operations
5.1 What foreign currency or exchange restrictions should
foreign investors be aware of?
Article 3 of the Foreign Direct Investment Law No. 4875
assures investors unrestricted repatriation of profits. Foreign
investors are free to repatriate net profits, dividends,
proceeds from the sale or liquidation of all or any part of an
investment; royalties or fees from licence, management and
similar agreements; or principal and interest payments of
Decree No. 32 on the Protection of the Value of Turkish
Currency recently restricted Turkish companies that do not have
foreign exchange income from borrowing foreign currency loans.
Several noteworthy exceptions apply to this restriction in the
case of banks or financial institutions or in the financing of
public-private partnership projects.
SECTION 6: Tax
6.1 Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for foreign
direct investment (FDI) into the country?
European jurisdictions with favourable taxation regimes,
such as the Netherlands or Luxembourg are sometimes used as
intermediate holding companies to acquire Turkish target
companies. The motivation behind these structures are tax
benefits available under the tax treaty between the respective
countries and Turkey, such as the reduction of Turkish
withholding tax rates on dividends and interest and exemption
from local capital gains taxes realized on exit from investment
in a Turkish target company.
6.2 What are the applicable rates of corporate tax and
withholding tax on dividends?
The corporate income tax rate is 22%. The withholding tax on
dividends is 15%.
6.3 Does the government have any FDI tax incentive schemes
The following incentives are available within the Turkish
Incentive System, subject to certain terms and conditions: VAT
exemption; customs duty exemption; tax reduction; social
security premium support; interest support; land allocation;
VAT refund and income tax withholding support.
Investors should apply for an Investment Incentive
Certificate to benefit from one of the incentive schemes that
its investment qualifies for, e.g., the General Investment
Incentives System, Large-Scale Investment Incentives System,
Regional Investment Incentives System or Strategic Investment
Incentive System. These schemes offer varying advantages and
are offered based on the regions or sectors that the intended
investment relates to.
6.4 Are there any reciprocal tax arrangements between your
jurisdiction and Chin a? If so, how can they aid
The Agreement Between The People's Republic of China and The
Republic of Turkey for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion With Respect to Taxes on Income
was signed on May 23 1995 between Turkey and China to address
double taxation. The withholding tax rate for dividends shall
not exceed 10% of gross dividends if the beneficial owner is a
resident of the other contracting party. Effective withholding
tax charged for interest shall not exceed 10% of the gross
amount of interest or royalties.
Senior partner, Hergüner Bilgen
Özeke Attorney Partnership
T: +90 212 310 18 00
F: +90 212 310 18 99
Ümit Hergüner co-founded Hergüner
Bilgen Özeke in 1989, where, as senior partner, he
takes the lead on every major matter involving
joint-ventures; private equity; acquisitions;
restructuring; corporate governance; franchising &
distributiorship; contract management; public tenders;
procurement; government relations; government
contracts; defence contracts; and public international
Hergüner is a member of the International
Relations & European Union Center advisory board of
the Union of Turkish Bar Associations (TBB) in Ankara
and the Turkish Industrialists and Businessmen
Association (TÜSİAD). He has served as the
American Bar Association (ABA) and TBB Representative
to the International Bar Association's (IBA) Working
Group on UN Guidelines on Human Rights and Business. He
is a board member of the International Law Institute
(ILI) in Washington, DC, and a former President of the
Istanbul chapter of ILI. He has also been heavily
involved in the Corporate Governance Association of
Turkey (TKYD), having served as its president, as well
as serving on the TKYD advisory board.
Hergüner holds an undergraduate and a master's
degree from Istanbul University School of Law, as well
as LLM degrees from the American University Washington
College of Law and the University of Virginia School of
Managing partner, Hergüner Bilgen
Özeke Attorney Partnership
T: +90 212 310 18 00
F: +90 212 310 18 99
Senem Denktaş has been with Hergüner
Bilgen Özeke for 20 years, where she has
significant experience in PPPs; concessions agreements
and privatisation; joint-ventures; private equity;
acquisitions; restructuring; intellectual property;
data protection; and cyber-security. Denktaş also
practices in the area of technology, media and
telecommunications law, including the regulation and
policy of telecommunications, media, the internet, and
Prior to joining the firm, Denktaş served as
the international director of institutional relations
for the European Law Students' Association (ELSA) in
Brussels. Denktaş is a member of the Istanbul Bar
Association and the European Law Students Association
Denktaş received her bachelor of laws from
Istanbul University School of Law in 1996 and her
master of laws in international business law from the
London School of Economics and Political Science in
Partner, Hergüner Bilgen Özeke
T: +90 212 310 18 00
F: +90 212 310 18 99
Deniz Tuncel has been with Hergüner Bilgen
Özeke for nine years, where he is a partner in the
corporate and M&A and energy practice groups,
generally advising as transactional counsel for
cross-border mergers and acquisitions and
joint-ventures aimed at facilitating direct investment
into Turkey. Having joined the firm in 2009, Tuncel was
seconded to the Tokyo office of the prominent Japanese
law firm of Mori Hamada & Matsumoto in 2014. His
major work with Hergüner has included acquisitions
of power generation plants, upstream and downstream oil
& gas (e.g., E&P and distribution business)
transactions, and advising cross-border natural gas
Tuncel is a member of the Istanbul Bar Association
and the Harvard Law School Alumni Association; he is a
member of the supervisory board of the Istanbul chapter
of the International Law Institute (ILI); and he is a
member of the editorial board of the Turkish Commercial
Tuncel is a graduate of Istanbul University, and
after qualifying as a Turkish lawyer, he received his
first LLM degree from İstanbul Bilgi University,
and a second LLM degree from Harvard Law School. In
addition to his native Turkish, he speaks fluent
English and intermediate Japanese.