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FOREIGN DIRECT INVESTMENTS

Foreign Direct Investments in Turkey

C&G has a strong expertise in international expansion of foreign companies. Our Istanbul based law Office entirely focuses on foreign strategic alliances and direct investments in Turkey, mainly EU funds and financial aids; and assists its foreign client companies on the research on govermental incentives.

Besides the establishment all types of companies or Liason Offices and Branch Offices, our law office assists our clients on legal steps for the set up of manufacturing and assembly plants, distribution centers, service centers, call centers, R&D facilities, data centers, warehouse, clinic and any others facilities and affiliated headquarters in Turkey.

Our services include also advising and assisting in obtaining work and residence permit in Turkey.

Overseas Investments for Turkish Investors

The international background of our team allows us to work in collobaration with specialized lawyers or legal consultants in specific countries. Hence; C&G Law Office has advised and is advising multiple Turkish clients on their investements in foreign countries all over the world via its international lawyer team, by finding solutions fit to their requirements, goals and budgets. On the other hand, we represent also our clients regarding the disputes related to their several investments in among other countries, since our capability stretches across various jurisdictions worldwide.

DISPUTE RESOLUTION

When a dispute arises, our first goal is to help our client to resolve the dispute via alternative dispute resolutions methods.

However if the litigation is inevitable; we try to better understand the merit of the case by means of our close cooperation with technical experts related to the subject of the dispute and we represent our client in all court instances by providing the appropriate injunctions and other preliminary reliefs and collection of evidences.

And apart from litigation; as the members of Chartered Institute of Arbitration (CIArb), we also arbitrate cases to conclusion to serve the needs of our clients.

PATENTS&TRADEMARKS

Our team has also the breadth and depth of experience in the intellectual property law. Accordingly, we advises our clients on the full array of their IP legal and business needs such as prosecution, litigation, transactional services, and commercialization of IP assets as well as the patents, trademarks, copyrights, trade secrets or other IP-related matters.

NEW LAW ON INTERNATIONAL WORKFORCE ENTERED INTO FORCE CONCERNING THE EMPLOYMENT OF FOREIGNERS IN TURKEY AND WORK PERMIT FOR FOREIGNERS

Turkish Law on the Work Permit for Foreigners No. 4817 which had been in effect since 2003 has been abrogated by Article 27.7 of Law No 6735 on International Workforce, which entered into force on the date of 13.08.2016 regarding Work Permit for foreigners.

PARTNERS AND DIRECTORS OF COMPANIES

In accordance with Article 10.5 of The Law on International Workforce No 6735, it has been expressly regulated that;

Foreign Managing Director who is the shareholderof limited liability companies and,
Foreign shareholder of joint-stock company who is also member to board of directors

must obtain work permit,

However in accordance with Article 13.7 of the above mentioned Code,

Foreign Non-resident member of board directors of joint-stock companies,
Non-executive foreign shareholders of limited liability companies,

are exempt from work permit.

Thus, it has been clarified that the nonexecutive foreign shareholders of limited liability companies and also the non-resident foreign board members of joint-stock companies who are not shareholder shall be assessed in the scope of work permit exemption.

Foreigners who are entitled to a work permit exemption must obtain the document proving this exemption.

On the other hand, the executive Managing Director of a limited liability company must obtain work permit without consedering whether he/she is shareholder or not.

In addition to the tax immunity promulgated by Avoiding Double Taxation Agreements between countries; by virtue of the mentioned article, the Cross-Border Service Providers whose activities in Turkey not exceeding ninety days within the period of hundred and eighty days shall be assessed in the scope of work permit exemption.

Work permit is granted for a year, and it may be extended to the period of two or three years with the condition to be employed by the same employer. Regardless to be employed by the same employer; foreigners who has completed a period of eight years of work permit without interruption shall be entitled to apply for the acquirement of a permanent work permit.

TURQUOIS CARD

In order to provide a skilled workforce; ‘’Turquois Card’ providing a permanent work permit has been regulated by Article 11 of the mentioned Code. ‘’In accordance with the international workforce policy; Turquois Card shall be granted to the foreigners whose applications are accepted as appropriate with regard to their education level, professional experience, contribution to science and technology, effects of activities or investment in Turkey to national economy and employment, suggestions of International Workforce Policy Advisory Board and procedure and principles designated by Ministry .’’ With this regulation, qualified foreigners founded favourable by the evaluation performed in the end of the period of the first three years of transition following the application, shall be entitled to benefit from all the rights provided by a permanent work permit.

FREE ZONES

Foreigners planning to work in free zones must primarily obtain the conformity opinion of Ministry of Economy.

ENGINEER, ARCHITECT AND STUDENTS

In accordance with Article 20 of the above mentioned Code,

Foreignengineers and architects shall be entitled to apply for the acquirement of the Project-based of temporary work permit, provided that their graduation certificates are recognized by Council of Higher Education. Engineers and Architects must receive the opinion of the Union of Chambers of Engineers and Architectduring their work permit applications.

It has been promulgated by Article 19 of New Code that foreign students residing in Turkey and who are subject to a Higher Education Institution may also work by obtaining work permit.

It has been come into force by the law no 6735 that those who do not hold residence permit may also apply for work permit and conclude it in Turkey. Accordingly, the process of work permit application made without residence permit has been simplified and centralized in a single body in order to eliminate the complex bureaucracy in comparison to the Law No 4817.

In any case, besides of the obligation of employing five Turkish citizens regulated by the Article 13 of the Regulation for Implementation of Law on Work Permit for Foreigners No 4817; the evaluation criterias related to the work permit will be also re-determined and announced within the frame of the Law on International Workforce No 6735 by Ministry of Labour and Social Security.

AMENDMENTS TO REAL ESTATE ACQUISITION LIMITS IN TURKEY FOR FOREIGN PERSONS AND FOREIGN COMPANIES

Turkish Parliament adopted a new law which removes reciprocity principle that was barring citizens of 89 countries from owning a property in Turkey. In other words, it is no longer required that a foreign person’s home country allows for a citizen of the Republic of Turkey to acquire real estate in order for that foreign person to be able to buy property in Turkey.

With the new law, foreign buyers can purchase land up to the 10% of a town’s acreage or 30 hectares throughout the country instead of 2,5 hectares. On the other hand, the Turkish Council of Ministers may raise this amount up to 60 hectares. In any event, the local land registry office should take the approval from the Military in order to determine if the related land is or not in military or security zone.

Besides, under the new legislation, foreign companies established in accordance with their own country’s laws may acquire real estates in Turkey only in accordance with the provisions of special codes and only to conduct their areas of activity mentioned on their Articles of Associations. Thus; these corporations are required to submit their projects to the approval of the relevant Ministry within two years. If approved, the project will be sent to the local land registry office. The companies other than the said commercial companies cannot acquire real estates in Turkey.

Pursuant to the article 35 of the Title Deeds Law no. 2644, the Turkish Council of Ministers may determine, restrict, sustain totally or partially or prohibit the acquisition of real estate of foreign persons or foreign companies upon the country, citizen, geographical region, term, number, rate, category, qualification, areameter or quantity.

Legal Steps to follow for acquiring Real Estate of foreign investors can be explained as:

Checking Title Deed Registry of real estate if there is any restriction right on the property,
Request the approval of the competent National Military Authority which will be submitted following its research on the potential new proprietor and also on the real estate which is subject to an acquisition by a foreigner whether it is located out of Military Forbidden Zones and Security Zones or not,
Following the approval of the Military, the signature of the official sale agreement before the related Title Deed Registry in order to register the property in the name of the new proprietor,
Submitting a declaration to the related local municipality related to the new ownership

With the same regulation, it has been also determined that the location, registration, announcement and planning of the areas with protected status such as natural protected areas, wetlands, private environmental protection areas are under the responsibility of the Ministry of Environment and Urban Planning.

What is “Fitness for Purpose” ?

The term “fitness for purpose” arises from the Sale of Goods Act 1979 and it was amended by the Sale and Supply of Goods Act 1994 which implicitly imposes conditions for every seller of goods when performing business. This contains a statement that the provided goods will be of satisfactory quality and, where the buyer demands a specified purpose, are reasonably fit for their intended purpose.

The seller’s consent on this clause declares that it is guaranteeing that the design will be compatible with the terms claimed by the buyer. This highlights that, the only duty of the buyer is to prove that the completed work is not working properly as it should. However, it is not necessary to demonstrate that the design has been negligent.

The parties should be aware of the existence of the term of the contract which states the buyer’s purpose. When this issue is unclear, the intended purpose will usually be evaluated by the court or arbitrator in regard to the facts. This puts an extra liability on the seller to add a stated purpose or buyer’s requirements and then to verify them to ensure that the purpose is defined in a clear way.

A fitness for purpose obligation may be implied into a contract where the seller has the obligation to provide the goods which should be fit for that specified purpose. If the seller refuses or will be unable to provide fitness for purpose in the work, he/she should expressly exclude fitness for purpose in the contract.

Where the fitness for purpose risk is excluded in the contract, then the seller will have the lower obligation of reasonable skill and care on the works. In the event that the parties agree on dividing the risk of the work being unfit with the agreed terms and conditions to reflect the risk taken amongst the parties in respect of uninsured losses, the seller can agree to be liable to perform the work or to provide the other losses arising from this breach.

In the event of lack of an express or implied fitness for purpose obligation, the seller’s performance must be in compliance with a reasonable skill and care which means that the work must be compatible with the standard of competent professional seller. In this event, the buyer should prove that the seller has been neglectful by showing that the work fails to be compatible with the standard of competent professional seller.

Revocation of contract is possible if the provided work is not consensual with the intended purpose of the buyer. Compensation claim of the buyer in accordance with general rules is also reserved.

Besides, in compliance with the article 35 of the United Nations Convention on Contracts for the International Sales of Goods the seller should supply the goods in the quality, quantity and description stated in the contract.

ADVANTAGES OF THE FREE ZONES

100% CORPORATION AND INCOME TAX EXEMPTION:

Companies are 100% exempt from Corporate and Income Tax.

BRIEF PAYMENT EXEMPTION:

Companies that sell at least 85% of their products abroad are 100% exempt from the income tax payable over salaries of employees.

VALUE-ADDED TAX (VAT) EXEMPTION:

As Free Zones are outside of the customs border, companies can purchase good from Turkey without VAT. Moreover infrastructure services are provided exempt from VAT.

FREE TRANSFER OF PROFITS:

Companies can freely transfer their profits and earnings to Turkey or any other country.

DUTY FEE EXEMPTION:

The goods entering the free zones are exempt from tariff.

MINIMUM OF BUREAUCRACY:

Bureaucracy has been minimized in the free zones.

EASY STORAGE:

Companies can keep their stock without duty free and unlimited period of time.

FREEDOM TO PURCHASE MACHINERY:

Companies are free to bring second hand (used) machinery to the Free Zones and there is no age limitations for the importation of second hand (used) machinery.

OTHER EXEMPTIONS:

There is no quality standard for price in the free zones.
THE OPPORTUNITY OF USING CHEAPER ENERGY:

Companies in free zones have an opportunity to use cheap energy.

INTRODUCTION TO ARBITRATION

Arbitration agreement

Arbitrations agreement can be in a form of an arbitration clause which is usually included in the substantive commercial contract. Nevertheless, in the light of judicature, such clause is regarded as a separate contract despite being part of another contract. Therefore even invalid substantive contract can contain perfectly valid arbitration agreement, and so any disputes arising from the invalid substantive contract can be resolved through arbitration based on that particular arbitration clause in the contract itself. This is the most common way of agreement. The arbitration agreement can be also made in a form of separate written contract in which parties further specify the entire conduct of an arbitration. It is crucial for the validity of the agreement to be entered willingly without any reservation and doubt. (more…)

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