Brand-new Turkish Economic Citizenship Program and aspects to consider for investing in Turkey[UPDATE – January 2019: We’ve written a new article about why Turkey may be one of the most appealing Citizenship by Investment programs available and how to obtain Turkish citizenship]
Turkey may be one of the most fascinating countries in our world. Its location between continents has made it a constant crossroads of historical cultures, influences, and great civilizations. A confluence of East and West is just one of the many aspects that make it special. But today we’re not going to get into the (very interesting) multicultural influences inherited by Turkish society, nor on how to cook a kebab. The subject that today occupies us is how to get Turkey Citizenship by Investment.
The amendment of the Citizenship Act of Turkey was published in the TC Resmi Gazette (Official Gazette of Turkey) on the 12th of January 2017. The new regulation will allow for the acquisition of Turkey citizenship by investment. We are going to discuss this and a few other aspects to consider, such as whether to apply for citizenship, residence, visas, and some keys factors to bear in mind when investing or doing business in Turkey.
Turkey Citizenship by investment
(Updated October 2018 – Investment requirements have been lowered)
On January 12th, 2017 the Regulation for the Amendment of the Regulation on the Application of the Citizenship Act of Turkey was published in the T.C. Resmi Gazette (Official Gazette of Turkey). This amendment announced the formation of an Economic Citizenship program that allows the acquisition of Turkey citizenship by investment. Its main objective is to stimulate the Real estate market, which has a current oversupply, and to attract foreign currencies and create jobs. There are five types of investment:
- Investment of fixed capital of at least USD 500,000 confirmed by the Ministry of Economy.
- Acquisition of real estate for a minimum value of USD 250,000, including an annotation in the cadastral records of a commitment to not sell the property within three years from the date of purchase, confirmed by the Ministry of Environment and Urbanism.
- A foreigner who, through their business, has generated employment for at least 50 Turkish people, confirmed by the Ministry of Labor and Social Security.
- A foreigner who holds a bank deposit of at least USD 500,000 for three years, supervised by the Banking Regulation and Supervision Agency (BDDK).
- A foreigner who invests in Treasury bonds or any type of government loan instruments worth USD 500,000 and maintains them for three years, under the supervision of the Undersecretariat of the Treasury.
The applicable exchange rate shall be that established by the Central Bank of Turkey (CBTR) at the time of the transaction. The current price of the Turkish Lira, with significant depreciation against the dollar in the last seven months, from USD 1 = TRY 2.90 (07/01/2016) to USD 1 = TRY 3.87 (31/01 / 2017), may be an added investing attraction.
It is important to note that Turkey allows dual citizenship.
The Council of Ministers is the competent authority in charge of deciding the granting of citizenship to a foreigner, therefore, even if the aforementioned requirements have been fulfilled, they reserve the right of approval.
Obtain Turkey Passport by Residence
If you like the idea of obtaining Turkish citizenship, but investing in one with the required amounts is either not attractive or affordable enough for you, it is possible to obtain a Turkish passport through residence, as well as some other processes:
- Turkish Citizenship by residence: 5 years of continuous residence, leaving the country only for a maximum of 6 months. Individuals eligible are owners of a real estate asset or having established a business or made an investment or for work, or spouse of a Turkish national or any other family ties, or completed university education in Turkey. Other requirements include: medical report as being free of communicable diseases, reports of good behavior, average knowledge of the Turkish language, proof of sufficient resources to sustain oneself, do not pose a threat to national security or order, to relinquish their previous nationality if their country of origin does not admit dual citizenship, and to have no criminal record or any open administrative causes, especially in tax matters.
- Turkish Citizenship by Special Government Decree: The Council of Ministers and the Executive Government have the power to grant Turkish nationality to any foreigner, in case they believe that they will be a great service for the country in fields such as science, technology, economics, society, sports, culture or the arts. A specialized committee will study the application submitted and if they are deemed to appropriate and in compliance with certain required terms, they will send a citizenship request to the Council of Ministers for their approval.
Other forms of citizenship acquisition include marriage (with a minimum of 3 years and subject to investigation by the authorities) and for minors adopted by Turkish citizens.
Getting a Residence Permit in Turkey
To apply for Turkish citizenship by residency it is necessary to have a residence permit for at least 5 years. Then, we outline the six types of permits contemplated in the Turkish Law on Foreigners and International Protection No. 6458.
- Short-term Residence Permit: 2 years maximum, renewable. For any foreign citizen who establishes a business or business relationship, work (requires the subsequent application for work permit), carries out scientific research or owns real estate or investment. Also for education and tourism, among other purposes.
- Family Residence Permit: 3 years maximum, renewable. For any foreign citizen with a Turkish spouse, or foreign children of a Turkish citizen.
- Student Residence Permit: 1 year maximum, renewable. This is for foreign students of primary or secondary or students of high education.
- Long-term Residence Permit: Indefinite. Foreigners legally resident in Turkey for 8 consecutive years (on student permits computes half of their duration). It is necessary to prove sufficient income to support themselves and their family, to have not received social assistance in the last three years, to have medical insurance and to not pose a threat to security and public order. Long-term residences will also be issued to refugees. The permit will be denied to those who have been for outside Turkish territory more than a continuous year during their residence.
- Other residence permits include humanitarian permits and for victims of human trafficking.
How much does the Residence Permit in Turkey cost?
Residence in Turkey requires the payment of a monthly fee that varies depending on the citizenship of the interested party. This ranges from USD 5-25 for the first month and USD 0.5-5 for the following months. The fee for residence approval is TRY 205.30 (≈USD 50).
What is the cost of living in Turkey?
Currently, with the Lira on the bottom, Turkey is considerably much cheaper than largest EU countries. You can read this article to have an idea of how much you need to live in Turkey.
Turkey Visa Requirements
Visa policy in Turkey is considerably flexible. Although at the outset any foreigner wishing to enter Turkey for the purpose of tourism or business must apply for a visa, there are a large number of exemptions. In more than 40 countries there is the eVisa available.
There are certain foreign-nationals that are exempt from visas and are allowed a stay of 90 days in 180 days in Turkey, if no other duration is specified, for tourism or commercial reasons:
Andorra, Argentina, Azerbaijan (30 days), Belarus (30 days), Belize, Bolivia, Bosnia and Herzegovina, Brazil, Brunei, Bulgaria, Chile, Colombia, Costa Rica (30 days), Czech Republic, Denmark, Ecuador, El Salvador, Finland, France*, Georgia*, Germany*, Greece*, Guatemala, Honduras, Hong Kong, Hungary, Iceland, Iran, Israel, Italy*, Japan, Kazakhstan (30 days), Latvia (30 days), Liechtenstein*, Lithuania, Luxembourg*, Macedonia, Malaysia, Monaco, Mongolia (30 days), Montenegro, Morocco, Moldova, New Zealand, Nicaragua, Panama, Paraguay, Peru, Russia (60 days), Saint Kitts and Nevis, San Marino, Seychelles, Singapore, South Korea, Sweden, Switzerland*, Tajikistan (30 days), Thailand (30 days), Trinidad and Tobago, Tunisia, Ukraine, Uruguay, Vatican City, Venezuela.
* Nationals of these countries may enter the country with an ID Card instead of a passport.
Exempt from visa only for tourism reasons (90 days in 180 days):
Albania, Jordan, Kosovo, Kyrgyzstan, Lebanon, Qatar, Romania, Serbia, Slovakia, Slovenia
Nationals from the following countries will be able to obtain multiple e-Visa online entries that will allow them a stay of 90 days in 180 days if no other duration is specified:
Antigua and Barbuda, Armenia (30 days), Australia, Austria, Bahamas, Bahrain, Barbados, Belgium*, Canada, China (30 days), Croatia, Dominica, Dominican Republic, Republic of Cyprus, East Timor (30 days), Fiji (30 days), Grenada, Haiti, United Kingdom Hong Kong, Indonesia (30 days), Ireland, Jamaica, Kuwait, Maldives, Malta*, Mauritius (30 days), Mexico (30 days), Netherlands*, Norway, Oman, Poland, Portugal*, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, South Africa, Spain*, Suriname (30 days), Taiwan (30 days), United Arab Emirates, United Kingdom, United States.
* Nationals of these countries may enter the country with an ID Card instead of the passport.
Under certain conditions, citizens of certain countries not listed above may apply for the eVisa, such as holders of Schengen, U.S., U.K. or Ireland visas, when flying with national Turkish companies as Turkish Airlines and having a hotel reservation.
How much does a Turkey Visa cost?
Visa fees vary depending on the nationality of the applicant, and whether the application has been made online, at embassies or consulates or at the airport upon arrival. The most affordable is USD 15 and USD 80 for the most expensive.
Turkey Passport Visa-Free countries
According to the 2016 Visa Restrictions Index of Henley & Partners, a global ranking of countries drawn from the freedom of travel enjoyed by its citizens, the Turkish passport ranks 51st of 104. Turkish citizens have access without a visa or visa upon arrival in more than 102 countries and territories, including most countries in Latin America and Southeast Asia. Most European countries, the U.S., Canada, Russia, China, and India require the issuance of a visa prior to arrival in the country.
Turkish Passport Visa-Free/Visa on arrival/eVisa Map:
Invest in Turkey
After having discussed the options for getting Turkish citizenship either by investment or residence, we must assess whether it is really a good idea carry out an investment or establish a business.
Turkey political and economic situation
2016 was a particularly convulsive year for Turkey. Terrorist attacks, the failed July coup, state of emergency and the subsequent confiscation of more than USD 10m in assets of companies considered to be engaged in unfair practices. There was a collapse of foreign investment, historical lows of the Turkish Lira, a public debt rated as Junk Bonds by several international agencies and a questioning of its trade relationship with the EU. Since then, Turkey has not seemed much like Eden’s Garden of prosperity.
2017 saw more trouble, with a referendum that gave more power to the president, an economy, an economy entering into a recession, security, internal conflicts with ethnic minorities and involvement in the Syrian Civil War across its southern border. Economic instability caused by its currency crash continued into 2018, but has since stabilized in 2019. Despite its problems, there are optimistic voices that continue to trust the country’s great economic potential. It was one of the fastest recovering economies after the global financial crisis, and despite the political turmoil, FocusEconomics forecasted that the Turkish economy will begin to grow again at a rate of 2.3% in 2020, following a 1% contraction in 2019.
Investment Opportunities in Turkey
One of the quick ways to get the citizenship is to establish a business that employs more than 100 Turks or invest in fixed capital. In addition, by citizenship by residence, establish a business and meet the above requirements, will allow us to obtain the Turkish passport in 5 years. Now, the million-dollar question is, what opportunities does the country offer us to start our business project. Keep reading.
Despite the collapse in 2016, Turkey has in recent times been one of the main recipients of foreign direct investment of West Asia, just behind Israel. It has an internal market of more than 70 million people, with a growing consumer middle class, public investment plans and developed infrastructure. The country is a gateway and distribution hub to the European market, Middle East, Central Asia, and North Africa, and it has signed free trade agreements with EFTA and with 32 other countries. It has the resources to be resilient in the face of crises, which it has demonstrated many times in its past.
Industry is one of the sectors with the most investment opportunities, being one of the most competitive European countries in the manufacturing, textile and agri-food sectors. The automotive industry is another of its key sectors, especially in the vehicle materials supply market. Other important developing sectors are energy, construction, telecommunications, the chemical industry, and health. In addition, it presents important opportunities in the mineral sector, with richness in natural resources such as boron, coal, iron, chromium, copper or silver that are still underutilized.
Turkey’s tourism sector was one of those with great opportunities, but by 2016 it fell by around 30% compared to 2015, due to the perception of insecurity (terrorism, political instability) by foreigners. It has since started to pick up again since the government’s rapprochement with Russia in 2018, which is a major source of its tourist arrivals.
As discussed earlier, thanks to its strategic position, it also offers good opportunities in the logistics, transportation and insurance sectors.
The Turkish workforce is developed and flexible, with a relatively low cost compared to most European Union countries. The average gross monthly salary in January 2016 was TRY 4,020 (≈USD 1,000). The current gross minimum wage Is TRY 1,777 (≈USD 460).
Invest in Real Estate in Turkey
Turkey’s real estate sector has been a major driver of the country’s economic growth in recent years, as well as being the prime sector of foreign direct investment. In 2012, the law was changed, allowing foreigners to buy properties based on reciprocity. After three years, the number of homes was increased by 4 million. In 2015 alone, more than 22,000 houses were sold to non-Turks with a value of almost USD 4M (at the exchange rate of early 2016), making it one of the best real estate market performers of the world. The price increased 26% (not adjusted to inflation) in Istanbul and 12% (not adjusted to inflation) in Ankara.
In the first two quarters of 2016, price increases slowed. The average growth was 13.98% (4.76% inflation-adjusted), due to political and economic uncertainty in the country and the foreign direct investment collapse. In order to overcome it, the Government has launched programs to attract foreign capital, such as economic citizenship, which, along with the low value of the Turkish lira, can encourage foreign investment.
Currently (2019), the average square meter price in Turkey is approximately TRY 8,500 (≈USD 1,500). The average gross rental yield is 4.96%, which has been buoyed by the sharp drop in real estate prices since 2016.
Savings & Capital Markets in Turkey
The market value of the top 20 companies traded in Borsa Istanbul (BIST), Turkey’s stock market, shot up almost TL 42.6b in 2016 against all odds. At December 30, 2016, the total market value of the companies was TL 616b, TL 61b more than just the previous year. The coup, Brexit, the US presidential elections, and the Fed policy led to fluctuations and uncertainty in the market. Following the coup attempt, the market fell by almost TL 78b in a week, but it rebounded quickly against all odds. It has since been rebounding since another drop in early 2019.
Currently, S&P rates Turkey Bond at B1 with a negative outlook, while, Fitch rates it at BB – with a negative outlook. In the second half of 2016, the 10-year Turkey Bond Interest rate shot up, with an annual low of less than 9% from July 2016 to 11.8% at the beginning of 2017. As of September 25, 2019, interest on the 10-year Treasury Bond was at 13.78%, down more than 4% from its 2018 level.
Turkey Interest rates applied to bank deposits are relatively high. Depending on the bank, currency, and amounts invested, yield returns range from 10% to 20% for both short and long-term deposits.
Setting up a company in Turkey
In Turkey, a foreigner can own a Turkish company in its entirety. The LLC (Limited Liability Company) is the most common for small and medium-sized companies and JSC (Joint Stock Company) for large corporations.
- Limited Liability Company: the most common among foreign investors for the ease and simplicity of the incorporation process. Administered by a Board of Directors, an LLC requires at least one shareholder and a minimum capital of TRY 10,000 (≈USD 2,600).
- Join-Stock Company: Large corporations, managed by a board of directors and a supervisory board. The minimum capital required is TRY 50,000 (≈USD 13,000).
Other options available are the Collective Company or Commandite Company, which do not require minimum capital, or the establishment of a branch, which is the easiest, quickest and least expensive way to incorporate.
The process of registering an LLC, the most common business form in Turkey, usually takes about 7 days on average. The minimum paid-in capital required is TRY 2,500 (≈ USD 650). Costs will vary depending on the size of the company are normally around TRY 4,000 (≈ USD 1,000).
Taxes in Turkey
Corporate Income Tax
Tax law states the following to be subject to Turkey Corporate Income tax; the worldwide income of resident entities (those whose head office is in Turkey or the central business office is in Turkey) and Income from activities in Turkey of non-resident companies. The current rate is 20%.
Distribution of dividends between resident companies is tax exempt. Dividends received from a non-resident entity are considered business income and subject to Corporate Income Tax. However, a participation exemption may apply, if the payer is a corporation or an LLC, a shareholder has owned at least 10% of the paid-in capital of the distributor for at least 1 year, the profits were subject to a foreign income tax of at least 15% (20% may apply for financial services) and the dividends are remitted to Turkey by the date the corporate tax return is due.
Dividends and Capital Gains received by an International Holding Corporation may be tax exempt, as long as 75% of its assets are foreign participation held for at least 1 year (2 years for capital gains), holds at least 10% of each foreign entity, and those subsidiaries are corporations or LLCs.
Capital Gains are usually treated as ordinary income and taxed at corporate income tax rates. There may be a 75% exemption on capital gains from the disposal of domestic participation if it has been held for at least two years, and the gains are kept in a special fund account under shareholders’ equity for the next five years after the sale, among other requirements.
Regarding withholding taxes, payments to non-residents are taxed at standard rates of 15% on dividends, 10% on interests, 20% on royalties, 20% on service fees and 15% on branch profits remittance. You can check the tax treaties signed by Turkey that may reduce or eliminate withholding taxes here.
Turkey has enacted thin capitalization, transfer pricing and controlled foreign companies (CFC) rules.
Personal Income Tax
The law defines a Turkey tax resident as any person who has their domicile in Turkey, or lives in Turkey for more than six months per year (there are certain exemptions). The worldwide income of a resident person will be subject to Turkish personal income tax. Non-residents are only required to pay a tax on their income derived from Turkish source.
Capital gains derived from the sale of real estate, and held for more than 5 years, are exempt from income tax.
In Turkey, a progressive personal income tax applies:
Income from employment
|Annual Income (TRY)||Tax Rate (%)|
|1 – 12,000||(≈USD 0.25 – 3,100)||15|
|12,001 – 30,000||(≈USD 3,100 – 7,750)||20|
|30,001 – 110,000||(≈USD 7,750 – 28,400)||27|
|110,0001 – over||(≈USD 28,400 – over)||35|
|Annual Income (TRY)||Tax Rate (%)|
|1 – 12,000||(≈USD 0.25 – 3,100)||15|
|12,001 – 30,000||(≈USD 3,100 – 7,750)||20|
|30,001 – 69,000||(≈USD 7,750 – 17,830)||27|
|69,001 – over||(≈USD 17,830 – over)||35|
Turkey has signed tax treaties with a large group of jurisdictions. Check incorporations.io/turkey for further information.
Social Security Contributions
The employer and employee contribution to social security is 20% and 14%, respectively.
Turkey Property Taxes
There is a municipal tax on real estate, which varies depending on the type of property: residential premises and land 0.1%, buildings 0.2%, land for construction 0.3%. There is a real estate transfer tax of 4% of the transfer value.
The general rate of Turkish VAT is 18%. There is a reduced rate of 8% and a super reduced rate of 1% for certain basic products.
In terms of mobility, the Turkish passport has visa-free access to South America, Russia, Southeast Asia and certain Middle-East countries, which can be somewhat valuable. But is clearly behind other second passports available through an investment in some of its neighbors, such as Malta or Cyprus, or the Caribbean countries, which offer visa-free access through all of the Schengen area. Although Turkey is considered an EU candidate and qualified to join the Union, recent political events are not going in this direction, and it is highly doubtful that this will occur in the short/medium-term.
However, despite the considerable amounts for investing, unlike other citizenship by investment programs that involve donations or lost funds, for those looking for a fast-track passport, especially for Middle Eastern applicants, it may be more attractive and profitable than others. Considering the currently high yields for both deposits and government bonds or certain investments in real estate, with the lira at historic lows, may be an interesting medium/long-term option. For those willing to do business in Turkey, despite the political-economic uncertainty, the country has interesting investment opportunities, and a 2nd passport may be an added incentive, whether for acquiring fixed capital assets or employing at least 100 nationals.
Contact us or explore how we can help you to create and execute your internationalization action plan, to diversify and secure yourself, your business and your finances.
How to get Turkish Citizenship-by-investment?
There are several ways: Investment of USD 500,000 in Fixed Capital Assets, buying real state of at least USD 250,000, running a business that creates 50 jobs, make a bank deposit of USD 500,000 or investing USD 500,000 in treasury bonds.
How to obtain Turkey Citizenship by Residence?
By marrying a Turkish citizen or holding a residence permit for 5 years. There is also a fast path to getting a Turkish passport through a government decree.
Does Turkey allow dual citizenship?
How to apply for an indefinite residence permit in Turkey?
Once you have held a residence permit for 8 years, under certain requirements you can apply for an indefinite residence permit.
What Visa do I need for travel to Turkey?
You will probably not need any Visa, or can just apply for an eVisa, Turkey has an open visa policy, facilitating the entry of citizens of more than 100 countries.
Which countries can I travel to with Turkey passport?
Turkish citizens can travel to more than 100 countries without a visa, with visa on arrival or eVisa, but most economic powers as the EU, US, Canada, India, Russia or China requires the issuance of a visa.
Why should I invest in Turkey (or not)?
Although Turkey is emerging from a delicate political, socioeconomic and security situation, it has great economic potential with very promising developing sectors and trade agreements with EFTA and 32 other countries.
What investment opportunities are there in Turkey?
Manufacturers, textiles, agri-food, automotive, energy, construction, chemical, health, telecommunications, mineral extraction, logistics, transportation, and insurance.
Should I invest in Real Estate?
Well, the real estate market bubble that took hold of Turkey throughout the middle of the decade has burst, and prices have bottomed out significantly in 2019. So, combined with the Lira’s severe depreciation, now might be a great time to buy in Turkey. However, as always, it’s imperative to properly evaluate the best type of property investment project and its deadlines.
Should I deposit my savings in Turkey?
Interest rates are high, both for bank deposits and Government Bonds. Although these have a very bad rating, a bankruptcy of the government seems improbable. The political situation and the behavior of the real estate market will have a large effect on bank stability, and will be key events to watch that will shed more light on the subject.
How do I set up a company in Turkey?
The set-up process will not be complicated, and lasts an average of 7 days. The minimum capital required is relatively low.
How much does it cost to set up a company in Turkey?
Rates depend on several factors but range around USD 1,000.
Is Turkey a high-tax country?
Depends on what you compare it with, taxes in Turkey are lower than most EU-15 countries, but we can find more relaxed tax regimes nearby. Corporate Income is subject to a flat tax rate of 20% and Personal Income is subject to a progressive tax rate that ranges between 15-35%.
Have any other question? Are you planning to immigrate and/or incorporate in Turkey? Feel free to contact us.
This article should not be construed as legal, tax or investment advice. Flag Theory has access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.