Zeynep Özgültekin (ONaL Attorneys At Law) and İlayda Akça (CORE & Law and Economics) contributed to the development of this publication

The Turkish FDI regime is mainly regulated under the Turkish FDI Law published in 2003, and the Turkish FDI Regulation, which provides that foreign and Turkish investors should be treated equally. Moreover, the Turkish government has been carrying out investment incentive programs to maintain domestic economic stability. For the period 2021 – 2023, a comprehensive foreign direct investment strategy program was published by the Presidency Investment Office of the Republic of Türkiye, aiming to increase Türkiye's FDI share in the global FDI market. There are as yet no programs published specifically for the FDI Strategy concerning subsequent years. Having said that, the Medium-Term Program for 2024 – 2026, which was published on September 6, 2023, provides foundational principles for the enhancement of the business and investment environment in Türkiye.

Summary of major changes in 2023

• To encourage FDI in Türkiye, the Presidency of Strategy and Budget of the Republic of Türkiye published the Medium-Term Program reflecting, among others, Türkiye's FDI strategy outlining legal and public advancements. Accordingly, the program sets forth that transparent and predictable regulations in compliance with the international norms will be adopted, and the bureaucratic procedures will be simplified. More specifically, while the regulations on issues of urgency for direct investments will be placed on the agenda of the Grand National Assembly of Türkiye earlier; the transactions such as permits and licenses for investments will be transferred to online platforms, so that the processes will be shortened
• According to the Ministry of Industry and Technology, as of October 2023, the number of companies with international capital operating in Türkiye reached 80,504, up from 5,600 in 2002
• In contrast to previous years, there has been no official government announcement made or report published on FDI in Türkiye in 2023. However, government officials are conducting meetings with investors to address and eliminate the concerns around FDI in Türkiye

Who files?

The FDI regime is based on a post-closing notification procedure, rather than a prior approval/review procedure. There is no suspension requirement. In this context, foreign-capitalized companies, or companies that become foreign-capitalized as a result of the transaction, are responsible for filing the notifications.

FDI companies are obliged to make certain notifications to the ministry's General Directorate of Incentive Practices and Foreign Capital through an online system named E-TUYS. Moreover, foreign-capitalized companies may also designate the authorized signatories to submit any required notification via E-TUYS.

Special requirements set forth in specific sectors

FDI in Türkiye is not restricted, and foreign investments are treated in the same way as their local counterparts under the relevant legislation. Indeed, the FDI Law sets out that foreign investors are allowed to make investments in Türkiye unless otherwise stipulated in specific laws or international treaties. On the other hand, there are various sectors with exceptions that either entail specific restrictions on foreign shareholdings or require the grant of permissions for investments in the relevant sectors.

The Civil Aviation Act No. 2920 requires written agreements to be concluded for the acquisitions of Turkish civil aircraft and subsequently such agreements should be notified to the aviation registry held within the Ministry of Transport and Infrastructure. In addition, the legislation also requires the majority shareholders of Turkish aircraft operators to be Turkish, and stipulates that an aircraft is deemed a Turkish aircraft only if it is owned by a Turkish citizen. If it is owned by the companies and cooperatives registered in the Turkish Trade Registry, it shall be deemed to be a Turkish aircraft only if the majority of the individuals authorized to manage and represent the company are Turkish citizens and if the majority of the votes are held by Turkish partners.

The Radio and Television Broadcasting Law No. 6112 also sets out specific requirements for the establishment and share ratios of private media service providers. Accordingly, the total foreign share capital of a media service provider cannot exceed 50 percent of registered capital. Besides, foreign persons are not allowed to be the direct shareholders of more than two media service providers, nor allowed to possess any privileged shares.

The Land Registry Law No. 2644 stipulates that foreigners can acquire real estate or limited property right in Türkiye subject to certain conditions. In particular, the total area of such real estates or property rights acquired cannot exceed 10 percent of the total surface area of the district subject to private ownership and 30 hectares per person across the country. Further requirements are also envisaged for purchasing real estate in military forbidden zones, military security zones or strategic zones. Specific notification procedures are set forth in the legislation requiring the Ministry of Trade to be informed of the relevant acquisition.

The Cabotage Law specifies geographical restrictions, under which deriving commercial benefits from seas and lakes is a right granted exclusively to Turkish citizens.

In addition to the above, the Mining Law, Environmental Law, and Tourism Incentive Law also set out specific regimes and require approval procedures in certain cases for FDI in Türkiye. Therefore, it is crucial for foreign investors to identify the sectors they are investing in, and comply with the specific requirements in the relevant legislation.

Types of deals reviewed

Under the Turkish FDI regime, FDI is defined as importing cash capital, company securities (excluding state securities), machinery and equipment, and industrial and intellectual property rights to Türkiye from abroad; setting up a new company or branch; joining the shareholding of a company by way of acquiring shares outside securities exchanges, or at least 10 percent shareholding or voting rights at the same amount from securities exchanged through economic assets by foreign investors.

Scope of the review

FDI companies submit any required notification to the Ministry of Industry and Technology's General Directorate of Incentive Practices and Foreign Capital through the E-TUYS online system; however, these notifications do not require an approval from the relevant ministry. In other words, mere notification is sufficient. To that end, pursuant to article 6 of the FDI Regulation, approval is only required for companies establishing a liaison office in Türkiye.

Changes to the capital and shareholding structure of FDI companies must be notified within one month. FDI companies must also submit annual notifications by filling out a standard form requiring general information pertaining to the FDI company, including its trading name, address, tax identification number, and brief information regarding its subsidiaries and shareholding structure.

Separately, certain sector-specific legislation also includes provisions related to FDI, and this legislation may require further approvals from relevant authorities such as the Ministry of Environment, Urbanization and Climate Change, the Energy Market Regulation Authority, the Ministry of Treasury and Finance, and the Banking Regulation and Supervision Agency for investments into these regulated sectors.

The FDI rules in Türkiye apply to transactions that will result in a change in the direct shareholding of a Turkish company. If the transaction will not result in a direct change in the shareholding structure of the Turkish subsidiary, the transaction will not be subject to any filing/notification obligations within the scope of the FDI rules in Türkiye. If the investment is considered a merger and/or acquisition or an establishment of joint venture under Turkish merger control rules, this transaction is subject to a mandatory filing with the Turkish Competition Authority as well.

Review process timeline

There is generally no time limit stipulated for review processes under the Turkish FDI regime. The duration of the review process would depend on the specific factual matrix in question. There is no general requirement for pre-filing or initial review. For liaison offices, under article 6 of the FDI Regulation, the application is reviewed within 15 business days after submission of all requested information and documents.

How foreign investors can protect themselves

The Turkish FDI regime is based on the concept of freedom to invest. Article 3 of the FDI Law provides that foreign investors can invest in Türkiye directly and they must be treated equally to local investors. Having said that, certain sectors have specific regimes because of additional concerns in relation to public security and public interest. To that end, foreign investors should take into account whether the envisaged transaction triggers additional FDI requirements and filings under sector-specific legislation.

For cases involving potential mergers, acquisitions or joint ventures, it is also important to conduct an assessment as to whether the envisaged transaction is subject to the mandatory notification to the Turkish Competition Authority as well. Foreign investors should bear in mind that failure to comply with the notification requirement might lead to an administrative monetary fine amounting to 0.1 percent of turnover generated during the financial year preceding the decision date.

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