Esma Aktaş (White & Case, Associate, Istanbul) contributed to the development of this publication

The Turkish foreign direct investment (FDI) regime is mainly regulated under the Turkish FDI Law published in 2003 and the Turkish FDI Regulation. Turkish FDI Law provides that foreign and Turkish investors should be treated equally. Moreover, the Turkish government has started investment incentive programs to maintain domestic economic stability. To that end, in 2021, Türkiye's FDI Strategy (2021 – 2023) Report was published and the relevant report aims to increase Türkiye's FDI market share in global FDI inflows to 1.5 percent by 2023.

Recent updates

• To encourage FDI in Türkiye, the Investment Office of the Presidency of the Republic of Türkiye developed Türkiye's FDI Strategy (2021 – 2023) Report in cooperation with relevant public and private industry organizations
• The government's strategy targets bringing in value-added investments in strategic areas in the Turkish economy and increasing Türkiye's market share in global FDI inflows
• According to the Ministry of Industry and Technology, as of mid-2022, the number of companies with international capital in Türkiye hit 78,257, up from 5,600 in 2002
• Moreover, according to the Central Bank of Republic of Türkiye, the FDI in Türkiye increased to US$949 million as of November 2022

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.

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, or setting up a new company or branch, or 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 legislations also include provisions related to FDI, and these legislations may require further approvals from relevant authorities such as the Ministry of Environment, Urbanization and Climate Change, Energy Market Regulation Authority, Ministry of Treasury and Finance, and 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 the Turkish merger control rules, this transaction is also subject to a mandatory filing with the Turkish Competition Authority (TCA) 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.

In terms of the TCA's review process for merger notifications, if the Competition Board does not respond within 30 calendar days upon a complete filing, it is considered to be a tacit approval. However, in practice, the Board almost always responds within the 30 calendar-day period by sending a written request for information. Any written request by the TCA for missing information will restart the timelines. Cases that do not raise significant competition concerns are likely to be reviewed within four to six weeks.

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 as 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, the 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 TCA 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 the turnover generated during the financial year preceding the decision date.

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