Corporate Law / Corporate Maintenance

As of October 1, 2024, significant changes have been introduced to Turkey’s work permit regulations for foreigners. These updates reflect a broader shift in Turkey’s employment landscape, particularly focusing on key criteria such as employment levels, financial thresholds, and salary requirements. With the country continuing to attract foreign talent, both employers and potential foreign workers must now navigate a more structured and demanding process. The recent adjustments aim to streamline foreign employment while safeguarding opportunities for the local workforce.

These new regulations bring more clarity to the expectations placed on companies and their foreign hires, emphasizing stricter financial and employment criteria. For example, companies must now meet higher financial adequacy standards and employment ratios to support their applications. Additionally, salary thresholds have been updated to better align with the responsibilities and expertise of foreign workers, ensuring competitive compensation. Understanding these changes is vital to avoiding application rejections or delays, as compliance has become even more crucial under the 2024 framework.

I. Work Permit Application Methods Remain Unchanged

 Despite the significant changes in work permit criteria, the fundamental methods for applying for a work permit in Turkey remain unchanged. Foreigners can still apply for work permits using one of two primary methods: overseas applications or domestic applications, depending on their residency status in Turkey.

a. Overseas Work Permit Applications:

Foreigners who do not have a valid residence permit in Turkey must apply for a work permit through the relevant Turkish consulate in their home country or country of residence. The process involves submitting all necessary documents to the consulate, which will then forward the application to the Ministry of Labor and Social Security for evaluation. Once approved, the applicant receives a reference number, which their employer in Turkey must use to complete the process through the Ministry’s online application system.

b. Domestic Applications for Foreigners :

Foreigners who have already obtained a residence permit in Turkey valid for at least six months can apply directly to the Ministry of Labor and Social Security. These applications are submitted via the Ministry’s online system, allowing for a more streamlined process compared to overseas applications. However, it is essential that all documentation is complete and accurate to avoid delays or rejections.

While the overall process for submitting work permit applications has not changed with the 2024 updates, it is important to be aware of the new employment, financial, and salary criteria that will apply to these applications.

 II. Updated Employment Criteria

 One of the most notable changes introduced in the 2024 work permit regulations is the updated employment criteria for companies looking to hire foreign nationals. The Ministry of Labor has imposed stricter rules, particularly focusing on the ratio of Turkish employees to foreign employees, with specific exceptions for larger enterprises.

1. General Employment Requirement: As in previous years, companies applying to hire foreign employees must employ at least five Turkish citizens for every foreign worker they seek to hire. This ratio ensures that foreign employment does not disproportionately affect the local workforce, reinforcing the protection of local employment opportunities.
2. Exemption for Large Companies: A new exemption has been introduced for companies with significant financial performance. Businesses that had a net sales turnover of at least 50 million Turkish Lira in the previous year are exempt from the five-Turkish-to-one-foreign-worker rule. This exemption applies for up to five foreign employees, meaning companies in this category can hire up to five foreign workers without needing to meet the standard employment ratio.

These changes reflect the Turkish government’s commitment to supporting foreign investment while safeguarding employment opportunities for Turkish citizens. Companies that meet the financial exemption can now employ foreign talent more flexibly, while smaller businesses must ensure they comply with the updated employment criteria to avoid application rejection.

 III. Revised Financial Adequacy Criteria

 The 2024 updates have introduced more stringent financial adequacy criteria for companies seeking to employ foreign workers. These criteria are designed to ensure that only financially stable businesses are eligible to hire foreign employees, reflecting the government’s focus on promoting robust economic participation from both local and foreign entities.

1. For Newly Established Companies: For companies established in the current fiscal year that have not yet completed a full fiscal cycle or produced annual financial statements, the minimum paid-in capital required for work permit applications has been raised to 500,000 TL. This is a significant increase from the previous requirement of 100,000 TL, underscoring the stricter expectations for new businesses to demonstrate their financial strength before hiring foreign workers.
2. For Existing Companies: Companies that have been in operation for more than a year and have submitted at least one annual balance sheet must meet one of the following criteria:
   • A paid-in capital of at least 500,000 TL (up from the previous requirement of 100,000 TL), or
   • Annual net sales of at least 8 million TL, or
   • Exports totaling at least 150,000 USD in the previous year.
3. For Partnerships: In cases where a company applying for a work permit is part of a partnership, at least one of the partners must meet the financial criteria. This includes having a minimum paid-in capital of 500,000 TL, annual net sales of 8 million TL, or exports of at least 150,000 USD.

It’s important to note that these revised capital requirements will not take effect until January 1, 2025. Until then, the existing criteria remain applicable. More details regarding this transitional period are provided in the following chapters below.

 IV. New Salary Thresholds for Work Permit Applications

 The 2024 updates have introduced revised salary requirements for foreign employees, marking a notable shift in compensation expectations across various job roles. The new thresholds are expressed as multiples of the gross minimum wage, ensuring that foreign workers are compensated fairly based on their responsibilities. Compared to the previous criteria, these new thresholds are either higher or adjusted to better align with the level of expertise required for each position.

1. Executives and Pilots: Under the new regulations, foreigners employed as senior executives or pilots must now receive a salary that is at least 5 times the gross minimum wage. This is a reduction from the previous requirement of 6.5 times the minimum wage, providing more flexibility for employers without compromising fair compensation.
2. Engineers and Architects: For foreign engineers and architects, the salary threshold has been adjusted to 4 times the gross minimum wage, down from the previous 4.5 times the minimum wage. This slight decrease continues to recognize the specialized skills involved, while making the hiring process more accessible for companies.
3. Other Managers: Mid-level managers who do not qualify as senior executives must be compensated with a salary that is at least 3 times the gross minimum wage. This remains consistent with the previous criteria, ensuring that mid-level management positions maintain the same compensation expectations.
4. Skilled Workers and Specialists: Foreign workers in roles requiring specialized skills or craftsmanship must now receive at least 2 times the gross minimum wage, a reduction from the previous threshold of 3 times the minimum wage. This adjustment broadens opportunities for skilled workers while maintaining fair pay standards.
5. Household Workers and Other Roles: For household service providers and other general positions, the salary must meet the minimum wage requirement, which remains unchanged from previous regulations. This ensures that foreign workers in these roles are still compensated at a fair and legal level.

The revised salary thresholds represent a more balanced approach to compensating foreign employees, providing some flexibility in hiring while still maintaining competitive wages. Employers must carefully adhere to these new salary requirements to avoid application rejections, particularly given the reduced thresholds for some key roles compared to previous years.

V. Expanded Exemptions from Employment and Financial Criteria

 The 2024 updates also introduce expanded exemptions for certain foreign employees and companies from the standard employment and financial adequacy requirements. These exemptions provide flexibility for businesses and foreign workers who meet specific conditions, allowing them to bypass some of the more stringent criteria introduced in the new regulations.

1. Foreign Workers with Long-Term Residence in Turkey: A significant change is the introduction of exemptions for foreign employees who have legally resided in Turkey for at least three years (excluding student residence permits). Foreign workers who meet this condition and are applying for a work permit within Turkey may benefit from exemptions to both the employment and financial adequacy criteria. This exemption applies to a maximum of three foreign employees per business.
2. Employment Balance with Turkish Citizens: Even for businesses benefiting from the exemptions mentioned above, the number of foreign employees must not exceed the number of Turkish citizens employed in the same workplace. This ensures that even exempt companies maintain a reasonable balance between Turkish and foreign workers.
3. International Protection Applicants: Businesses employing foreign workers who are under international protection may benefit from further flexibility in the employment and financial criteria. However, the total number of such foreign workers must still respect the balance rule, meaning that foreign workers cannot exceed the number of Turkish employees in the workplace. If a business wishes to employ more than three foreign workers under international protection, the standard employment and financial adequacy criteria will be applied to any additional foreign employees.

These exemptions are designed to encourage businesses to employ foreign workers who have established legal residence in Turkey, while still maintaining safeguards for the local workforce. Companies and foreign employees who qualify for these exemptions will find the work permit application process more flexible, especially in terms of meeting the otherwise strict financial and employment requirements.

VI. Transition Period

The 2024 regulations include transitional provisions to ensure a smooth implementation of the new criteria, particularly regarding work permits issued prior to October 1, 2024. These provisions offer guidance on how existing and future applications will be handled during the transition period, preventing any abrupt disruption to ongoing employment.

1. Handling of Existing Work Permits: Work permits granted before October 1, 2024, are still valid under the terms they were issued. However, when applying for an extension of these permits, the application will be evaluated based on the criteria that were in effect at the time of the initial permit’s issuance. This means that the stricter financial adequacy and employment criteria introduced in 2024 will not retroactively apply to these extensions. Extending a previously issued work permit will be crucial to avoiding the more demanding criteria, especially regarding financial adequacy. If a permit is allowed to expire or is cancelled, any new application will be subject to the updated, stricter regulations. This could mean a much higher capital requirement, making it critical to manage work permit extensions carefully.
2. New Applications During the Transitional Period: For new applications submitted after October 1, 2024, the revised criteria will apply immediately. However, there are exceptions related to financial adequacy criteria:
   • Until January 1, 2025, companies can still meet the previous financial adequacy criteria, which require a minimum paid-in capital of 100,000 TL, net sales of 800,000 TL, or exports of 150,000 USD.
   • After January 1, 2025, companies must comply with the new thresholds, which raise the minimum paid-in capital to 500,000 TL, among other requirements.
3. Status of Previous Applications: Applications submitted before October 1, 2024, will be processed based on the previous regulations. This includes work permits still in the evaluation process at the time of the regulatory change. The new criteria will not affect these ongoing applications.

In summary, extending work permits issued before October 1, 2024, is vital to avoid being subject to the new, stricter criteria, particularly in terms of financial adequacy and capital requirements. Letting a work permit lapse could result in a costly reapplication process under the updated regulations.,

VII. Conclusion

 The 2024 updates to work permit regulations for foreigners represent a significant shift in the country’s employment landscape. With stricter financial adequacy requirements, updated employment criteria, and revised salary thresholds, companies must now carefully navigate the more demanding regulations to ensure successful applications. These changes reflect Turkey’s commitment to balancing the needs of foreign talent with the protection of its local workforce.

For businesses, it is essential to stay aware of these updates, particularly regarding the new financial thresholds that will come into effect on January 1, 2025. Companies that act promptly by extending work permits issued before October 1, 2024, can avoid the more stringent requirements and ensure continuity for their foreign employees. Conversely, failure to extend these permits could lead to reapplications under much stricter conditions, especially financially.

Ultimately, understanding and complying with the new regulations will be key for businesses and foreign workers to avoid delays or rejections in the application process. Given the complexities of the new rules,

Av. Ali Yurtsever

Contact for consulation

Author Bio

Av. Ali Yurtsever

1. Overview

The main legislation governing the duties, responsibilities and the liabilities of board members of capital companies in Turkey, (JSCs and LLCs) is the Turkish Commercial Code No. 6102, (TCC). As a rule, the TCC requires the Board Members to act as cautious executives and protect the interests of the company while performing their duties with good faith, which means that no general liability can be stipulated against Board Members in event of damages or losses if those members can prove that they acted as cautious executives in good faith.

2. Legal Liabilities of Board Members of Capital Companies

The TCC lists a number of different duties and obligations to Board Members, which all have separate liabilities imposed upon the members if violated. The obligations and their corresponding liabilities arising from the TCC are listed below:

a) General Rule for Liabilities of Board Members

The general rule governing all obligations and liabilities of board members of capital companies is set forth at Article 553 of the TCC, which states that  in cases where the shareholders, board members and managers (those with delegated powers) breach their obligations arising from the Law or the Articles of Association of the company (AoA), they will be held liable for damages incurred by the company, company shareholders and/or company creditors, as a result of such breach. 

b) Specific Duties & Liabilities of Board Members

Once the Tourism License is obtained, the company will need to proceed with the application for a Medical License (Health Tourism Certificate) to the Ministry of Health. These applications are to be submitted to the relevant Provincial Directorate of Health where the company is located and are subject to a separate set of requirements. These requirements include (but are not limited to) signed protocols with different licensed medical facilities, infrastructure for a call center and employment of qualified personnel. 

Apart from this general rule, there are specific provisions provided for in TCC and in other secondary regulations that govern the duties and liabilities of board members. These include liabilities and obligations such as:

1. Duty of care & loyalty
2. Prohibition of transacting with the company & to take out loans from the company
3. Duty to keep proper company Books
4. Documents and declarations contradicting the Law
5. Misleading declarations regarding Capital
6. Irregularity in determination of in-kind capital value
7. Proper collection of capital from the public

It is important to note here that the above is not exhaustive list of potential liabilities of board members. It should also be noted that each duty and liability have their own set of sanctions and consequences, both legal and criminal. 

For example, one of the duties and liabilities of board members of capital companies is to provide truthful declarations to the authorities regarding the company’s capital, and a specific set of provisions will be applicable in case of violation of this duty. Accordingly, Article 550 TCC sets forth that if the capital of the company is shown as paid off when in fact it is not, the persons who have created this illusion, together with the authorities of the company, are liable for the unpaid amounts, provided that they are in fact negligent. This also includes the board members of the company. A penalty of imprisonment from three months to two years may also be applicable for this violation.

3. Legal Liabilities of Board Members with Delegated Powers

The TCC allows board members to delegate their duties and representation powers to other board members and/or to third parties. However, it is important to note here that at least one board member must always hold the power of representation of the company.

Delegation of power is an important tool for board members as it can allow for the board members who delegate their representation powers to be released from the liabilities associated with being a board member. As according to TCC 553/2, in the event of delegation of powers, those who delegated powers may not be held liable, unless a breach of the obligation to choose appropriate persons to delegate powers can be proven.

Although a delegation of power is possible, it also has its limits. According to the Law, some of the powers and duties that cannot be delegated to third parties are as follows (the following is not an exhaustive list):

1. High-level management of the company and the power to give orders for high level management; 
2. Determining the management organization of the company; 
3. Establishing the organization for the accounting, financial auditing and financial planning;

Accordingly, if a power is delegated, and this power may not be so delegated according to Law or the AoA, such delegation will be deemed illegal, and the BoD member(s) will still be held liable even if the negligent act was performed by the third party with delegated powers.

4. Public Debt Liabilities of Board Members 

Liabilities of board members of capital companies arising from the public debts of the company are regulated separately and are subject to different rules and conditions. Accordingly, board members can be held personally liable (with their personal assets) for the tax liabilities of a company, regardless of their fault or negligence, in the event any of the below shall occur:

1. initiation of collection proceedings against the company for a tax payment obligation (tax, default interest or tax penalty) arising from the failure of performance of tax liabilities in a timely and proper manner; 
2. as a result of the collection proceedings in (i) above, failure of the tax administration to collect its tax receivables due to the insufficient assets of a company after the collection process by the tax authorities; or 
3. (iii) a tax obligation of the company becomes due as a result of the failure of the legal representative to perform his duties with respect to the payment of taxes.

The failure of a board member to perform their tax duties (i.e., occurrence of a tax payment obligation) is automatically deemed as the legal representative’s fault and/or negligence. 

4. Conclusion 

It is important to note here once again that the above does not provide a full list of all potential liabilities a board member will undertake. The liabilities of board members in capital companies is a complex subject that is regulated under different laws and secondary regulations. Since directors are the ones that are effectively in charge of the JSC’s day to day operation and are the signatory representatives of the company, they undertake significant liabilities for their actions that result in loss or damages, or unpaid debts. It is therefore, imperative that persons who will be taking on board member roles in companies in Turkey understand the duties, liabilities and risks involved with such a position.

1. OVERVIEW

Over the past few years, several different developments, both transnational and domestic, have had effect of making capital investment in Turkey a more desirable and approachable prospect for foreign investors. These developments range from global socio-political changes to internal economical issues Turkey has been experiencing these past several years, making it an affordable and attractive place for foreign investors to make capital investments, mainly due to the low initial investment costs and the geographical location of Turkey.

2. FOREIGN CAPITAL INVESTMENT IN TURKEY

There are relatively few capital restrictions imposed upon capital investment in Turkey, and Turkey has also taken steps to ease the complexities and procedures the foreigners need to go through in order to incorporate and/or relocate into Turkey. It is important to note that foreigners are allowed to freely make capital investment in Turkey and are even allowed to have full/sole ownership of a capital company.

Although the procedures for incorporation have been simplified over the years, foreign investors may still find it difficult to understand and navigate the rules, procedures and the bureaucratic red tapes that they may come across when trying to bring their capital investments in Turkey. The summary below should shed some light on what potential investors should expect when investing in Turkey.

a) Choosing the Right Company Type

Although the legislation does allow for the incorporation of “personal companies” (where company owners are fully liable with their personal assets for any and all company debts), capital companies are the most common form of business entities in Turkey utilized by both local and foreign investors. The Joint Stock Companies (JSC) and Limited Liability Companies (similar to ‘LLC’ or ‘LLP’s around the world) are the two most common types of capital investments in Turkey. The two main differences between these company types is as follows:

b) Capital Investment in Turkey – What to Expect?

Although Turkey has been taking steps to simplify the incorporation procedures since 2018, it can still seem complex to the uninitiated. The below image provides a brief visual summary of the main steps required to incorporate a company in Turkey:

• Step 1 – Drafting: This stage is the initial preparation stage where the investor needs to decide on the type of investment (the company). It is important for the investor decide on the correct company type that suits the needs and requirements of the planned investment. Making an informed decision here will be crucial for the investor to save valuable time and costs.

• Step 2 – Bank Account: As shown above, there is a crucial difference between the two company types, which is the requirement to deposit the initial company capital before incorporation. For LTD’s, no initial payment of company capital is required, and therefore this step 2 and the following step 3 can be skipped entirely to be handled after incorporation. However, for JSC incorporations, a capital blockade account will need to be opened at a local bank following the initial submission of documents. This is can be the most problematic step depending on the nationality of the investor as well as the person(s) who will be appointed as directors / managers to the company to be incorporated in Turkey.

• Step 3 – Depositing Capital: As noted in detail in step 2, this step will only be required for JSC incorporations. Accordingly, at least ¼ of the committed company capital needs to be deposited to the capital blockade account of the company before the final submission step.

• Step 4 – Final Submission: Once all documents are ready, all documents needs to be physically submitted to the relevant Trade Registry, where the shareholders of the company will also be required to sign the newly incorporated company’s Articles of Association (this can also be handled remotely with designated power of attorneys). The Trade Registry will review the application and will approved the incorporation if all documents are in order. Once the trade registry approves, the company will be formally incorporated.

• Step 5 – Tax Submissions: This is another crucial step and one missed by many first-time foreign investors. Following the approval of the trade registry and incorporation of the company, it is crucial for the company to submit the relevant tax office and social security registration applications as soon as possible, to avoid paying monetary fines to these institutions.

3. WHY INVEST IN TURKEY?

Turkey’s unique geographic location coupled with low investment costs make it an attractive place for foreign capital investment. It’s customs union with the EU allows direct access to the EU market.

Due to its unique geographic location, Turkey can also act as a hub, offering easy access to 1.3 billion people in Europe, MENA and central Asia within a 4-hour flight radius.

Turkey has a wide global market access at the crossroads between Europe, Africa and Asia, making it an efficient hub to access international markets around the world. Turkey also has a strong manufacturing infrastructure, ranging from the automotive sector to machinery & electronic equipment, defense, and agriculture & fresh produce.  Turkey’s exports grew to $225 Billion in 2021, according to the Turkey Investment Office, which further highlights its production capacity.

4. CONCLUSION

Although this article aims to summarize the rules and procedures governing capital investment in Turkey, it should by no means treated as a full and complete guide to company incorporation. There are numerous issues that needs consideration when deciding which options suits best for the planned invest, and any wrong handling of the preparation or the submission processes can cause the investors to lose valuable time and money. To avoid such a drastic outcomes it highly advised that foreigner investors seek professional assistance for their capital investment in Turkey. Further information regarding corporate tax and tax cycles can be accessed here.