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Turkey Routes to Market

So you've decided to expand your business in Turkey and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into Turkey:

Investment Zones

With Turkey looking to encourage foreign investment in key areas, it has established investment zones with special tax incentives and exemptions. The zones are divided into four broad areas:

• Technology Development

• Organized Investment Zones (OIZs)

• Industrial Zones

• Free Zones

Each zone has industry specific incentives and the Free Zones offer the following incentives:

• Exemption from customs duties and other assorted duties.

• Exemption from corporate income tax for manufacturing companies.

• Exemption from VAT and special consumption tax.

• Exemption from income tax on employees salary (subject to export conditions).

• Goods can remain in free zones for an unlimited period.

• Companies are free to transfer profits from free zones to abroad as well as to Turkey without restrictions.

The incorporation and registration of a business is handled by one government ministry and can be completed in one day but is subject to approval.

Limited Liability Company

When incorporating a Turkish business as a limited company between two and fifty shareholders or legal entities are needed and the minimum investment is YLT5,000. The investors liability to losses is limited to the amount invested in the company.

Joint Stock Company

A Joint Stock Company is also a limited liability company and is established with a minimum of five shareholders or legal entities. Like a UK corporation, the companys stock are divide into shares. It is compulsory to have a board of directors, a supervisory board and the minimum capital required to start the business is YTL50,000

Branch Office

With approval from the Ministry of Commerce and Industry, a foreign business whose capital is divided into shares can open branches in Turkey to perform business.

Liaison Office

Similar to a branch office, a liaison office is allowed to represent a company abroad but it is not permitted to carry out commercial activities. Approval is required by the Investments of the Undersecretariat of Treasury.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

• Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

• Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

• Patent License - The allowance of another party to use your patented product, design or process.

• Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Turkey

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Turkey include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in Turkey: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

The franchise market in Turkey is expected to reach $60 billion in 2010. Turkeys young population is open and receptive to innovations and Turkeys growing economy attracts high numbers of foreign franchise investors, with brands such as KFC and Pizza Hut presenting routes to the market.

To increase information and about the area, a franchising academy was founded in Istanbul under the leadership of Aydın University.

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