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Types of Investment Funds in Turkey

Types of Investment Funds in Turkey

Types of Investment Funds in Turkey

When you look at Turkey’s investment scenario and examine types of investment Funds in Turkey in detail, you will notice very flexible regulations related to establishments. Both non-professional and professional investors can get benefits from these laws provided for the establishment of these funds.

If a property is used to manage various instruments accepted by the capital markets, it’s known as an investment fund under Turkish legislation. Turkey has a large variety of investment funds, such as; gold, silver, real estate, and other important assets.

The essential laws which govern the types of investment funds and their establishments in Turkey are as follows:

  • The Principles Concerning Mutual Funds,
  • The Principles Concerning Exchange Trade Funds,
  • The Principles Concerning the Registration and Sale of Mutual Funds,
  • The Principles Concerning the Establishment and Operation of Pension Funds.

 

As per the Turkish Legal System, companies are divided into Private Companies and Capital Companies.1  When a company commands a vast market and is made up of Collective Companies, it’s known as a Private Company. When a company is a Limited Liability and Incorporated Company, it is known as a Capital Company. The majority of companies are Joint-Stock and Limited Liability companies in Turkey, instead of Individual Companies.

If you are interested in establishing a new company in Turkey, you check out our article on; “Establishing a Company in Turkey” and get more information on the matter.

What are the Types of Investment Funds in Turkey?

The Turkish government has provided several types of investment funds to businesspeople, the largest of which are Turkish and foreign funds.

What follows are the types of Turkish investment funds accommodated by the Turkish Government:

  • Protected or Guaranteed Funds,
  • Hedge Funds,
  • Bond-bill Funds,
  • Equity Funds,
  • Index Funds,
  • Sector Funds.

 

Mutual funds are a collection of these funds. In addition, the Turkish Constitution stipulates its citizens with their own pension, exchange-traded funds, and real estate investment funds. Using venture capital investment funds can also be beneficial. Domestic and foreign investors can benefit from these types of investment funds in Turkey.

If you have decided to set up an investment fund in Turkey but don’t know the steps. No worries! 

Steps to Set Up a Company and Investment Fund in Turkey

In Turkey, the setup and registration process is usually the same regardless of the types of investment funds you choose. Turkey requires the approval of the Capital Market Boards (CMB). A portfolio management business founded as a Turkish corporation in the future must also set the fund.

Once the company is registered with the official Turkish Company Register, an agreement with a depositary acknowledgment will be prepared by the CMB. The main work of a depositary is to keep the funds’ assets per Turkey’s Company Laws.1

A set of documents containing the investment’s internal rules and regulations should be drafted, and you have to get it approved from the CMB. Plus, registration with the Trade Register is also necessary. The primary tool to establish companies in Turkey is the Ministry of Commerce’s web portal MERSIS, and you can register regardless of the company type or types of investment funds.

Type of the company, its full title, address, founding partners, objectives and subjects, capital, Board of Directors, signature officials, preferred shares (if any), share transfer restrictions (if any), and other information are entered through this web portal.

Once you have entered the information, MERSIS will prepare the company’s Articles of Association for you and your company. When all the pending permissions are approved, the location where the company will be established is to be referred to the Commercial Registry Office in Turkey. 

How can you open an Investment Fund in Turkey?

The established company’s founding partners, registration declarations, and all the essential and related documents must be presented and deposited.2

As per the Turkish Commercial Code, you have to pay a minimum of ¼ of the capital from Joint-Stock Companies before the registration, supposing the established company is a Joint-Stock Company and has cash as capital. In that case, an account must be opened by the new company’s name after the signature and approval have been done by the Articles of Association by the Commercial Registry Office. You have to pay ¼th of the capital to the designated bank.

The bank will block the deposited capital until registration, and the bank shall prepare a letter of the blockade. The Joint-Stock Company shall be registered with the submission of the blockage letter to the Directorate of Trade Registry.

You can add assets holding intellectual property rights, virtual environments with no restricted real rights, seizure, and injunctions, which may be evaluated and transferred in cash, when you want to place your property as real capital.2

According to the Turkish Commercial Code, if you own a limited company, you do not need to have any deposit capital before registering. As a result, the business is registered after the signature of the Articles of Association and the payment of the Commercial Registry Office fees.

The company’s type doesn’t matter. Regardless of how much capital has been invested in the company before registration, you have to invest its total capital within 24 months after the partners’ registration. 

Taxation is also an essential factor when you are looking into types of investment funds in Turkey.

What about the Taxation of Investment Funds in Turkey?

There are a few exceptions in Turkey when it comes to investment funds. This section will provide you with a complete overview of venture capital funds, real estate investment funds, securities funds, and investment funds, as well as gold and other precious metals.

Some commodities such as the income derived from warrants, foreign exchange, loans, financial assets, derivatives, and transactions by the foreign investment fund aren’t taxable. At the same time, local portfolio management businesses are also exempt from the tax.

This tax exemption is given to these management companies because of their significant amount of foreign types of investment funds in Turkey.

Are you interested to learn about corporate tax rates in Turkey? Check out our article about; “Corporate Taxation in Turkey” and learn more information on the matter.

What are the investment restrictions in Turkey?

Despite its flexibility, Turkish law sets a number of limits on investment funds. Among them, Turkish investment funds of all forms are prohibited from:

  • Invest over 10% of the money in securities provided by a company alone,
  • Invest over 9% of its capital or over 9% of the voting shares.

 

Additionally, funds with a sole owner and manager are prohibited from investing more than 20% of the assets or voting shares in the company.

What are the requirements for foreign investment funds in Turkey?

The Turkish Stock Exchange does not allow foreign funds to be traded, although a foreign investment company can trade its shares on the local capital markets. The offer must be made through a Turkish brokerage firm and is subject to the Capital Markets Board’s clearance. Bearer shares can be used to register securities issued by a foreign fund.

Final Words and Conclusions on Types of Investment Funds in Turkey

Turkey has become one of the top destinations globally to open the business you desire. Many foreign entrepreneurs are attracted to the opportunity to extend their investment fund in Turkey due to the country’s developed economy. Furthermore, the Turkish Government is working very hard to make the country the hub of long-term investment from foreign investors by preparing essential reforms and regulations.3

When you think about the types of investment funds in Turkey, you will notice a lot of profitable options at your disposal, and the Turkish Government is keen on supporting foreign investors to benefit from the countries developing economy. Which will be beneficial for both Turkey and the foreign investors.

Remember to seek advice from an experienced law firm if you have any questions or to offer their guidance to you in the entire process.