Dr. Koray Ateş
korayates@muhasebetr.com

Establishing A Holding In Turkey And Its Advantages

Foreign investors have various advantages which they will achieve by establishing holding in Turkey. In general, holdings are defined as non-operated companies which do not engage in activities such as production and sales, they are often the main partners of companies, or otherwise hold, manage and participate to these companies.

IS IT NECESSARY TO HAVE 5 DIFFERENT COMPANIES TO BECOME A HOLDING?

No. It’s not mandatory to dominate over or participate a company to establish a holding company. You can establish a holding as company by yourself.

WHY MOST OF THE COMPANIES IN TURKEY DO NOT PARTICIPATE IN OTHER COMPANIES AND ESTABLISHED ON ITS OWN?

In circumstances that the Holding do not participate in other companies’ capital, transfer pricing will be on the agenda in accordance with Articles 12 and 13 of the Corporate Tax Law and the companies in which it participates will transfer their shares to the Holding at an equivalent price. In other words, the capital of the company in which the Holding will participate is 1,000,000 TL. In this case, market evaluation will be made to the company and the participation will be held over its market value not over 1,000,000 TL. If the company has no stock share in this case gains from appreciation will show up. This is a high tax burden. This is the reason most of the holdings in Turkey do not participate in group companies.

CAN HOLDING BE ESTABLISHED AS AN ORDINARY COMPANY?

Yes, it can be. The only feature is that the articles of association needs to be contain special clauses and the permission of the Ministry is obligatory for its establishment.

Although the type of Holding companies is not defined in the TTL (Turkish Trade Law), according to the relevant Communiqué of the Ministry of Customs and Trade, can be established as a type of joint stock company with permission from the ministry.

WHAT ARE THE TAXATIONAL ADVANTAGES OF BEING HOLDING?

1. In case of profit distribution of affiliated companies, income tax can’t be done over the dividends distributed to the holding. Due to the holding company can distribute this profit one year later at the earliest to the natural entity shareholders the tax is paid with one-year delay. Therefore, tax is used by the group for one year as financing.
2. Affiliation privilege are applied to the dividends that are distributed to the holding.
3. In case of the sale of participation shares of the affiliated companies that take place in the Holding’s balance sheet, 75% of the income from this sale is exempted from corporate tax.
4. The sale of participation stocks held in the Holding's balance sheet for 2 years is exempt from value added tax.
5. Loans that is provided by the Holding from banks and financial institutions and let its shareholders to use under the same conditions are not considered as hidden capital.
6. Shareholders who put the shares of other companies in their hands as non-monetary capital (contributions in-kind) to the holding. This transaction of the shareholders is by way of the sale of the shares, so the gain from this sale is the gain on value increase. However, in the Income Tax Law, if the shares are sold after holding for 2 years, the gain is not considered as gain on value increase and is not taxed.

ROAD MAP TO CONGLOMERATE

In the scope of explanations above. Holding can be established in a very little time without the need of establishing 5 different companies by the company partner who is willing to establish a holding. A minimum capital of 50,000 TL (approximately $ 10,000) is needed for the cost of establishment. 4/1 of this capital 12.500 TL needs to be paid on establishment phase. The remaining 37,500 TL must be paid within 24 months. Other establishment costs are maximum 10,000 TL

29.09.2019

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