When it comes to foreign investments, the question as to how non-Turkish individuals may be legally employed in Turkey by Turkish companies (with/out foreign shareholding) becomes an important issue. As such, this article aims to provide a brief overview on the criteria that must be met by the said companies in order to duly employ foreign individuals in Turkey and the exceptions available to such criteria.
First, all foreigners must, in principle, obtain a work permit in order to be legally employed in Turkey. The Turkish company employing such foreign individual(s) sponsors said permit.
The Turkish companies in question must meet certain criteria in order for said employee to be issued with a work permit. These have been published by the Ministry of Labour and Social Security (the “Ministry”) and include, but are not limited to, the following:
i. at least five (5) Turkish citizens must be employed by the Turkish company for each foreign employee (the “5/1 Rule”); and
ii. the Turkish company must have a paid-up share capital of at least TRY 100,000 (one hundred thousand Turkish Liras (app. USD 27,200)) or have sales with a gross amount of TRY 800,000 (eight hundred thousand Turkish Liras (app. USD 217,400)) or exports with a value of USD 250,000 (two hundred fifty thousand US Dollars).
The 5/1 Rule has caused various problems for companies with a relatively small headcount, as it prohibits such companies from employing foreign personnel without employing a significant number of Turkish employees. However, there are various cases where the 5/1 Rule can be relaxed and thus allow foreign individuals to be employed without employing Turkish citizens.
To this end, the Ministry has published criteria stating how Turkish companies with investments exceeding certain thresholds (and as a result, are considered as “qualified foreign direct investors”) (özellik arzeden doğrudan yabancı yatırım) may employ key foreign employees without being bound by the 5/1 Rule.
Based on the said criteria, a Turkish company established by a foreign entity shall be considered a qualified direct foreign investor if, among others:
i. the turnover of the Turkish company in question was app. TRY 100.2 million (one hundred million and two hundred thousand TRY (app. USD 28.6 million)) in the previous financial year and the foreign shareholders of the Turkish company have a share capital of at least TRY 1.333.150 (one million three hundred thirty three thousand and one hundred and fifty Turkish Lira (app. USD 381,000)) in the said company; or
ii. the Turkish company has export sales of at least USD 1 million (one million USD) and the foreign shareholders of the Turkish company have a share capital of at least TRY 1.333.150 (one million three hundred thirty three thousand and one hundred and fifty Turkish Lira (app. USD 381,000)) in the said company; or
iii. at least 250 (two hundred and fifty) people are employed by the Turkish company and the foreign shareholders of the Turkish company have share capital of at least TRY 1.333.150 (one million three hundred thirty three thousand and one hundred and fifty Turkish Lira (app. USD 381,000)) in the said company; or
iv. the company in question makes an investment and the fixed investment value is at least TRY 33.3 million (thirty three million and three hundred thousand Turkish Liras (app. USD 9.5 million)); or
v. the foreign parent company of the Turkish company has a foreign direct investment in at least one other foreign jurisdiction.
As for the key personnel, an employee will be considered key personnel if he/she is a shareholder, chairperson, member of the board of directors, general manager, vice general manager, manager or vice manager who:
i. works in the upper management of the Turkish company in question or who has an executive function therein; or
ii. entirely or partially manages the Turkish company; or
iii. inspects or monitors the work undertaken by the auditors or the technical or administrative personnel of the Turkish company; or
iv. is entitled to recruit new employees for, or dismiss current ones from, the Turkish company, or who may make suggestions regarding the same.
Further, an individual who holds key information regarding the services provided by, the management of or the research tools and techniques possessed by the Turkish company in question is also considered a key personnel.
In addition to the above, the Ministry has also published other criteria whereby certain other exceptions to the 5/1 Rule may be granted to the Turkish company. These criteria are based on multilateral or bilateral treaties or types of work that require high technology and for which a competent Turkish work force is not available.
In light of the above, it may be possible to employ key personnel without being bound by the 5/1 Rule. However, whether a certain employee qualifies as key personnel (i.e. whether such personnel hold the above qualifications) will be determined by the relevant public authorities on a case-by-case basis.
Further, and as indicated above, it may also be possible to engage foreign employees without being bound by the 5/1 Rule, based on multilateral or bilateral treaties or for specific high technology works.
Lastly, it should be noted that, in order to legally employ foreign employees in Turkey, the application of the 5/1 Rule (or a possible exception thereto) should be evaluated on a case-by-case basis; it would be advisable for said evaluation to be made by qualified agency providing such services.