Capital Increase in Turkey: A Practical Guide for Foreign Investors and Companies

For companies operating in Turkey, increasing share capital can be an important step when additional funding is required for business expansion, new investments, working capital or changes in the company’s ownership structure.

A capital increase can also be particularly relevant for foreign investors that have established a Turkish subsidiary and need to inject additional funds into the business.

However, a capital increase is not simply a matter of transferring money to a company’s bank account. It is a formal corporate transaction that requires the appropriate shareholder resolutions, documentation, accounting treatment and registration with the relevant Trade Registry.

What Is a Capital Increase in Turkey?

A capital increase is a corporate procedure through which a Turkish company increases its registered share capital.

Depending on the circumstances, the increase may be made through a cash contribution, capitalization of eligible internal resources or an in-kind contribution.

The appropriate structure depends on factors such as the company’s legal form, the purpose of the investment, the source of the capital and the company’s existing financial structure.

For foreign-owned companies, a capital increase can be used to provide additional financing to a Turkish subsidiary without changing the company’s overall business structure.

Why Do Companies Increase Their Capital?

There are several reasons why a company may decide to increase its share capital.

Financing Business Expansion

Companies may require additional equity to open new facilities, enter new markets, hire employees or expand their commercial activities.

Funding New Investments

A capital increase can provide the Turkish company with funds for equipment, technology, real estate, software, research and development or other business investments.

Strengthening the Company’s Equity

Additional paid-in capital can strengthen the company’s equity position and improve its financial structure.

Providing Working Capital

Foreign shareholders may inject additional capital when a Turkish subsidiary requires funds to finance its day-to-day operations.

Supporting Changes in the Shareholding Structure

Depending on the transaction structure, a capital increase can also be used when new investors enter a company or existing shareholders increase their participation.

It is important, however, to distinguish a capital increase from a share transfer. A capital increase increases the company’s registered share capital, whereas a share transfer generally involves the transfer of existing shares from one shareholder to another.

Capital Increase for Foreign-Owned Companies

Foreign investors can generally participate in the capital increase of Turkish companies, subject to applicable corporate and sector-specific requirements.

For an international group, the process may involve transferring funds from a foreign parent company or shareholder to its Turkish subsidiary. The transaction should be properly documented so that the purpose and nature of the payment are clear in the company’s corporate, banking and accounting records.

Foreign shareholders should also consider the documentation requirements that may apply to documents issued outside Turkey, including notarization, legalization or apostille procedures and certified Turkish translations where applicable.

For this reason, foreign-owned companies should coordinate the capital increase with their accounting and tax advisors before the transaction is implemented.

How Does the Capital Increase Process Work?

Although the exact procedure varies according to the company and the type of capital increase, the process generally involves several stages.

1. Determine the Capital Increase Structure

The company first determines the amount of the proposed increase and whether it will be made through cash, internal resources or another legally permitted method.

2. Prepare the Corporate Resolution

The relevant corporate body approves the capital increase in accordance with the company’s legal structure and the applicable provisions of Turkish Commercial Code.

3. Prepare Supporting Documents

The company prepares the required corporate documents, capital payment evidence and, where applicable, CPA or Sworn-in CPA reports and other supporting documentation.

4. Complete the Capital Contribution

For a cash capital increase, the shareholder makes the required capital contribution in accordance with the applicable corporate and banking procedures.

5. Register the Capital Increase

The capital increase is submitted to the relevant Trade Registry for registration and, where required, publication.

The Turkish Trade Registry is the official registry in which legally required corporate changes are registered. Trade Registry procedures are conducted through the MERSİS system.

6. Update Accounting and Corporate Records

Following registration, the company’s accounting records should be updated to reflect the new capital structure. Companies operating in Turkey may also require ongoing accounting and bookkeeping services in Turkey to maintain statutory records and comply with Turkish accounting requirements.

Capital Increase and Corporate Tax Considerations

One of the reasons a capital increase can be particularly relevant for Turkish companies is the potential tax treatment of qualifying cash capital increases.

Turkish corporate tax legislation provides a cash capital increase deduction mechanism under specific conditions. The mechanism is designed to encourage companies to strengthen their financing through equity.

The availability and calculation of the deduction depend on the nature and timing of the capital contribution and the applicable tax rules for the relevant period.

Companies should therefore assess the potential tax treatment before implementing a substantial capital increase rather than assuming that every increase in registered capital will automatically qualify for a deduction.

For foreign investors, this can be an important part of the decision between different financing structures for a Turkish subsidiary and should be considered as part of the company’s broader taxation in Turkey strategy.

Capital Increase Through Internal Resources

Not every capital increase requires new money to be transferred into the company.

Where legally permitted, certain eligible amounts already recorded within the company’s equity may be capitalized and converted into share capital.

This type of transaction is fundamentally different from a cash capital increase because it does not necessarily bring additional external funds into the company.

The company must establish that the relevant internal resources are available and eligible for capitalization under the applicable legislation and accounting rules.

Capital Increase Through In-Kind Contributions

In certain circumstances, capital may also be contributed in kind rather than in cash.

An in-kind contribution can involve assets or other qualifying economic values, subject to the applicable legal and valuation requirements.

Additional documentation and valuation procedures may be required for in-kind contributions. The exact requirements depend on the nature of the asset being contributed.

What Documents May Be Required?

The documents required for a capital increase vary according to the transaction.

Depending on the circumstances, the process may involve:

• Shareholders’ or General Assembly resolution

• Amended Articles of Association

• Capital payment documentation

• CPA or Sworn-in CPA report

• Documents relating to internal resources

• Valuation documentation for in-kind contributions

• Identification and corporate documents of foreign shareholders

• Notarized, legalized or apostilled foreign documents where applicable

• Certified Turkish translations

• Trade Registry application documents

The Turkish Ministry of Trade specifically identifies additional documentation that may be required for certain capital increases, including CPA/YMM reports concerning paid capital, company equity and internal resources, as well as valuation documentation for in-kind capital contributions.

How Long Does a Capital Increase Take?

The duration of a capital increase depends on the company structure, transaction type, documentation and Trade Registry procedures.

A straightforward transaction can be completed relatively quickly once the required documents have been prepared. However, foreign shareholder documentation, notarization, apostille procedures, translations, CPA reports or additional approvals can extend the timeline.

Companies should therefore prepare the documentation before initiating the formal registration process.

Capital Increase Costs

The cost of a capital increase depends on the transaction structure and the services required.

Potential costs may include:

• Trade Registry-related charges

• Publication costs

• Notary and certification costs

• Translation costs

• CPA or accounting fees

• Professional advisory fees

• Banking costs, where applicable

The amount contributed as share capital should be distinguished from the administrative and professional costs of completing the capital increase. The capital contribution becomes part of the company’s capital structure; it is not itself a professional service fee.

Why Professional Assistance Matters

Capital increases combine several areas of corporate administration.

A transaction may require coordination between shareholders, company management, accountants, banks, CPAs, notaries and the Trade Registry.

For foreign-owned companies, the process can be more complex because documents may originate outside Turkey and additional translation, certification and banking procedures may be involved.

Professional assistance from a CPA in Turkey can help ensure that the corporate resolution, capital payment, accounting records and Trade Registry application are consistent with one another.

Capital Increase and Foreign Investment Planning

For international investors, a capital increase should be considered as part of the company’s broader financing strategy.

Before transferring funds to a Turkish subsidiary, the shareholder should consider:

• The required amount of capital

• The intended use of the funds

• The company’s existing capital structure

• The ownership percentages of shareholders

• The applicable tax treatment

• Banking and payment documentation

• Accounting treatment

• Trade Registry requirements

This is particularly important where the capital increase is substantial or where the transaction is connected with a wider restructuring or investment plan.

Final Considerations

A capital increase can be an effective way for Turkish companies and foreign-owned subsidiaries to strengthen their equity, finance investments and support business growth.

However, the transaction should be structured carefully. Corporate approvals, capital contributions, accounting records, tax treatment and Trade Registry registration all need to be coordinated.

Foreign investors considering a capital injection into an existing Turkish company can review A&M Consulting Co.’s detailed guide to Capital Increase in Turkey for additional information about the requirements, procedure, tax considerations and documentation involved.

Professional advice can be particularly valuable when the transaction involves foreign shareholders, significant capital contributions or potential tax benefits.