5 Legal Risks Foreign Investors Should Check Before Investing in Turkey (2026 Updated Guide)

-5 Legal Risks Foreign Investors Should Check Before Investing in Turkey | 2026

Planning to invest in Turkey? Discover five major legal risks foreign investors should investigate before signing contracts, transferring funds, acquiring property or purchasing shares in a Turkish company.

Turkey offers opportunities for international investors in real estate, manufacturing, energy, technology, trade and other sectors. However, a commercially attractive investment can become costly when ownership rights, regulatory requirements, contractual obligations or existing liabilities are not properly investigated. Foreign investors should therefore complete a structured legal review before transferring funds or committing to a transaction. The following five legal risks deserve particular attention when investing in Turkey in 2026.

1. Unclear Ownership, Hidden Liabilities and Defective Title

One of the most important risks is discovering that the seller does not have the ownership rights or authority necessary to complete the transaction. This issue can arise in real estate purchases, company acquisitions, share transfers and transactions involving valuable business assets.

Real Estate Investment Risks

Before purchasing property, verify the registered owner, title information, mortgages, attachments, easements and other registered encumbrances. The property’s physical condition and actual use should also be compared with the official records. Zoning restrictions, construction permits, occupancy status and condominium documentation may affect its value and intended use.

Foreign buyers should not rely exclusively on a property advertisement, reservation agreement or statement from a broker. The legal status of the specific property must be checked independently.

Company Acquisition Risks

When acquiring shares in a Turkish company, the buyer may inherit exposure to historical tax liabilities, unpaid social security contributions, litigation, employment claims, regulatory violations, undisclosed debts and contractual disputes. A company that appears profitable may have substantial liabilities that are not obvious from its headline financial statements.

A legal and financial due diligence process should examine corporate records, shareholder rights, management authority, material contracts, financial statements, litigation and regulatory compliance.

How Can Investors Reduce This Risk?

Obtain official records, verify the seller’s authority, investigate existing liabilities and make completion conditional on appropriate contractual protections. Where necessary, use representations and warranties, indemnities, escrow arrangements and clearly defined closing conditions.

2. Regulatory Approvals, Licensing and Foreign Investment Restrictions

Foreign investment does not eliminate the need to comply with Turkish legislation. Depending on the sector, an investor may need operating licences, regulatory approvals, environmental permits, construction permissions or sector-specific authorizations.

Sector-Specific Requirements

Energy, financial services, telecommunications, healthcare, transportation and other regulated sectors can involve requirements that differ significantly from those applicable to an ordinary commercial company.

For example, acquiring shares in a regulated business may require an approval or notification even where the same transaction involving an unregulated company would not.

Foreign Ownership and Strategic Assets

The applicable restrictions must be checked against the particular investment structure and sector. Real estate acquisitions by foreign individuals or entities can also be subject to nationality, location, area and other statutory limitations.

An investor should not assume that permission to establish a Turkish company automatically means that every asset can be acquired or every activity can be conducted without further authorization.

How Can Investors Reduce This Risk?

Prepare a regulatory approval matrix before signing the transaction documents. Identify each required licence, responsible authority, application requirement, deadline and consequence of non-compliance. Where approval is a condition of the transaction, the agreement should address what happens if approval is delayed, refused or granted subject to conditions.

3. Tax Exposure, Transfer Pricing and Undisclosed Financial Obligations

Tax risks can materially affect the real return on a Turkish investment. The relevant analysis may involve corporate taxation, withholding tax, value-added tax, stamp tax, customs duties, social security contributions and international tax considerations.

Historical Tax Liabilities

In an acquisition, a buyer should investigate whether the target company has filed the required returns, paid its taxes and maintained reliable accounting records. Potential issues include unreported revenue, unsupported expenses, payroll liabilities, related-party transactions and unresolved tax examinations.

A contractual promise by the seller to pay historical liabilities may provide a remedy between the parties, but it does not automatically prevent the authorities from pursuing the legally responsible taxpayer.

Cross-Border Payments and Transfer Pricing

Payments between related companies may require particular attention. Management fees, royalties, interest, technical service fees and other intercompany transactions should be supported by genuine agreements and appropriate commercial and accounting evidence.

Transfer pricing, withholding tax and deductibility should be reviewed before the payment structure is implemented.

Customs and Import Exposure

Investors acquiring an importing or manufacturing business should also investigate customs declarations, product classification, origin documentation, customs valuation, preferential tariff claims and any history of additional duties or administrative penalties.

A post-clearance audit can reveal liabilities that were not obvious during an ordinary commercial review.

How Can Investors Reduce This Risk?

Request tax and customs records, review ongoing audits and disputes, test material transactions and assess potential liabilities under realistic scenarios. Purchase agreements should allocate responsibility for historical tax and customs exposure and establish procedures for notification, defense and recovery.

4. Weak Contracts, Unenforceable Protections and Dispute Resolution Risks

A transaction can be commercially attractive but legally fragile if the agreement does not clearly define the parties’ obligations and remedies.

Foreign investors should review more than the purchase price. Payment conditions, delivery obligations, performance guarantees, termination rights, liability limitations and dispute resolution provisions can determine whether the investment remains viable when a disagreement arises.

Share Purchase and Joint Venture Agreements

In a company acquisition or joint venture, the parties should define management powers, reserved matters, voting rights, dividend policies, funding obligations, transfer restrictions, deadlock mechanisms and exit arrangements.

Without clear provisions, disagreements between shareholders can prevent the company from making important decisions or completing a planned sale.

Real Estate and Construction Contracts

Property and construction agreements should address title transfer, completion dates, defects, permitted use, payment milestones, guarantees, delay compensation and the consequences of non-performance.

Foreign buyers should verify that contractual descriptions correspond with the actual property and that payment obligations are linked to appropriate milestones and legal safeguards.

Governing Law and Dispute Resolution

The agreement should identify the applicable law and a suitable dispute resolution mechanism. Depending on the transaction, Turkish courts, arbitration or another legally available mechanism may be considered.

A foreign court judgment or arbitral award may require additional procedures before it can be enforced against assets in Turkey. The appropriate strategy depends on the governing legal framework and the type of decision.

How Can Investors Reduce This Risk?

Have the agreement reviewed before signing, rather than after a dispute arises. Define measurable obligations, evidence requirements, notice procedures, remedies and dispute resolution arrangements. Ensure that the contractual protections are practical and capable of enforcement.

5. Fraud, Unauthorized Representatives and Misappropriation of Investment Funds

Foreign investors may face risks involving fraudulent intermediaries, unauthorized agents, misleading financial information, false property representations or the diversion of investment funds.

These problems can occur even where the underlying project or company genuinely exists.

Verify the Recipient of Every Payment

Before transferring a substantial amount, establish who is legally entitled to receive it and why. Payments to an intermediary’s personal account, an unrelated company or an undisclosed third party should be investigated carefully.

The investor should verify the beneficiary’s identity, contractual role, authority to receive the money and connection with the transaction.

Investigate Powers of Attorney and Corporate Authority

A person who introduces a deal or communicates with the investor may not have authority to bind the company, transfer property or receive the purchase price.

Review the relevant corporate resolutions, signature authority, powers of attorney and agency agreements. For high-value transactions, verify the authority directly through appropriate independent channels.

Preserve Evidence Before a Dispute Develops

Maintain signed agreements, invoices, payment confirmations, bank records, correspondence, due diligence materials and records of representations made before the investment.

If suspected fraud emerges, stop additional payments where appropriate, preserve the evidence, identify the recipients of the funds and obtain urgent advice about possible criminal, civil and asset-protection measures.

How Can Investors Reduce This Risk?

Use independently verified payment instructions, establish transparent payment milestones and avoid transferring funds solely on the basis of verbal assurances. For substantial transactions, consider appropriate escrow or other controlled payment arrangements where legally and commercially suitable.

A Practical Due Diligence Checklist for Foreign Investors

Before committing to an investment in Turkey, consider completing the following checks:

• Verify the ownership of the property, shares or assets being acquired.
• Investigate mortgages, encumbrances, litigation and existing liabilities.
• Review corporate records, financial statements and material contracts.
• Identify all required licences, regulatory approvals and foreign ownership restrictions.
• Examine tax, customs, payroll and transfer-pricing exposure.
• Verify the authority of directors, agents, brokers and representatives.
• Confirm the legal identity of every payment recipient.
• Review representations, warranties, indemnities and closing conditions.
• Establish an appropriate dispute resolution and enforcement strategy.
• Prepare a documented closing checklist and preserve the transaction record.

Frequently Asked Questions

1. Can a foreign investor establish a company in Turkey?

Foreign investors can generally establish companies in Turkey, subject to the applicable corporate, sector-specific and regulatory requirements. The appropriate structure depends on the intended activity, ownership arrangements and investment objectives.

2. Can foreign investors purchase real estate in Turkey?

Foreign individuals and entities may be able to acquire real estate, but eligibility and restrictions depend on the investor’s legal status, nationality, property location, applicable limits and the nature of the transaction. The specific property should be checked before payment.

3. Is legal due diligence necessary before buying a Turkish company?

Yes. Due diligence helps identify historical liabilities, disputes, ownership problems, regulatory issues and contractual risks that may affect the value of the acquisition.

4. Can a buyer become exposed to a company’s historical tax liabilities?

Potential exposure depends on the transaction structure and applicable law. An asset acquisition and a share acquisition can have different consequences. Contractual indemnities may help allocate the economic risk but do not automatically eliminate obligations owed to public authorities.

5. What should an investor do if a Turkish business partner misuses investment funds?

Preserve the contracts, payment records and communications, identify the recipients and subsequent movement of the funds, and assess available civil, criminal and protective remedies based on the evidence.

6. Are foreign investors required to obtain sector-specific licences?

Some investments require licences, permits or regulatory approvals. The requirements depend on the business activity and applicable legislation.

7. Can a foreign investor protect an investment through contractual guarantees?

Representations, warranties, indemnities, security arrangements and clear dispute resolution provisions can reduce risk. Their effectiveness depends on the wording, the parties’ circumstances and the availability of assets against which a claim can be enforced.

8. Can a dispute involving a Turkish investment be resolved through arbitration?

Arbitration may be available where a valid arbitration agreement and the applicable legal requirements permit it. The clause should be reviewed carefully, including its scope, seat, rules and enforcement implications.

9. What should be checked before transferring investment funds?

Verify the recipient’s identity and authority, the contractual basis for payment, the transaction documents, the beneficiary account and any conditions that must be satisfied before payment.

10. When should a foreign investor consult a Turkish lawyer?

Ideally, before signing binding documents, transferring substantial funds or acquiring shares or property. Early legal review can identify problems while the investor still has an opportunity to renegotiate or withdraw under the applicable agreement.

Legal Support for Foreign Investors in Turkey

Investing in Turkey requires more than evaluating commercial potential. Ownership verification, regulatory compliance, tax and customs due diligence, enforceable contracts and fraud prevention can all influence the success of an investment. Fırat Fesih Kaya Law Office assists foreign investors, international businesses and cross-border commercial clients with investment due diligence, company acquisitions, real estate transactions, contract negotiations, regulatory issues and investment disputes. Lawyer Fırat Fesih Kaya provides legal assistance in identifying risks before completion, structuring contractual protections and evaluating remedies when an investment encounters legal difficulties.

Phone: +90 312 434 22 22

Mobile: +90 532 769 22 22

Email: info@firatfesihkaya.av.tr

Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey