Legal consultancy for Indian investors in Turkey covers treaty position, outbound investment sequencing under Indian exchange control rules, entity structuring and enforcement of Indian judgments and awards.
Indian investment into Turkey sits in a position that is unusual and, for most investors, invisible until something goes wrong. The commercial framework is favourable. The tax framework is settled and has been for nearly three decades. The protection framework, the one that matters only when a government does something the investor did not expect, was withdrawn in 2019 and has not been replaced.
Investors usually begin with the question of standing, and the honest answer has two halves that point in opposite directions. What treaty position does an Indian investor hold in Turkey? Fully relieved and largely unprotected. The double taxation agreement between India and Turkey has been in force since 1 February 1997 and continues to operate, reducing withholding and allocating taxing rights. The bilateral investment treaty signed in 1998 entered into force in 2007 and was terminated on 8 July 2019, unilaterally denounced by India as part of its programme of exiting older investment treaties. Tax relief remains. Investor-state protection does not.
The second question follows immediately from the first, and its answer explains why the position is so rarely noticed. Why would India remove protection from its own outbound investors? Because the treaties were written to attract capital into India rather than to protect capital leaving it, and India’s exposure as a respondent state outweighed the benefit to its investors abroad. India terminated treaties with dozens of counterparties on that reasoning. The decision was defensive and inbound-facing; the effect on an Indian manufacturer building a plant near Izmir was a by-product rather than a policy.
Structuring questions come next, and here the constraint sits on the Indian side rather than the Turkish one. Which Turkish investments can an Indian company actually make? Fewer than a Turkish adviser would assume. Indian exchange control rules prohibit overseas direct investment in real estate as an asset class, which removes the route by which many foreign investors enter Turkey. An Indian corporate can build a factory, acquire an operating company or establish a subsidiary. It cannot deploy corporate funds into Turkish property as an investment.
The last question is the one that decides contract drafting. How enforceable is an Indian judgment or award in Turkey? An arbitral award travels considerably better than a court judgment. Both India and Turkey are parties to the New York Convention, which gives awards a defined route with narrow refusal grounds. A judgment of an Indian court must satisfy the general recognition conditions of Turkish private international law, including reciprocity, which is not established by assumption.
Öznur & Partners advises Indian corporates, promoters and family offices on entry, structuring, contracting and disputes in Turkey. This page addresses what is specific to Indian capital. The framework applying to all foreign investors, covering entity types, property eligibility, tax and employment, is set out on our page on Turkish law for foreign investors.
⚖️ Which Legal Issues Are Specific to Indian Investment in Turkey?
Four issues attach to Indian investment in Turkey that do not attach in the same form to investment from other jurisdictions.
Absence of investment treaty protection. Investments made after 8 July 2019 are not covered by a bilateral investment treaty between India and Turkey. Recourse against Turkish state action runs through Turkish administrative and judicial channels, through contract, or through whatever protection the investment structure itself provides.
Outbound investment constraints under Indian law. The Indian regime permits substantial overseas investment through the automatic route but restricts it by asset class, by structure and by aggregate exposure to net worth. These are Indian constraints on an Indian entity, and no Turkish structuring can remove them.
Continuing reporting obligations. Indian outbound investment is a continuing compliance relationship rather than a one-time approval. Annual reporting runs for the life of the overseas entity, and repatriation of amounts due carries its own deadline. Groups that treat the remittance as the finish line accumulate defaults quietly (and discover them at the next transaction, when regularisation becomes a precondition rather than a housekeeping item).
Enforcement asymmetry. The difference between the enforceability of an Indian award and an Indian judgment in Turkey is large enough to determine which dispute resolution clause belongs in the contract, and the decision has to be made at drafting.
None of these makes Turkey a difficult destination for Indian capital. Each of them makes the structure a decision rather than a formality.
⚖️ When Should an Indian Company Engage Turkish Counsel?
Turkish counsel should be engaged before the Indian filings are prepared, because the Indian filing describes the Turkish structure and amending it afterwards is slower than getting it right once.
Four moments carry disproportionate weight.
Before the asset class is chosen. Whether the Turkish investment is an operating business, a manufacturing facility or a property holding determines whether the Indian corporate route is available at all. This is the first question, not a detail to settle after the site visit.
Before the Turkish entity is registered. The entity type, the shareholding split and the articles of association determine the Turkish property regime, the tax treatment of a future exit and the regulatory classification of the activity. These are settled at formation and expensive to revisit, and they are described in the Indian filing.
Before signing with a Turkish partner. Joint ventures are common in Turkish manufacturing and distribution. Without treaty protection standing behind the investment, the contract carries more weight than it would for an investor from a treaty-covered jurisdiction (the shareholders agreement is doing work that, for a Chinese or German investor, a treaty would partly do).
Before any dispute becomes formal. Interim attachment over Turkish assets is available through Turkish courts even where the merits will be arbitrated elsewhere, and it is frequently the step that determines whether an eventual award is collectable.
Groups that already hold a Turkish entity are late for the first two items and on time for everything else. The structure can usually be adjusted; what cannot be adjusted is the date on which the investment was made, which is the date that determines treaty coverage.
⚖️ How We Advise Indian Clients on Turkish Matters
Our work with Indian clients is organised around the sequence rather than around a service list.
Structuring and entry. Entity selection, joint venture documentation, permit and licensing analysis, incentive certificate applications, and alignment of the Turkish structure with the group’s Indian filing timetable. The structuring output is delivered in writing with statutory references so that it can be relied on by an Indian legal team and, where useful, submitted as supporting material to an authorised dealer bank.
Contracting. Shareholders agreements, distribution and supply contracts, construction and EPC documentation, and the governing law, forum and currency clauses that determine what happens if the relationship fails. This work carries additional weight where no investment treaty sits behind the investment.
Disputes and enforcement. Turkish litigation and arbitration, enforcement of Indian arbitral awards, recognition proceedings for Indian judgments, and protective measures over Turkish assets.
Execution is remote by default. Incorporation, corporate bank account opening, permit applications and contract execution can be completed under a power of attorney executed in India and legalised by Apostille, as both countries are parties to the Apostille Convention. Documents in Hindi or in regional languages require sworn translation for official use in Turkey; documents already in English are still translated for filing purposes, which is a step worth scheduling rather than discovering.
Planning a Turkish investment, or already holding one made before July 2019?
The date matters more than most investors realise. Our Istanbul-based investment lawyers can establish your treaty position and the structure that follows from it.
⚖️ Is There an Investment Treaty Between India and Turkey?
Not currently. The Agreement between India and Turkey for the Reciprocal Promotion and Protection of Investments was signed on 17 September 1998 and entered into force on 18 October 2007. It was terminated on 8 July 2019, by unilateral denunciation.
The termination was not directed at Turkey. From 2016 onward India served notice on the large majority of its older investment treaties, following its adoption of a revised model text in 2015. Older treaties remain in force with only a small number of counterparties (Turkey was not singled out, which is cold comfort to an investor holding a Turkish asset).
The practical consequences are specific.
No investor-state dispute settlement. An Indian investor whose Turkish investment is affected by state action cannot commence treaty arbitration against Turkey under a bilateral instrument. The available routes are Turkish administrative litigation, Turkish courts, and contractual remedies against the counterparty.
No treaty standard of treatment. Substantive protections of the kind these treaties contain, including fair and equitable treatment and protection against expropriation without compensation, no longer apply as treaty obligations. Turkish domestic law contains its own protection against expropriation without compensation, and the Foreign Direct Investment Law guarantees equal treatment and free transfer of proceeds. These are real protections, but they are Turkish law protections, alterable by Turkey and enforced in Turkish forums (which is the whole point of an investment treaty, and the whole loss when there is not one).
Pre-termination investments may still be covered. Investment treaties commonly contain a survival or sunset clause continuing substantive protection for investments made before termination, for a defined period after it. Where an Indian investment in Turkey was made before 8 July 2019, the position depends on the terms of that clause in the 1998 agreement and on the date the investment was made. This is a question with a specific answer that should be established rather than assumed.
Two structuring responses are available and both require thought rather than reflex.
The first is to hold the Turkish investment through an entity in a jurisdiction that does have a bilateral investment treaty in force with Turkey. This is lawful treaty planning where the structure is genuine and established before any dispute is foreseeable, and it interacts with Indian outbound rules on multi-layer structures, so it cannot be designed on the Turkish side alone.
The second is to compensate contractually. Where the Turkish counterparty is a public body or the project depends on a concession or licence, the contract can carry stabilisation, compensation and dispute resolution provisions that do some of the work a treaty would otherwise do. Our contract practice handles this drafting, and our arbitration practice the clause architecture that supports it.
⚖️ The India Turkey Double Taxation Agreement
The tax position is settled and, unlike the investment position, unchanged. The Agreement between India and Turkey for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income entered into force on 1 February 1997 and continues to apply.
The agreement performs three functions for an Indian investor in Turkey.
It allocates taxing rights between the two states across categories of income including business profits, dividends, interest, royalties, capital gains and employment income, and it defines when a Turkish presence amounts to a permanent establishment.
It caps withholding rates on dividends, interest and royalties flowing between the two countries, generally below the domestic rates that would otherwise apply.
It provides a credit mechanism so that tax paid in one state is relieved in the other, and a mutual agreement procedure through which the two tax administrations resolve disputed positions.
Three practical points determine whether the benefit is actually obtained.
Treaty relief is documentary. A tax residency certificate from the Indian authorities, in the form Turkish authorities accept, is required before reduced rates apply. Without it the domestic rate is withheld, and recovering the difference afterwards is slower and less certain than presenting the certificate on time.
Permanent establishment exposure arises without incorporation. An Indian company serving Turkish customers through an agent who habitually concludes contracts on its behalf, or through a fixed place of business, can create a taxable presence in Turkey without registering an entity. Groups that avoid incorporating in order to stay outside Turkish tax sometimes create the exposure they were avoiding.
The multilateral instrument applies. India has adopted the BEPS multilateral convention, which modifies covered treaties by introducing anti-abuse tests. A structure whose principal purpose is obtaining treaty benefit can be denied that benefit, which is directly relevant to the holding-company response described in the previous section.
The general treaty mechanism is set out in our note on double tax treaties in Turkey, the underlying concepts in our note on types of double taxation, and the wider framework on our tax practice page.
⚖️ Can an Indian Company Buy Property in Turkey?
An Indian company generally cannot use the corporate overseas investment route to acquire Turkish real estate as an investment, because Indian exchange control rules exclude real estate as an asset class from permitted overseas direct investment. The exclusion does not extend to the development of townships, or the construction of residential or commercial premises, roads or bridges for sale or lease, which are treated as business activity rather than as real estate investment.
The distinction is between holding property and building it. An Indian construction group establishing a Turkish subsidiary to develop and sell residential units is conducting a permitted business. An Indian company acquiring completed Turkish apartments to hold, let or resell is doing something the corporate route does not permit.
This matters more in Turkey than in most destinations, because property is Turkey’s most visible offer to foreign capital and because the investment-based citizenship route runs through property acquisition. Advisers accustomed to structuring property purchases for investors of other nationalities will frequently propose a corporate holding structure that an Indian corporate investor cannot lawfully fund (the proposal is competent on the Turkish side and unusable on the Indian one).
Resident individuals in India operate under a separate framework for personal remittances abroad, subject to an annual per-person limit, and property acquisition abroad by an individual is addressed there rather than under the corporate route. The limit is set by the Reserve Bank and is revised from time to time, so the current figure and the current permitted purposes should be confirmed before a purchase is committed rather than assumed from an earlier transaction.
On the Turkish side, eligibility is a separate question with its own answer. Acquisition by a foreign individual is subject to Article 35 of the Land Registry Law, which imposes nationality conditions, area limits and restrictions in military and security zones, examined in our note on property eligibility for foreign buyers. Where a Turkish company with fifty percent or more foreign shareholding acquires property, the acquisition must serve the purpose stated in its articles of association.
Title, zoning and encumbrance verification before any deposit is paid is handled through our real estate legal due diligence process, and the wider framework on our real estate practice page.
⚖️ Indian Outbound Investment Rules and the Turkish Timetable
Indian outbound investment operates under the Foreign Exchange Management Act and the Overseas Investment Rules, Regulations and Directions that took effect on 22 August 2022. The framework distinguishes between an automatic route, available where prescribed conditions are met, and an approval route requiring the Reserve Bank’s consent.
The features that shape a Turkish transaction are these.
Financial commitment is capped by net worth. Total financial commitment across all foreign entities is limited to four hundred percent of the Indian entity’s net worth as shown in its last audited balance sheet, subject to an overall annual ceiling for the financial year. The cap aggregates equity, debt, guarantees and other non-fund-based exposure, so a guarantee given in support of a Turkish subsidiary consumes the same headroom as cash (a point that surprises groups whose Turkish bank facility is parent-guaranteed).
A unique identification number precedes the money. A UIN is obtained for the foreign entity before outward remittance or acquisition of equity, whichever comes first, and all subsequent transactions with that entity are routed through the same designated bank against the same number.
Reporting continues for the life of the investment. An annual performance report is filed for each foreign entity, and changes in the foreign entity’s particulars are reported within a defined period. Amounts due from the foreign entity are repatriated to India within ninety days of falling due.
Structural restrictions apply. Rules on the number of subsidiary layers and on structures that invest back into India constrain how a Turkish entity may itself hold further entities, which is directly relevant where the Turkish company is intended as a regional platform.
Non-compliance is priced. Contraventions under the exchange control framework carry penalties calculated by reference to the amount involved, with continuing daily amounts for ongoing default. Late filings can be regularised on payment of a fee, but a pattern of unreported activity complicates every subsequent transaction.
| Aspect | Turkish side | Indian side |
|---|---|---|
| Nature of requirement | Notification, with approval only for liaison offices | Automatic route where conditions are met, otherwise RBI approval |
| Timing relative to capital | Largely after the structure exists | UIN before remittance or equity acquisition |
| Ceiling on exposure | None on inbound investment | Four hundred percent of net worth, plus an annual ceiling |
| Asset class restriction | Property rules turn on shareholding and location | Real estate excluded from the corporate route |
| Ongoing obligation | Notification of capital and shareholding changes | Annual performance report and ninety-day repatriation |
The operative rule that follows is the same one that applies to every two-jurisdiction structure and is ignored with the same regularity. The Turkish structure should be final before the Indian filing is submitted, because the filing describes it. Turkish incorporation is measured in days and the Indian process is measured in weeks, which means the Turkish design accommodates the Indian timetable rather than the reverse.
Funding the Turkish entity partly by shareholder loan rather than equity requires the loan to be documented and priced before the funds move, since Turkish transfer pricing and thin capitalisation rules examine the arrangement as constituted. Corporate account opening and the beneficial ownership documentation banks require is handled through our banking and finance practice.
⚖️ Entity Choice and Manufacturing Investment
Indian investment in Turkey concentrates in manufacturing, engineering, pharmaceuticals, textiles, chemicals and information technology services, and the entity question is usually settled by what the operation will do rather than by tax preference alone.
The two principal vehicles are the limited liability company and the joint stock company. They differ in minimum capital, in how shares transfer, in the tax treatment of a share sale and in whether shareholders can be pursued personally for the company’s unpaid public debts. The comparison is set out in our note on choosing between a limited and a joint stock company, and the incorporation sequence on our company formation page.
Two considerations weigh differently for Indian investors than for others.
Exit treatment should be settled at entry. Where the Indian parent expects to divest within a defined horizon, the entity type and the identity of the shareholder determine how the sale is taxed and how the proceeds return to India under the repatriation rules. The interaction of Turkish exit tax treatment and Indian disinvestment reporting is easier to design than to unwind, and is addressed on our exit strategies page.
Incentive timing collides with filing timing. Turkish investment incentive certificates apply to expenditure incurred after the application. An Indian group that has completed its filings and faces internal pressure to deploy capital may order equipment before the Turkish certificate is issued, and the customs and value added tax exemptions do not apply retroactively. The programme is set out on our manufacturing incentives page and the machinery exemption in our note on VAT exemption for foreign investors.
Turkey also maintains trade remedy measures affecting certain Indian-origin goods, including categories of flat steel. A group whose Turkish plan involves importing inputs from its own Indian facilities should establish the position for those specific products before the supply chain is fixed, since the duty attaches to the import rather than to the investor. This work sits with our international trade and customs practice.
Personnel transfers from India require work permits obtained by the Turkish employer, and Turkish employment law governs the relationship irrespective of nationality, including job security provisions and statutory severance accrual. These are addressed on our corporate immigration and employment law pages.
⚖️ Can an Indian Court Judgment Be Enforced in Turkey?
Not directly, and not on the same footing as an Indian arbitral award. This asymmetry is the single most important dispute resolution consideration for Indian parties contracting with Turkish counterparties, and it is decided at drafting rather than at enforcement.
A foreign court judgment requires a recognition and enforcement action before a Turkish court. The court examines whether reciprocity exists between Turkey and the state of origin, whether the defendant was properly served and able to present a defence, whether the judgment is compatible with Turkish public order, and whether the matter fell within exclusive Turkish jurisdiction. Reciprocity is the condition that most often decides the outcome, and it can rest on treaty, on statute or on demonstrated judicial practice (the last of these is the weakest footing, since the evidential burden then lies with the party seeking enforcement).
Arbitral awards follow the New York Convention, to which both India and Turkey are parties. Refusal grounds are narrow and defined by the Convention, and the Turkish court does not review the merits. Indian enforcement of foreign awards operates through its own statutory framework with its own notification requirements, which is a point to confirm in the specific direction of enforcement contemplated.
Three drafting points recur in India-Turkey contracts.
Forum selection should follow the assets. Where the counterparty’s assets are in Turkey and the remedy sought is monetary, an arbitration clause produces a materially more collectable outcome than an Indian court jurisdiction clause. Where the dispute concerns Turkish immovable property, exclusive Turkish jurisdiction may apply irrespective of what the contract provides.
Governing language should be designated. Bilingual contracts should state which version controls. Where they do not, a discrepancy between texts becomes a dispute about the contract rather than a dispute under it.
Interim relief should be preserved. Attachment over Turkish assets through Turkish courts remains available where the merits are arbitrated elsewhere, provided the clause does not inadvertently exclude it.
Enforcement work is handled through our recognition and enforcement practice, disputes arising from supply and distribution relationships on our commercial contract disputes page.
⚖️ Brand, Technology and Data in the Turkish Market
Indian groups entering Turkey with an established brand should file before entry rather than after the first shipment. Turkish industrial property protection is registration-based and territorial, and use of a mark in India, however extensive, does not by itself defeat a Turkish registration held by an unrelated party.
The pattern is familiar and avoidable: a former distributor or local importer registers the mark, and the group discovers the position when it tries to use its own name in a market it has just entered. Opposition and cancellation proceedings are available and often succeed in bad faith cases, but they cost more and take longer than a filing would have (and a Madrid Protocol designation, made before entry, would have cost a fraction of either). International registration through the Madrid Protocol designating Turkey is available to groups already holding an Indian registration and is generally the efficient route.
Technology licensed into a Turkish subsidiary raises a second question. Royalty flows are covered by the double taxation agreement and the applicable rate depends on the category of payment, which makes the characterisation of the licence a tax question as well as a commercial one.
Personal data processed by the Turkish operation, including employee data, falls under the Turkish Personal Data Protection Law. Indian groups running centralised systems should establish the cross-border transfer position before data begins moving, since a group policy drafted for another regime does not automatically satisfy the Turkish conditions and retrospective compliance does not cure transfers already made.
These are handled through our intellectual property and information technology law practices.
⚖️ Two Treaties, Opposite Directions
An Indian investor in Turkey stands on ground that looks uniform and is not. One bilateral instrument, signed in the 1990s, remains in force and continues to make the investment more efficient. Another, signed a year later, was withdrawn in 2019 and no longer makes it safer. The two were negotiated by the same states, in the same decade, for the same relationship, and today they point in opposite directions.
What follows is not caution but sequence. The absence of treaty protection does not make Turkish investment unwise; Turkish domestic law contains real guarantees and Turkish courts are available. It makes the structure and the contract carry weight they would not otherwise carry, and it makes the date of an existing investment a fact worth establishing precisely.
The questions that decide an Indian investment in Turkey are mostly not the ones a Turkish adviser would raise unprompted. They concern asset class rather than entity type, net worth headroom rather than capital adequacy, the survival clause of a terminated treaty rather than the terms of a current one, and the order in which two unconnected regulators will be satisfied.
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Whether you are structuring a Turkish manufacturing investment, establishing whether an existing investment retains treaty protection, or drafting the dispute resolution clause that will decide collectability, our Istanbul-based investment lawyers can establish where you stand.