Starting a Technology Startup in Turkey

Why Turkey for Tech Startups?

Turkey has rapidly developed into one of the region’s most vibrant tech startup ecosystems. Istanbul ranks among the top technology hubs in Europe and the Middle East, and the country has produced multiple unicorn startups. Key advantages include:

• Large domestic market: 85+ million consumers with high digital adoption
• Young, educated tech talent: One of the largest engineering graduate populations in Europe
• Cost-competitive: Salaries and operational costs are competitive compared to Western Europe
• Technopark incentives: Significant tax exemptions for qualifying R&D and software activities
• Government grants: TÜBİTAK and KOSGEB programs offer non-dilutive funding
• Strategic location: Access to European, Middle Eastern, and Central Asian markets
• Growing VC ecosystem: Active local and international venture capital activity

Step 1: Company Formation

Most Turkish tech startups form as an LLC at inception and convert to a JSC (A.Ş.) when raising venture capital, as JSCs offer more sophisticated share structures.

LLC is ideal for:

• Early-stage solo founders or small teams
• Bootstrapped operations
• Minimum capital: 50,000 TRY

JSC is required when:

• You need share classes with different rights (preferred shares, options)
• Raising VC or angel investment
• Establishing an Employee Stock Option Plan (ESOP)
• Minimum capital: 250,000 TRY

See our LLC formation guide and JSC formation guide for full formation steps.

Step 2: Technopark (Technopolis) Setup

What Are Technoparks?

Technoparks (teknoparklar or teknokentler) are technology development zones established under Law No. 4691 on Technology Development Zones. They are affiliated with universities and provide significant incentives for resident companies.

Turkey has 90+ active technoparks across the country, including:

Technopark Tax Incentives

Companies operating within technoparks and engaged in qualifying software development and R&D activities enjoy:

• Corporate income tax exemption on income derived from qualifying R&D and software activities — this exemption is extended through December 31, 2028
• Income tax exemption on wages of R&D and software development personnel (up to 50% of R&D staff wages)
• VAT exemption on software products and deliverables sold to domestic customers
• Customs duty exemption on imported equipment used for R&D

How to Become a Technopark Resident

1. Apply to the management company of your chosen technopark
2. Submit a project description detailing your R&D/software activity
3. Demonstrate that your activities qualify (must be genuine R&D or software development)
4. Execute a lease/license agreement with the technopark management company
5. Register your technopark address with the Trade Registry

The application process typically takes 2–6 weeks.

Step 3: R&D Center Designation

For companies with significant R&D operations, R&D Center designation under Law No. 5746 provides additional benefits:

• 150% deduction of R&D expenditures for corporate tax purposes (effectively a 50% additional deduction on top of normal expense deduction)
• Income tax exemption for R&D personnel wages
• SGK employer contribution subsidy for R&D staff

To qualify as an R&D center, a company must:

• Employ at least 15 full-time R&D personnel (or 30 in some categories)
• Dedicate dedicated physical R&D space
• Obtain designation from the Ministry of Industry and Technology

R&D center designation is typically for companies past the startup stage with significant ongoing R&D investment.

Step 4: TÜBİTAK Grants

TÜBİTAK (Scientific and Technological Research Council of Turkey) offers multiple grant programs for startups and technology companies:

TEYDEB Programs

TÜBİTAK’s TEYDEB (Technology and Innovation Funding Programs Directorate) programs include:

TÜBİTAK grants are non-dilutive (no equity given up) but require detailed project documentation, milestone reporting, and auditing of expenditures.

Step 5: KOSGEB Support Programs

KOSGEB (Small and Medium Enterprises Development Organization) offers support programs for startups and SMEs:

• New Entrepreneur Support: Up to 150,000 TRY grant for new businesses (including foreign-owned companies)
• Entrepreneurship Training and Support: Business plan coaching and mentorship
• R&D, Innovation and Industrial Application Support: Grants for prototype development
• Digitalization Support: Up to 100,000 TRY for digital transformation projects

KOSGEB programs are accessible to foreign-owned Turkish companies. Applications are made through the KOSGEB portal (kosgeb.gov.tr).

Equity Structures for Turkish Tech Startups

Employee Stock Options (ESOP)

Turkish law has traditionally made ESOP implementation complex. For JSC structures, employee share options can be implemented through:

• Direct share allocations to employees
• Convertible loan agreements
• Option agreements (enforceability has been clarified by recent legal developments)

Many Turkish startups use option pools structured through the JSC’s share capital. Legal advice is essential to ensure the option plan is tax-efficient and enforceable.

VC Investment Structure

When raising VC investment, Turkish startups typically:

1. Convert from LLC to JSC (if not already a JSC)
2. Issue new shares (Series A, etc.) with preferred rights
3. Define liquidation preferences, anti-dilution, and information rights in a shareholders’ agreement
4. Register share capital increases with the Trade Registry

Foreign VC funds can directly invest in Turkish JSCs without special government approval (for most sectors). The investment is registered as foreign direct investment.

Istanbul’s Tech Ecosystem

Istanbul is home to key startup support infrastructure:

• Istanbul Startup Studio (İSTKA)
• BTECH (Boğaziçi University accelerator)
• ITU Çekirdek accelerator
• Startupbootcamp Istanbul
• Multiple co-working spaces: WeWork, Kolektif House, Atölye, and others

Regional hubs are growing in Ankara (especially around ODTÜ), Izmir, and Konya.

Frequently Asked Questions

Does a technopark company pay any corporate income tax? Income from qualifying R&D and software activities is exempt. However, income from non-qualifying activities (sales, services, investments) remains subject to 25% corporate income tax. Clear accounting separation is required.

Can a foreign-founded startup access TÜBİTAK grants? Yes. Foreign-owned Turkish companies are eligible for TÜBİTAK and KOSGEB programs, provided the company is registered in Turkey and the R&D activities are conducted in Turkey.

Do I need to be in a technopark to get the software income tax exemption? Yes. The income tax exemption specifically applies to companies located within a designated technopark. Companies outside technoparks are subject to standard corporate income tax on software income (though they may still benefit from R&D center or Law 5746 deductions if they qualify).

How competitive is Turkey for attracting tech talent? Turkey produces approximately 100,000 engineering graduates per year, including a large number of software and computer engineering graduates. Salaries for mid-level software engineers in Istanbul are significantly lower than in Western Europe, making Turkey competitive for talent-intensive operations.