ENERGY

Local Content Requirements and Beyond: Key Decisions for Wind Industry Suppliers Entering Türkiye

The local content requirements imposed in some wind energy projects in Türkiye, in particular in the YEKA tenders, have confronted foreign suppliers that have served this market through exports for years with a new question. The issue is no longer whether selling to Türkiye is commercially attractive, but what kind of presence must be established in Türkiye for the product to meet the local content criteria of the tender specifications.

What at first appears to be a technical supply chain question in practice marks a turning point, because the legal decisions taken in the first months of market entry largely determine the costs of the investment for the following decade. The following addresses five issues that suppliers most frequently face in making this transition.

What the local content requirement means in practice

The local content criterion is not met simply because the product has crossed the Turkish border; what matters is where the value is created. Nor is it a single fixed rate for all projects; which component is required, at what local content rate and with which certification is set out in the relevant tender specifications. Whether merely assembling imported components in Türkiye is sufficient must therefore be assessed against the production and certification requirements laid down there for the component concerned.

The supplier should therefore first clarify which stage of the production process it intends to move to Türkiye. All subsequent legal questions, from corporate structure and customs regime to incentives and staffing, depend on this decision. The reverse sequence of first setting up a company and only later defining the scope of production is a common mistake in practice and an expensive one to correct.

Choice of structure and the liaison office misconception

The classic structure foreign companies turn to as a first step in Türkiye is the liaison office. Relatively easy and inexpensive to set up, this structure is nevertheless unsuitable for a supplier that intends to manufacture and sell, because a liaison office may not engage in commercial activity or generate income. It cannot issue invoices and cannot act commercially as a party to sales relationships. The scope of activity declared in the permit application is also subject to review, and where offices are found to exceed it, the permit is typically not renewed. Suitable for a representation seeking to get to know the market, this tool falls well short of meeting the needs of a supplier pursuing local content.

That leaves two real options. A branch is an extension of the parent company, does not form a separate legal entity, and the parent's liability continues without limitation. A capital company in the form of a limited liability company or joint stock company, by contrast, limits liability, often provides a more suitable basis in incentive and tender procedures, and paves the way for a future partnership or transfer. It should be added that minimum capital requirements are low and incorporation can be completed within a few weeks.

For a supplier investing in production, a capital company is often the obvious choice; the right structure, however, should be determined by the size of the investment, the business model and the tax consequences. A branch remains an option worth considering mainly for pure service and installation activities.

Three critical points on the contract side

The first is the contract currency. Agreeing prices in foreign currency in contracts between parties resident in Türkiye was restricted for a long time; an amendment in 2025 lifted this restriction for sales of movable goods other than vehicles. For other types of contract, such as service, work and lease contracts, restrictions and exceptions continue to apply, and as soon as a foreign supplier sets up a company in Türkiye, its relationships with Turkish customers may also fall within the scope of these rules. This distinction is particularly important in models where the sale of turbine components and an installation or maintenance obligation are combined in the same contract. The issue should be reviewed before signing, since a later correction is both difficult and costly.

The second point is bank guarantees. In tender and supply relationships in Türkiye, the bank guarantee letter has become a widespread and largely standardised instrument. For the foreign supplier, the key question is whether existing group guarantee capacity can be used for the benefit of the Turkish subsidiary. As this question has both banking and tax aspects, it should be addressed while the structure is being set up.

The third point is dispute resolution. Choosing a foreign law is possible; the real issue, however, is less the choice of law than whether a decision can be enforced in Türkiye. While recognition and enforcement of foreign court judgments requires lengthy proceedings, practice regarding arbitral awards is predictable since Türkiye is a party to the international enforcement regime. Institutional arbitration seated in Istanbul also offers the parties geographical and linguistic flexibility.

Site and staffing

Wind turbine installation is among the activities carrying high occupational health and safety risks, and the hazard class of the workplace is determined by the activity carried out. This classification brings with it a set of obligations, from appointing an occupational safety specialist and a workplace physician to risk assessment and employee training, and these obligations do not cease by being passed on to a subcontractor.

Foreign technicians working on site generally require a work permit. The exemption for the installation, maintenance and repair of imported machinery and equipment is limited in time, so site assignments lasting several months often fall outside its scope. It should also be borne in mind that, when granting a work permit, a ratio between the number of Turkish and foreign employees at the workplace is required. Although the new exceptions introduced in August 2026 have widened the cases in which this rule does not apply, the ratio should be taken into account in the initial investment planning, as otherwise the permit process may stall.

A shortcut frequently used by suppliers in recent years is to employ site staff through a third company. It must be examined, however, whether this structure is a genuine subcontracting or service relationship or a temporary employment arrangement, which under Turkish law may only be provided by licensed private employment agencies; in structures that do not comply with the rules, there is a risk that the workers are treated as direct employees of the principal employer. This risk materialises in retroactive severance and notice pay claims as well as social security liabilities.

Customs and incentives

Customs formalities may be handled by the company itself or through a licensed customs broker; where a broker is used, a duly issued customs power of attorney is required. As the acceptance in Türkiye of powers of attorney issued abroad is subject to certain formal requirements, a defective document can in effect bring imports to a halt.

Where part of the production is intended for export, the inward processing regime may offer a considerable cost advantage. The choice between an organised industrial zone, a free zone and an investment incentive certificate, on the other hand, has lasting consequences for the tax and social security burden. This choice should clearly be made before the investment decision, because once the facility is built, the structure often cannot be changed.

Conclusion

The local content requirement turns an exporting supplier into an investor. Three decisions determine the success of this transition: choosing the right legal form, setting up the contract currency and security structure correctly from the outset, and designing a staffing model that complies with the licensing rules. All three can be settled before the investment decision, and experience shows that corrections made later always cost more.