Turkmenistan

Economic and Legal Climate

Turkmenistan, located in Central Asia, offers a unique business environment characterized by significant natural resources, particularly in oil and gas. The country has a centrally planned economy and is making efforts to attract foreign investment in various sectors such as agriculture, construction, and energy. Turkmenistan’s legal system is based on civil law, with recent reforms aimed at improving the business climate and legal protections for investors.

Official Languages

The official language of Turkmenistan is Turkmen. Russian is also widely used, especially in business and government settings. English is less commonly spoken, so engaging local legal and business experts who are fluent in Turkmen and Russian is advisable for international investors.

Banking System

Turkmenistan has a developing banking system overseen by the Central Bank of Turkmenistan. The country hosts several state-owned and private banks offering basic financial services. The banking sector is relatively nascent compared to more established financial centers, so businesses may need to engage with larger international banks for more comprehensive services.

Maintenance Costs

Maintenance costs for companies in Turkmenistan are moderate. Annual compliance requirements include renewing business licenses, filing tax returns, conducting audits, and maintaining proper accounting records. These processes can involve some administrative efforts and costs, but they are generally manageable with the assistance of local professionals.

Setting Up Costs

Setting up a company in Turkmenistan involves several costs, including incorporation fees, legal fees, and registration with the Ministry of Justice and the State Tax Service. The process includes drafting the company’s charter, obtaining a tax identification number, and registering for VAT if applicable. The incorporation process can typically be completed within a few weeks if all documentation is in order.

Corporate Tax Rate

Turkmenistan offers a corporate tax rate of 8% for most businesses, which is relatively low compared to global standards. However, the tax rate can vary depending on the sector and specific agreements with the government. The country provides various tax incentives and deductions for investments in priority sectors, particularly in energy, agriculture, and infrastructure.

Territorial or Non-Territorial Principles

Turkmenistan operates a worldwide tax system, meaning resident companies are taxed on their global income. However, specific incentives and tax treaties are available to help mitigate the impact of double taxation and enhance tax efficiency for foreign investors.

Currency Regulation

Turkmenistan imposes strict regulations on foreign exchange transactions to maintain economic stability. The currency used is the Turkmenistan manat (TMT). While the regulatory framework supports international trade and investment, engaging local experts can help navigate any specific currency regulations.

Advantages of Setting Up a Company in Turkmenistan

1. Abundant Natural Resources: Significant natural resources, particularly in oil and gas, offer substantial business opportunities.
2. Competitive Tax Regime: Low corporate tax rate with various tax incentives for investments in priority sectors.
3. Strategic Location: Turkmenistan’s location provides access to markets in Central Asia, the Caspian region, and beyond.
4. Government Support: Various government incentives and support programs for foreign investors, particularly in energy and infrastructure.
5. Growing Market: Emerging market with significant potential for growth in various sectors.

Disadvantages of Setting Up a Company in Turkmenistan

1. Bureaucratic Complexity: Navigating Turkmenistan’s regulatory and bureaucratic landscape can be challenging and time-consuming.
2. Language Barrier: Proficiency in Turkmen or Russian is essential for many legal and administrative matters, necessitating local expertise.
3. Infrastructure Development: While improving, some aspects of Turkmenistan’s infrastructure may not be as developed as in other major international business hubs.
4. Political and Economic Stability: Turkmenistan has faced political and economic challenges, which may present risks for some investors.

Conclusion

Turkmenistan offers a unique environment for setting up a company, with its abundant natural resources, competitive tax regime, and strategic location. Despite challenges such as bureaucratic complexity and infrastructure development, the overall advantages make Turkmenistan a compelling choice for international investors, particularly in the energy sector. Global Expand can assist you in navigating the complexities of setting up a company in Turkmenistan, ensuring a smooth and successful entry into this dynamic and resource-rich market.