The question usually arrives in the wrong form. A studio is told by an investor, an accelerator or a founder at the next desk that it “needs to be a Delaware company”, and it starts pricing incorporation agents before anyone has written down what problem the foreign entity is meant to solve. For a games business the honest answer is narrower than the folklore suggests: there are a handful of situations where a UK or US holding company is genuinely required, several where it is merely convenient, and a larger set where it costs real money and gives nothing back. This article sets out which is which, what the move costs under Turkish tax rules, the incentive a studio may be giving up, and why the transfer of the game itself is a separate decision from the transfer of the shares.
The reasons that are real
The first is an investor mandate. Many funds are constrained by their own documents as to what they can hold, and a fund whose limited partners expect Delaware paper will not take Turkish shares regardless of the merits. This is not a legal argument about Türkiye; it is a constraint in someone else’s fund agreement, and it is not negotiable by persuasion. If the round depends on that investor, the holding company is a condition, and the question becomes when and how rather than whether.
The second is contracting capacity with counterparties who will not contract otherwise. In games this is more concrete than in most sectors, because the counterparties are few and their paper is standard. Storefronts, platform holders for console development, middleware vendors and publishers each have onboarding processes, payout arrangements and tax documentation requirements, and some of them are materially easier to satisfy from a US or UK entity. Where a studio has actually been told that a specific agreement cannot be signed from Türkiye, that is a real reason. Where nobody has said it and the studio is anticipating, it is not yet a reason.
The third is an expected exit. Acquirers in this sector are overwhelmingly foreign, and an acquisition of a Turkish company by a foreign buyer carries diligence and process that a share purchase in a familiar jurisdiction does not. Studios with a credible line of sight to a trade sale sometimes structure for the buyer they expect rather than the round they are doing. That is a legitimate reason, but it is a forecast, and forecasts should be priced as such rather than treated as necessity.
The reasons that are not
Three recur. The first is tax saving in the abstract: a holding company does not by itself reduce the tax on development work performed in Türkiye by people resident in Türkiye, and the rules discussed below exist precisely to prevent that. The second is credibility, which is mostly a website and a track record rather than a certificate of incorporation. The third is banking and payment convenience, which is a real irritation but usually addressable without a corporate restructuring, and which is an expensive thing to solve with a holding company that then has to be maintained, filed and audited every year in a jurisdiction where nobody on the team lives.
What the move costs under Turkish rules
A flip is a disposal by the founders of their Turkish shares in exchange for shares in the new parent, and Turkish tax law looks at it as a disposal. Under repeated Article 80 of the Income Tax Law No. 193, gains from the disposal of securities are capital gains, with an exception for shares of full-liability corporations held for more than two years, and gains from the disposal of partnership rights or shares are capital gains in their own right. The practical consequence catches studios out. Whether the founders hold printed share certificates in an anonim şirket, and for how long they have held them, can change the analysis, whereas partnership interests disposed of without that history sit in the second category. A studio contemplating a flip within the next couple of years should establish where its founders sit before the swap is drafted, not after, because the position cannot be improved retrospectively.
After the flip, two regimes govern the relationship between the parent and the Turkish company. Article 13 of the Corporate Tax Law No. 5520 treats a price agreed with related parties contrary to the arm’s length principle as a disguised distribution of profit through transfer pricing, and expressly counts purchases and sales of goods or services, leasing, lending and payments such as bonuses and salaries as within scope. A Turkish subsidiary performing development for a foreign parent is a services arrangement between related parties, and it needs a documented basis, not a round number. Article 7 of the same Law then addresses controlled foreign companies: profits of a foreign subsidiary controlled to the extent of at least half of its capital, dividend or voting rights, whether distributed or not, are subject to Turkish corporate tax where three conditions coincide, namely that a quarter or more of its gross revenue consists of passive income such as interest, dividends, rent, licence fees and securities gains rather than activity carried on with proportionate capital, organisation and staff, that the foreign entity bears a total income and corporate tax burden below ten per cent on its commercial balance sheet profit, and that its gross revenue exceeds the threshold stated in the Law. A holding company that owns the game, licenses it out and employs nobody is close to that description, which is a reason to give the parent genuine function rather than to treat it as a nameplate.
The incentive you may be giving up
Studios operating from a technology development zone often do so because of temporary Article 2 of Law No. 4691, under which income of income and corporate taxpayers operating in the Zone, derived exclusively from software, design and research-and-development activities in that Zone, is exempt from income and corporate tax until 31 December 2028. A later paragraph matters specifically for a flip: where that income derives from the sale, transfer or licensing of intangible rights, the benefit of the exemption may be made conditional on those rights having been obtained as a result of research-and-development activity and registered, recorded or notified under the relevant legislation, with application made to the competent authority by the deadline for the return.
Read that alongside a plan to move the game to a foreign parent and the shape of the problem appears. The transfer of the game is itself a transfer of intangible rights, the exemption on it is conditional rather than automatic, and the registration step is something that has to have been done rather than something that can be arranged at signing. A studio that intends to keep the Zone benefit has to keep the qualifying activity, and the rights it produces, in a place where the benefit can still attach.
Moving the shares is not moving the game
This is the distinction that causes the most avoidable damage. A share swap changes who owns the Turkish company. It does not, by itself, move the intellectual property in the game from the Turkish company to the parent. Founders frequently assume the game travels with the shares and then discover, at the next diligence, that the asset still sits in the subsidiary while the investor bought into the parent.
If the intention is for the parent to own the game, that requires its own transfer, in writing and with the economic rights listed separately as Law No. 5846 on Intellectual and Artistic Works requires, priced on an arm’s length basis for the purposes of Article 13, and tested against the Zone conditions above where they apply. If the intention is for the Turkish company to keep the game and licence it upward or outward, that is a perfectly respectable structure, and often the better one where the incentives live in Türkiye, but it needs a licence agreement that says so. What does not work is leaving the question unanswered and discovering the answer during an acquisition. We covered the operational side of this in running the Turkish subsidiary after the flip, and the decision framework between the two forms in Delaware C-Corp or Turkish joint-stock company.
United Kingdom or United States
Where a holding is genuinely needed, the choice usually follows the counterparty rather than the tax. Studios raising from US venture funds, or expecting a US acquirer, tend toward a Delaware corporation because that is the paper those parties use and the documents are commoditised. Studios whose commercial centre of gravity is European publishing, or whose team expects to relocate part of the business to London, more often look at a UK company, where the filing burden is moderate and the company law is familiar to European counterparties. Both are maintenance obligations: registered office, filings, accounts, and directors who are actually willing to act. Neither solves a problem in the Turkish company, and both add a layer that has to be explained in every future diligence.
When to wait
The strongest argument for waiting is that a flip done before the facts are settled exports the problems rather than resolving them. If the chain of title in the game is incomplete, the parent acquires an incomplete chain. If the publishing agreement has a change-of-control clause, the flip may trigger it. If the founders’ holding period matters for their own tax position, moving early may cost them personally. And if the studio is not yet raising from an investor who requires it, the structure is being built for a hypothetical counterparty at a real annual cost.
The sequence that tends to work is unglamorous: clean the intellectual property, settle the company form and the share ledger in Türkiye, read the publishing agreement for consent requirements, establish the founders’ tax position, and only then, when a specific investor or a specific contract requires it, build the holding company with a defined function and a documented relationship with the Turkish entity. Studios that do it in that order flip once. Studios that do it in the other order tend to flip, unwind something, and flip again.
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Gaming & Esports Law
Studio funding rounds, chain of title, publishing and platform agreements, esports.
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Incorporation, founder agreements, ESOP, term sheets, regulatory matters.
View service →US Company Formations & Flip-Ups
Delaware C-Corp, flip-up structures, SAFE/convertible notes, 83(b).
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