Turkmenistan – AI Global Compliance Guide

Turkmen Languages

5.6 million Population

TMT Currency

+2.3% (2025) GDP

Employment by Major Industries

Service sector

Industry

Agriculture

Country profile

Overview

Turkmenistan is a country in Central Asia that shares borders with Iran to the south, Afghanistan to the southeast, Uzbekistan to the north and east, and Kazakhstan to the northwest.

Covering 488,100 square kilometers, the country boasts a varied topography that includes mountains, deserts, and the shore of the Caspian Sea. Turkmenistan has no access to the ocean. Its terrain is mostly flat, with almost 80% of the territory covered by the sands of the Kara-Kum Desert, one of the largest sand deserts in the world. The Kopet-Dag Mountains, located in the south of the country, serve as a natural border between Turkmenistan and Iran.

Turkmenistan is renowned for its expansive landscapes, as well as its abundance of natural resources. The agricultural sector, of which cotton is a significant cash crop, is essential to the population’s access to food and jobs. Turkmenistan is a significant player in the world energy market because of its natural gas reserves, which are among the greatest in the world.

Turkmenistan is a sparsely populated country, home to about 6 million people. The bulk of the population is ethnic Turkmen, with large minorities of Uzbeks, Russians, and other ethnic groups. With a median age of 27, the population of the nation is rather youthful. The main city and the political and cultural hub of this country is Ashgabat, the capital.

Most people in Turkmenistan speak Turkmen, a Turkic language that is the country’s official language. Russian is also commonly spoken and used in commercial and official contexts, in addition to Turkmen. Turkmenistan’s past as a part of the Soviet Union, where Russian was the dominant language, is the reason for this bilingualism. Nearly 93% of Turkmenistan’s population is Muslim (mostly Sunni), and 6% are Christian. Religious practices are often intertwined with Turkmen cultural traditions, including celebrations, rituals, and social customs.

The public sector plays a dominant role in economic activity and private sector development. The Turkmenistan economy is heavily dependent on the production and export of natural gas, oil, petrochemicals, cotton, wheat and textiles.

Real GDP growth for 2025: 2.3%

https://www.imf.org/external/datamapper/profile/TKM

Country Calling Code: +993

Official languages

The official language is Turkmen.

Currency

The national currency of Turkmenistan is the Turkmen manat (TMT). It entered circulation on November 1, 1993. One manat is equivalent to 100 tenge. The new banknotes feature images of famous Turkmen people, prominent figures, and architectural monuments.

Political System

Turkmenistan is a democratic, legal and secular state. The form of government is a presidential republic. The political structure of the Turkmen state was formed in accordance with the Constitution of Turkmenistan, adopted on May 18, 1992.

As the Constitution of Turkmenistan is the Basic Law of the state, the state structure of Turkmenistan is based on the principles of separation of legislative, executive and judicial authorities, which maintain balance and act independently. The rules and regulations enshrined in the Constitution have direct effect.

The people exercise the sovereignty of Turkmenistan, and the people are the unique source of state power. The people of Turkmenistan exercise their power directly or through representative institutions.

The President of Turkmenistan is the Highest Official of Turkmenistan and is the Head of state and executive power. He heads the Cabinet of Ministers – Government of Turkmenistan.

The President of Turkmenistan acts as a guarantor of state Independence and legal status of permanent Neutrality, territorial integrity, observance of the Constitution, human and civil rights and freedoms, and fulfillment of international obligations. The President of Turkmenistan is the Commander-in-Chief of the Armed Forces of Turkmenistan.

The Halk Maslahaty (the People’s Council) of Turkmenistan is a highly representative body that represents the interests of the people of the country. The main goal and main tasks of the Halk Maslahaty of Turkmenistan are to support and serve the people in order to solve problems of national importance, to implement the reforms and social and economic programs implemented in the country, to develop proposals, to give advice, to strengthen the unity, stability, stability, peace, and well-being of the people, and to support and serve the dynamic development and strengthening of the independent, permanent neutral state along the path of great changes in the new era.

The Mejlis (Parliament) of Turkmenistan is a unicameral representative body that exercises legislative power. The Mejlis of Turkmenistan consists of 125 deputies, who are elected for a five-year term in constituencies with approximately the same number of voters.

The Cabinet of Ministers of Turkmenistan is an executive and regulatory body. The members of the Cabinet of Ministers include Deputy Chairmen of the Cabinet of Ministers and ministers.

Judicial power in Turkmenistan belongs only to courts. Judicial power is intended to protect the rights and freedoms of citizens, state and public interests protected by law.

Legal System

Turkmenistan’s legal system is based on civil law with influences from Islamic law. There is a well-established hierarchy of laws: the Constitution is supreme, followed by constitutional laws, codes, ordinary laws, presidential decrees, and resolutions of the National Assembly.

However, in practice, President Berdimuhamedov rules by decree and dominates the legislative and judicial branches; his decrees shape all spheres of life, from politics and the economy to the social sphere.

The independence of the judiciary is guaranteed by Article 6 of the Constitution, whereby power is exercised by the Supreme Court, the courts of Turkmenistan, and lower courts. Judges are proclaimed independent and answer only to the Constitution and the law, but in practice, the judiciary enjoys virtually no independence. Corruption is widespread in Turkmen courts, and their performance is further undermined by deep clientelism and patronage networks.

The Civil Code of Turkmenistan is based on a 19th-century German code. The Code is drafted in general terms, requiring scholarly and judicial interpretation for its application, which is lacking in Turkmenistan due to its underdeveloped judicial system. Article 1 of the Civil Code establishes the autonomy of the parties in determining the provisions of a contract, unless these provisions conflict with any legal provisions, while other articles define obligations, damages, and unfulfilled contracts.

Other key legislation includes the Law “On Foreign Concessions,” which defines the conditions for the establishment and operation of foreign concessions in Turkmenistan, and the Law “On Hydrocarbon Resources,” which sets forth the conditions regarding the exploration, production, and transportation of hydrocarbon resources in Turkmenistan.

Turkmenistan is a party to many international treaties, including the Geneva Conventions, the United Nations Convention against Corruption, and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which established the International Centre for Settlement of Investment Disputes. Turkmenistan is also a member of numerous international organizations, including the International Monetary Fund, the Organization for Security and Cooperation in Europe, the Commonwealth of Independent States, and the World Health Organization. Article 9 of the Constitution of Turkmenistan recognizes the “priority of generally recognized norms of international law” and their supremacy.

Options of Doing Business in Spain for a foreign entity expanding abroad

Foreign companies looking to expand their business in Turkmenistan have several business vehicles to choose from, depending on their operational needs, tax planning, and the level of liability protection they seek. The main business vehicles available for foreign companies in Turkmenistan include:

https://ybcase.com/jurisdictions/turkmenistan

The Limited Liability Company (LLC) is a flexible alternative, like US LLCs. It protects owners’ assets and limits each partner’s liability. An LLC needs a minimum of one founder. This type of Turkmenistan business is ideal for closely held ventures where member confidentiality is key.
The Joint-stock company (JSC) is the most common company type in Turkmenistan. It can be open or closed, with the option to issue shares. The authorized capital of a JSC is USD 22,000 (19,000 EUR). Shareholders are required to contribute at least 50% of the declared authorized capital at the time of registration. The remaining amount is transferred within the first year after registration.
Partnerships: it is an independent legal entity, which can be of two types. The Public-private partnership (PPP) is a formal agreement between a government entity and a private partner for specific projects, while a Joint venture (JV) is a common form of a partnership where both parties pool resources for mutual benefit.
Subsidiary: In Turkmenistan, foreign investors typically establish subsidiaries that align with their business objectives and the regulatory environment. A foreign parent company must incorporate it as a local entity under Turkmenistan law, choosing between forms like JSC or LLC (limited liability company).
Branch Office: Some foreign companies choose to establish branch offices to carry out specific operations in Turkmenistan. Branch offices are considered extensions of the parent company and are subject to their liabilities.
Representative Office: Representative offices of foreign companies in Turkmenistan are established to carry out specific, non-commercial activities on behalf of their parent companies. Representative offices cannot engage in direct business operations or generate revenue in Turkmenistan. Their primary functions are promotional and market research.
The Sole Proprietor is the simplest form for starting a business in Turkmenistan but carries unlimited personal liability. It’s better for local, low-risk Turkmenistan businesses, lack corporate benefits.
GEOR (Global Employer of Record) – a B2B service provider that acts as the legal employer of workers on behalf of a business worldwide.

In Turkmenistan, the setup and dissolution of companies by foreign investors are primarily governed by the following key legislative acts:

The Civil Code of Turkmenistan is the main regulatory document governing the legal status of legal entities, the procedure for concluding contracts, and the liability of commercial participants. The Code establishes the principles of entrepreneurial freedom, but with the caveat that state interests must be upheld.
The Law on Entrepreneurial Activity defines the general principles of entrepreneurial activity, the rights and responsibilities of business entities, as well as the procedure for carrying out entrepreneurial activity in Turkmenistan.
The Law on Enterprises establishes the legal, economic, and organizational principles for the establishment, operation, and termination of enterprises in Turkmenistan.
The Tax Code of Turkmenistan includes provisions on the taxation of legal entities, tax rates, and payment procedures. It specifies obligations to maintain tax records and submit reports in strict compliance with specified deadlines and forms.
The Law on Licensing Certain Types of Activities defines the types of businesses that require licensing and special permits. This applies to the following sectors: mining, alcohol production, and pharmaceutical production.

Limited Liability Company (LLC)

Setting Up a Limited Liability Company (LLC)

The process of setting up a Limited Liability Company in Turkmenistan involves several steps that must comply with local regulations. The following outlines the process:

Engage a Local Notary: An LLC must be established through a notarial deed, so the foreign investor must engage a local notary to draft and execute the incorporation documents. These include the Articles of Association, which outline the company’s purpose, governance structure, and operational rules.
Select a Company Name: The proposed company name must be unique and comply with local requirements. Investors must check the availability of the chosen name with the Ministry of Justice of Turkmenistan or its regional offices before formally registering it as part of the company formation process.
Define Share Capital: The minimum capital requirement to form a Limited Liability Company (LLC) in Turkmenistan is 11 000 USD (9500 EUR).
Appoint Directors and Shareholders: It is possible to appoint either a Turkmen citizen or a foreign citizen as the General Director. However, a foreign citizen must obtain a license from the Turkmen company wishing to employ a foreigner.
Register the Company in Turkmenistan Ministry of Justice. This process involves submitting the company’s incorporation articles, including details such as the company’s name, purpose, board of directors’ names and addresses, and share capital.
Registering the Turkmenistan LLC in the fiscal authorities as a company that do business in Turkmenistan.
Obtain a Business License: Companies obtain a Turkmenistan Business License after applying for any additional sector-specific permits required for your business activity.
Open a Corporate Bank Account: The LLC can open a corporate bank account in Turkmenistan to handle its financial transactions. This requires submitting the incorporation documents and proof of the company’s registration. In Turkmenistan, all documentation must be apostilled to comply with the bank’s requirements. Once all the requested paperwork and documents have been checked and approved, the bank will send a notification of the account opening.
Employment and Immigration Permits (if applicable): If the LLC intends to employ foreign staff, work permits, and residence permits must be obtained.
Compliance with Ongoing Obligations: After incorporation, the LLC must comply with annual reporting, tax filings, and other regulatory requirements, including submitting financial statements as required by law.

Costs

Professional assistance for incorporation typically costs around EUR 3000. Engaging a local notary to draft and execute incorporation documents range from EUR 1000 to EUR 1500. Obtaining the necessary licenses may cost approximately EUR 1500. The registration fee is up to 2500 EUR.

Timelines

The LLC can be incorporated within 3 business days. Obtaining a business license may take several weeks, depending on the complexity of the application and compliance with regulatory requirements. Creating the entire package of documents from scratch can take up to several months.

Closing of a Limited Liability Company (LLC)

The process of closing an LLC in Turkmenistan for foreign investors involves several legal and administrative steps to ensure compliance with local regulations. The key steps are as follows:

Decision to Dissolve: The shareholders of LLC must pass a formal resolution to dissolve the company. This decision is typically made during a general meeting of shareholders and must comply with the company’s Articles of Association.
Appointment of a Liquidator: Once the decision to dissolve is made, a liquidator must be appointed. The liquidator is responsible for managing the dissolution process, settling the company’s debts, and distributing any remaining assets to shareholders. In many cases, the company’s director acts as the liquidator.
Notification to Authorities: The company must notify the Turkmenistan Ministry of Justice. It will update the public register to reflect the company’s dissolution status. The National Tax Authority must also be informed, as all outstanding tax obligations, including corporate income tax, turnover tax, and payroll tax (if applicable), must be settled.
Publication of Dissolution: The dissolution must be published in a local newspaper to inform creditors and other stakeholders. This provides an opportunity for creditors to submit claims against the company.
Settlement of Debts and Liabilities: The liquidator is responsible for settling all outstanding debts and liabilities. If the company’s assets are insufficient to cover its debts, the liquidator may initiate bankruptcy proceedings.
Registry Filing: Final liquidation documents must be approved by shareholders and registered to close the entity formally.

Costs

Engaging a local notary to formalize the dissolution process is mandatory. Notary fees can vary but typically range from €1500 to €2000, depending on the complexity of the dissolution and the notary rates. Hiring legal advisors or accountants to assist with the dissolution process can incur additional costs, typically ranging from €2,000 to €3,000, based on the services required and the firm’s rates.

Timelines

In general, the entire process of dissolving an LLC in Turkmenistan can range from 3 to 6 months, depending on the company’s specific circumstances and the efficiency of the procedures followed.

Joint-Stock Company (JSC)

Setting Up a Joint-Stock Company (JSC)

The process of setting up a Turkmenistan is relatively straightforward. Here is a step-by-step guide:

Engage a Local Notary: a JSC must be established through a notarial deed, so the foreign investor must engage a local notary to draft and execute the incorporation documents
Choose a Name: The first step in setting up a Turkmenistan JSC is to choose a name for the company. The name should be unique and not already registered in Turkmenistan. It must have the abbreviation JSC at the end of the name.
Choose Directors and Shareholders: The founders (participants) of a company may be individuals and legal entities from Turkmenistan and foreign countries, as well as stateless persons. The number of founders (participants) of a company cannot be less than two. The minimum size of the authorized capital of a joint-stock company must be the total par value of shares issued and placed by the company, equal to at least 200 times the amount of the base amount determined by the legislation of Turkmenistan for calculating taxes and fees at the time of contribution by the founders (shareholders) to the authorized capital and submission of documents for state registration of the company. The specified amount can be from 10,000 TMT (5000 EUR) and above.
Register the Company: Once the directors and shareholders have been chosen, the next step is to register the company with the Turkmenistan Ministry of Justice. This process involves submitting the company’s incorporation articles, including details such as the company’s name, purpose, board of directors’ names and addresses, and share capital.
Registering the Turkmenistan JSC in the fiscal authorities as a company that do not do business in Turkmenistan.
Open a Bank Account (optional): To operate a Turkmenistan JSC, it is not necessary to have a bank account in Turkmenistan.
The Turkmenistan JSC must maintain accounting records. These records must be done and seal by a licensed accountant, that not necessary must be from Turkmenistan. The resident agent must maintain copy of the balances. Balances must be submitted to the resident agent once a year. Finally, it is necessary to file annual reports with the Turkmenistan Ministry of Justice to maintain the company’s good standing.
Obtain a Business License: Companies obtain a Turkmenistan Business License after applying for any additional sector-specific permits required for your business activity.
Employment and Immigration Permits (if applicable): If the JSC intends to employ foreign staff, work permits, and residence permits must be obtained.
Compliance with Ongoing Obligations: After incorporation, the JSC must comply with annual reporting, tax filings, and other regulatory requirements, including submitting financial statements as required by law.

Costs

The cost to form a Turkmenistan JSC typically starts around 3000EUR for the initial registration, which includes government fees and a year of agent services. Additional costs can arise for optional services like nominee shareholders, apostilled documents, and courier services.

Timelines

Registering a Turkmenistan JSC typically takes 3-5 business days. The exact timeframe depends on factors like the chosen service provider, their efficiency, and any additional requirements for document legalization and courier delivery.

Closing of a Joint-Stock Company (JSC)

The process of closing an JSC in Turkmenistan for foreign investors involves several legal and administrative steps to ensure compliance with local regulations. The key steps are as follows:

Decision to Dissolve: The shareholders of the JSC must pass a formal resolution to dissolve the company. This decision is typically made during a general meeting of shareholders and must comply with the company’s Articles of Association.
Appointment of a Liquidator: Once the decision to dissolve is made, a liquidator must be appointed. The liquidator is responsible for managing the dissolution process, settling the company’s debts, and distributing any remaining assets to shareholders. In many cases, the company’s director acts as the liquidator.
Notification to Authorities: The company must notify the Turkmenistan Ministry of Justice. It will update the public register to reflect the company’s dissolution status. The National Tax Authority must also be informed, as all outstanding tax obligations, including corporate income tax, turnover tax, and payroll tax (if applicable), must be settled.
Publication of Dissolution: The dissolution must be published in a local newspaper to inform creditors and other stakeholders. This provides an opportunity for creditors to submit claims against the company.
Settlement of Debts and Liabilities: The liquidator is responsible for settling all outstanding debts and liabilities. If the company’s assets are insufficient to cover its debts, the liquidator may initiate bankruptcy proceedings.
Registry Filing: Final liquidation documents must be approved by shareholders and registered to close the entity formally.

Costs

Engaging a local notary to formalize the dissolution process is mandatory. Notary fees can vary but typically range from €1,000, depending on the complexity of the dissolution and the notary rates. Hiring legal advisors or accountants to assist with the dissolution process can incur additional costs, typically ranging from €1,000 to €3,000, based on the services required and the firm’s rates.

Timelines

In general, the entire process of dissolving an JSC in Turkmenistan can range from 4 to 6 months, depending on the company’s specific circumstances and the efficiency of the procedures followed.

A Subsidiary, a Branch and a Representative office

A Subsidiary

Setting up a Subsidiary

The most popular types of subsidiaries for foreign investors in Turkmenistan are as follows:

Limited Liability Company (LLC): This is the most used structure for subsidiaries due to its flexibility, limited liability protection, and suitability for a variety of business activities. Foreign investors prefer LLC because the liability of shareholders is limited to their contributions, and it requires minimal capital investment.
Corporation (JSC): This structure is often chosen for larger businesses or subsidiaries that plan to raise capital through public offerings. The JSC offers limited liability to its shareholders and is designed for operations requiring significant investments.

These structures allow foreign investors to establish a legal presence in Turkmenistan while catering to their operational, financial, and liability needs. The choice of subsidiary depends on the nature of the business, the scale of operations, and strategic objectives.

Please refer to the relevant parts of the text for the details of incorporating and dissolving, costs and timelines associated.

A Branch

Setting up a Branch

The process of setting up a branch in Turkmenistan for a foreign company involves several steps to ensure compliance with local regulations. Below is an overview:

Authorization from the Parent Company: The foreign company must provide an official resolution or authorization from its board of directors or governing body to establish a branch in Turkmenistan. This resolution should detail the purpose and scope of the branch’s operations.

Appointing a Local Representative: A local representative, who will act on behalf of the branch, must be appointed. This representative is responsible for ensuring compliance with local laws and managing administrative matters.

Preparation of Required Documents: The foreign company must prepare the following documents:

A notarized and apostilled copy of the parent company’s articles of incorporation or equivalent documents.
Proof of the appointment of the local representative.
A detailed description of the branch’s proposed activities in Turkmenistan etc.

Registration with the Turkmenistan Ministry of Justice: The branch must be registered with the Ministry of Justice. The foreign company must submit the required documents along with a completed registration form. A registration fee of approximately up to €10 applies.

Application for a Business License: The branch must apply for a business license to local authority. This process involves submitting the branch’s registration documents, a description of its intended activities, and the local representative’s details. The application process typically takes 6 weeks.

Tax Registration: The branch must register with the Turkmenistan Tax Administration to obtain a tax number (hususy salgyt belgisi (HSB)). This is essential for complying with corporation, turnover, and other applicable taxes.

Opening a Bank Account: A corporate bank account must be opened in the branch’s name to facilitate business transactions. Banks may require the branch’s registration certificate, business license, and identification documents of the local representative.

Compliance with Employment and Immigration Laws (if applicable): If the branch plans to hire employees or bring in foreign staff, it must comply with Turkmenistan’s labor laws and obtain necessary work or residency permits.

Begin Operations: Once all regulatory and administrative steps are complete, the branch is authorized to commence its operations in Turkmenistan.

Costs

Approximately €4,000, depending on the complexity and professional services used. The state fee is 8,000 manat (approximately €2200).

Timelines

Registration takes 2 weeks after submission of documents. Application for a Business License takes 3-6 weeks.

Closing a Branch

The process of closing a branch in Turkmenistan for foreign investors involves a series of legal, administrative, and financial steps to ensure the branch is properly dissolved and compliant with local regulations. Below is an outline of the process:

Decision to Close the Branch: The foreign company must make the formal decision to close its branch in Turkmenistan. This decision is usually documented through a board resolution or other formal approval from the parent company’s governing body.
Appointment of a Liquidator (if required): If necessary, a liquidator may be appointed to oversee the closure process. The liquidator is responsible for managing the distribution of assets, settling liabilities, and ensuring that all financial obligations are met.
Settling Liabilities and Financial Obligations: Before the branch can be officially closed, all outstanding debts, contracts, and financial obligations must be settled. This includes paying off creditors, terminating employee contracts, and addressing any pending obligations.
Tax Compliance: The branch must ensure that all taxes, including corporate taxes and other relevant duties, are fully paid. This involves obtaining tax clearance from the Turkmenistan Tax Administration. Any outstanding taxes or compliance issues must be resolved before proceeding with the dissolution.
De-registering with the Ministry of Justice: The branch must submit a formal request for deregistration with the Turkmenistan Ministry of Justice. The required documents typically include the dissolution resolution, proof of identity of the authorized representative, and any other necessary paperwork.
Cancelling Business Licenses: The branch must cancel its business license. This process ensures that the branch is no longer recognized as an operating entity in Turkmenistan.
Closing Bank Accounts: The branch must close any corporate bank accounts opened in Turkmenistan. Any remaining funds in the accounts are distributed according to the terms of the liquidation or dissolution agreement, after settling all liabilities.
Labor and Immigration Compliance: If the branch employs workers, it is necessary to comply with local labor laws and immigration regulations. This includes terminating work contracts and ensuring any work or residency permits for foreign employees are cancelled.
Final Reporting: Once all legal, financial, and administrative tasks are completed, the liquidator or authorized representative will prepare a final report outlining the dissolution process.
Formal Deregistration and Closure: The final step is the official deregistration of the branch with the Ministry of Justice and the completion of the closure process. The parent company will receive confirmation that the branch is officially closed and no longer recognized as an entity in Turkmenistan.

Costs

The estimated costs are between €3,000 and €4,500, depending on the complexity of the closure and the services required.

Timelines

The deregistration process typically takes 1–2 weeks after submission of the necessary documents.

A Representative office

Setting up a Representative office

The process of setting up a representative office in Turkmenistan for a foreign company involves completing several legal, regulatory, and administrative steps. It is worth noting that representative offices cannot engage in direct business transactions, banking, or other commercial activities within Turkmenistan. Below is an outline of the process:

Approval from the Parent Company: The foreign company must issue a formal resolution or authorization to establish a representative office in Turkmenistan. This document must outline the purpose and activities of the representative office, which should be limited to non-commercial functions such as marketing, promotion, or liaison activities.

Appointment of a Local Representative: The parent company must appoint a local representative to act as the point of contact for the representative office. This individual will handle compliance with local regulations and manage the office’s day-to-day administrative tasks.

Preparation of Required Documents: The foreign company must prepare and submit the following:

A notarized copy of its articles of incorporation or equivalent documents.
A resolution authorizing the establishment of the representative office.
Identification and authorization details for the local representative etc.

Registration with the Ministry of Justice: The representative office must register with the Turkmenistan Ministry of Justice. Since representative offices are non-commercial entities, their registration involves simpler documentation and fees compared to other business structures.

Tax Registration (if applicable): Although representative offices generally do not generate income locally, they may still need to register with the Turkmenistan Tax Administration to confirm their tax-exempt status. This involves filing initial tax documents to clarify the office’s non-commercial nature.

Lease or Rental Agreement for Office Space: The representative office must secure a physical location in Turkmenistan. A lease or rental agreement may be required as part of the registration or licensing process.

Compliance with Employment and Immigration Laws (if applicable): If the representative office employs local or foreign staff, it must comply with labor and immigration laws, including obtaining work permits and adhering to local employment regulations.

Commencement of Activities: Once all registration and administrative requirements are complete, the representative office can begin operations. Its activities must remain non-commercial, focusing on tasks such as market research, client liaison, or promotional activities for the parent company.

Costs

Estimated between €2500 and €5,500, excluding office lease and operational expenses, depending on the use of professional services and the specifics of the business.

Timelines

Registration takes nearly 1 week after submitting the necessary documents.

Closing a Representative office

The process of closing a representative office for a foreign company in Turkmenistan involves completing several steps to ensure compliance with local laws and regulations. Below is an outline of the process:

Decision to Close the Representative Office: The foreign parent company must formally decide to close the representative office. This decision should be documented in a resolution or board decision, outlining the reasons for closure and authorizing the necessary steps.
Notification to Authorities: The parent company must notify the Turkmenistan Ministry of Justice of its intent to close the representative office. This involves submitting the closure resolution, along with identification documents and any forms required.
Settlement of Financial Obligations: The representative office must ensure all financial obligations are settled. This includes paying outstanding bills, terminating service contracts, and ensuring any local debts are cleared.
Tax Clearance: Although representative offices typically do not generate income, they must confirm their tax status with the Turkmenistan Tax Authority. A tax clearance certificate may need to be obtained to confirm there are no outstanding tax liabilities.
Termination of Lease or Rental Agreements: The office lease or rental agreement must be terminated according to the terms of the contract. Any associated costs or obligations, such as restoration fees, must be addressed.
Employee Termination and Immigration Compliance: If the representative office employs staff, all employment contracts must be terminated in compliance with local labor laws. Work or residency permits for foreign employees must also be cancelled with the relevant immigration authorities.
Submission of Final Report: A final report detailing the closure process, including confirmation of financial settlements, tax clearance, and license cancellations, must be prepared. This report may need to be submitted to relevant authorities, including the Chamber of Commerce.
Deregistration of the Office: The final step involves deregistering the representative office with the Turkmenistan Ministry of Justice. Once the deregistration is complete, the office is no longer legally recognized in Turkmenistan.

Costs

Estimated between €2500 and €4,000, depending on the complexity of the closure and the services required.

Timelines

Approximately 3 months to complete the entire process, depending on factors such as lease obligations, employee termination, and tax clearance.

Public-private partnership (PPP)

Setting Up a Public-private partnership (PPP)

On June 5, 2021, the President of Turkmenistan signed the Law “On Public-Private Partnership”. The Law defines the basic concepts and principles of public-private partnership (PPP), establishes procedures for the preparation and implementation of PPP projects, provides for financial support mechanisms, and contains the rights, obligations and powers of the parties to a public-private partnership. A public-private partnership is defined as a legally formalized mutually beneficial cooperation between public and private partners for a certain period, based on the pooling of their resources for the preparation and implementation of a public-private partnership project. Private partners may be a legal entity, except for one in whose authorized capital the state owns a share of more than 50 percent, an individual carrying out entrepreneurial activities without forming a legal entity, as well as a foreign organization. Below is a general outline of the process:

Choose the sphere of PPP: It is necessary to determine the scope of the project. The objects of public-private partnership may be property, property complexes and socio-economic infrastructure, the design, construction, development, supply, financing, reconstruction, modernization, operation and maintenance of which are carried out within the framework of the PPP project, as well as works (services) and innovations that will be implemented during the project implementation.

Draft a Partnership Agreement: Draft a partnership agreement that outlines key aspects of the partnership, including the roles and responsibilities of each partner, capital contributions, profit and loss distribution, procedures for decision-making and dispute resolution, and exit clauses. While not legally required, it is strongly recommended to have the agreement notarized.

Registering the Turkmenistan PPP in the fiscal authorities as a company that do not do business in Turkmenistan.

Open a Bank Account (optional): To operate a Turkmenistan partnership, it is not necessary to have a bank account in Turkmenistan.
The Turkmenistan partnership must maintain accounting records. These records must be done and seal by a licensed accountant, that not necessary must be from Turkmenistan.
Obtain a Business License: Companies obtain a Turkmenistan Business License after applying for any additional sector-specific permits required for your business activity.
Employment and Immigration Permits (if applicable): If the PPP intends to employ foreign staff, work permits, and residence permits must be obtained.
Compliance with Ongoing Obligations: After incorporation, the PPP must comply with annual reporting, tax filings, and other regulatory requirements, including submitting financial statements as required by law.

Costs

Legal or consultancy fees for drafting a Partnership agreement are €1500–€2000 (depending on whether it is notarized). There are no direct costs for opening a bank account, but a minimum deposit may be required (varies by bank).

Timelines

It takes 3-4 weeks to register a partnership. Getting necessary licenses takes 4 – 6 weeks in average.

Closing a Public-private partnership (PPP)

The process of closing a partnership in Turkmenistan for foreign investors involves several legal, administrative, and financial steps to ensure compliance with local regulations. Below is an outline of the process:

Agreement Among Partners: Partners must agree to dissolve the partnership. This decision is usually formalized through a resolution or amendment to the partnership agreement. The partnership agreement often outlines the dissolution process, including partner approvals and the role of a liquidator.
Appointment of a Liquidator (if required): If specified in the partnership agreement or deemed necessary, a liquidator is appointed to manage the dissolution process. The liquidator’s duties include settling debts, distributing remaining assets, and managing final legal and financial obligations.
Notification to the Turkmenistan authorized state body: The dissolution must be reported to the authorized state body submitting a formal request for deregistration. Required documents typically include the resolution to dissolve, proof of identity for the partners, and completed deregistration forms.
Settling Liabilities: All outstanding debts, obligations, and liabilities of the partnership must be settled. This includes paying off creditors, terminating contracts, and addressing any financial matters pending.
Tax Clearance: The partnership must obtain tax clearance from the Turkmenistan Tax Administration. This involves ensuring that all taxes, such as income tax, turnover tax, and payroll taxes, are fully paid. Tax audits may be conducted during this period.
Distribution of Remaining Assets: After liabilities are settled, any remaining assets are distributed among the partners according to the terms of the partnership agreement or legal provisions.
Final Reporting and Notification: The liquidator (if appointed) or the partners prepare a final report summarizing the dissolution process. This report is submitted to the relevant authorities.
Cancellation of Business Licenses: The business license issued to the partnership must be formally cancelled.
Closing Bank Accounts: Any bank accounts in the name of the partnership must be closed. Remaining funds are distributed to the partners after all financial obligations are met.
Confirmation of Deregistration: Once all steps are completed, the authorized state body issues confirmation of deregistration, officially closing the partnership.

Costs

The costs and timelines for closing a partnership in Turkmenistan for foreign investors depend on the type of partnership, the complexity of its financial obligations, and whether professional assistance is required.

Timelines

It takes approximately 6 months to complete the entire process.

Independent Contractor/ Sole Proprietor

Sole Proprietor

In Turkmenistan, a citizen of Turkmenistan or a foreign citizen with a residence permit or permanent residence can become a Sole Proprietor(IDP). The liability is unlimited, which means that the owner is liable for all their assets and debts.

Conducting the sole proprietorship is easier than other business forms as there is only one decision-maker, and the actions can be taken instantly. IDP is also more flexible to the changing environment, unlike large companies.

Setting Up as a Sole Proprietor in Turkmenistan

The process of setting up as a sole proprietor in Turkmenistan involves several steps to ensure compliance with local regulations. Below is an outline of the procedure:

Determine the Nature of Business: The individual must first define the type of business activity they intend to pursue and confirm whether a business license is required.
Choose a Business Name: The individual must select a trade name for their business, ensuring it is unique and does not conflict with existing registered names. This name must comply with Turkmenistan’s naming regulations.
Take a short training course at the School of Entrepreneurs of the Union of Industrialists and Entrepreneurs of Turkmenistan.
Registration with the tax authority at the place of residence and obtaining a patent with activity permits.
Registration with the pension fund at the place of residence.
Open a Business Bank Account: Opening a local business bank account is optional but recommended for managing business transactions and maintaining financial records.
Lease or Secure a Business Location: If applicable, the sole proprietor must secure a lease for office or retail space and ensure compliance with regulations for the chosen business location.
Comply with Additional Permits or Requirements: Depending on the nature of the business, additional permits may be required, such as environmental or health permits. These must be obtained before operations begin.
Commence Operations: Once all registrations and licenses are complete, the sole proprietor can officially start operating their business in Turkmenistan.

Costs

The registration fee typically ranges from €10 to €20, depending on the business’s scope.

Timelines

This process typically takes 2 weeks, depending on the time required for obtaining a business license and completing registrations. It is advisable to consult with local professionals to ensure all legal requirements are met efficiently.

Employee Misclassification Risk

Employee misclassification is the practice of companies inappropriately classifying workers as independent contractors rather than employees to avoid costs and administrative burdens associated with the latter. Companies do this to save money on things like benefits, payroll taxes, and unemployment insurance. Employee misclassification refers to an employment situation in which either an employer or an employee intentionally misrepresents the true nature of their working relationship.

The distinction between independent contractors and full-time employees is important because it affects issues such as tax obligations, benefits, and labor laws. Here are some factors that can help distinguish between the two:

1. Control over Work

Does the company have the right to direct how, when, and where the worker does his or her job? If the worker is free from control and direction in carrying out the duties under the contract and in practice, then the worker is likely an independent contractor. At the same time, full-time employees typically have more control and are subject to the direction and control of their employer.

2. Skill Level

How much training was required for a position? – The more training a company requires its employees to have, the less likely that company is going to hire an independent contractor. The skill level of an independent contractor is often directly related to the type of work they do, in that there’s a certain expectation that they have a more specialized level of expertise than a full-time employee. An independent contractor is hired with their specialized skills in mind, while a full-time employee is generally hired to perform a specific job function within your company.

3. Financial Control & Tax Obligations

Are the business aspects of a worker’s job controlled by an employer or are they in control of their own finances? Tax obligations are one of the major differences between independent contractors and full-time employees. Independent contractors are responsible for paying their own taxes, while employers are required to withhold taxes from the pay of full-time employees.

4. Benefits

Full-time employees are often eligible for benefits such as health insurance, retirement plans, and paid time off. When an employee is misclassified, that person may not have access to various benefits, such as health insurance and pension plans. Independent contractors are typically responsible for their own benefits and social security.

5. Duration of Work

Full-time employees are typically hired for a longer period of time, while independent contractors are often hired for specific projects or short-term work.

6. Type of Relationship

Is there a written contract or agreement that outlines what will be done and how much will be paid? When you treat someone as an independent contractor, they are not part of your company’s payroll. Rather, they operate as freelancers paid for their services—no matter how many hours they log in an average week. Independent contractors are often hired for specific projects or jobs that will end at some point and are not an ongoing source of work. In general, if a person does other work besides what you bring them in for (such as taking additional jobs from other employers or working independently), she’s more likely to be considered an independent contractor than a full-time employee.

Misclassifying employees as independent contractors can result in various consequences and liabilities for employers, including:

Back taxes: Employers may have to pay back taxes at the national, state, and local levels.
Back benefits: Employers may be responsible for providing backdated benefits to the employee, such as medical insurance, worker’s compensation, vacation pay, and sick leave.
Legal penalties: Employers may be subject to legal fines, including liquidated damages and attorney fees. In some cases, misclassification can lead to class action lawsuits.
Damage to reputation: In addition to financial and legal repercussions, employers risk damage to their reputation among peers and potential hires.

How Global Employer of Record Can Help Address Worker Misclassification Risk?

Global Employer of Record (EOR) service providers can help employers operating internationally address the risk of worker misclassification by providing expert guidance and support on compliance with local labor laws and regulations. Here are some ways that EOR service providers can help.

1. Compliance with Local Laws in 190 Countries

Global Employer of Record has expertise in local labor laws and regulations and can help employers ensure compliance with worker classification rules in different jurisdictions. They can guide whether a worker should be classified as an employee or an independent contractor. They can also assist with the necessary paperwork and documentation to ensure compliance.

2. Worker Misclassification Risk Management

Global EOR service providers can help employers manage the risks associated with worker misclassification by supporting tax compliance, workers’ compensation insurance, and other regulatory requirements. They can also help employers stay up-to-date with changes to labor laws and regulations in different countries.

3. Flexibility

A Global EOR can offer flexible employment solutions for international workers, such as short-term assignments, contract work, or permanent employment, depending on the needs of the employer and the worker. This flexibility can help employers manage their workforce more effectively while minimizing the risk of worker misclassification.

4. Administrative Support

A Global Employer of Record can handle administrative tasks related to employment, such as payroll processing, benefits administration, and compliance reporting. This can help employers focus on their core business activities while ensuring that their international workforce is managed effectively and compliantly.

Global EOR can help employers navigate the complex and ever-changing landscape of worker classification laws and regulations across different jurisdictions. By leveraging the expertise and support of a Global EOR, employers can reduce the risk of worker misclassification and ensure compliance with local labor laws and regulations.

Permanent Establishment (PE) Risks

Permanent Establishment (PE) is a concept in international taxation that refers to a fixed place of business through which an enterprise carries out its business activities. A PE can be a branch, office, factory, warehouse, or any other fixed place of business where the enterprise carries out its business activities, either wholly or partially. When an enterprise operates through a (Permanent Establishment) PE in a country other than its home country, it may become subject to the tax laws of that country.

This means that the income generated by a PE is potentially taxable in the country where the business is located and in the country where the business is incorporated. Only income attributable to local activity should be subject to local tax, which can be determined through a profit attribution exercise. However, consideration must also be given to whether there is an applicable double tax treaty between the two countries. If an enterprise is found to have a PE in a foreign country, it may be subject to tax on the profits earned in that country, as well as penalties and interest for failing to comply with the tax laws of that country. To avoid permanent establishment risk, enterprises must carefully assess their business activities in foreign countries and ensure that they do not create a fixed place of business or exceed the allowable time limit for employee presence in that country. They should also seek professional advice to understand the tax laws of foreign countries where they operate.

An organization will have a permanent establishment (PE) if any of the following applies:

The business has a physical presence in a foreign country.
The business is regularly present through employees or agents.
A sale is made from a fixed place of business.
The business is engaged in continuous and systematic activities in the foreign country.

If an enterprise wants to maintain direct control over everything from accounting procedures to staff management, it may choose to establish a foreign legal entity. This option allows the enterprise greater control over its operations in the foreign country, including hiring and managing employees, implementing its accounting procedures, and maintaining its banking relationships. However, establishing a foreign legal entity can be costly and time-consuming. In addition, it requires the enterprise to comply with the legal and regulatory requirements of the foreign country, which may differ significantly from those of the home country.

Alternatively, an enterprise may choose to outsource some of its operations, except for managing assets and collecting profits. This option allows businesses to focus on their core competencies while outsourcing non-core activities to specialized service providers.

Using a Global Employer of Record (EOR) can be an effective way for multinational employers to prevent or address Permanent Establishment (PE) risks. This third-party global employment solution enables compliance with local employment and tax laws while avoiding the establishment of a legal entity and taxable presence in the country.

PEO (Professional Employer Organization) / EOR (Employer of Records)

A Global Employer of Record

A Global Employer of Record (GEOR) is a B2B service provider that acts as the legal employer of workers on behalf of a business worldwide. The GEOR takes on the responsibility of hiring and managing the employees, including handling payroll, benefits, taxes, and compliance with local labor laws and regulations across the globe. Essentially, a GEOR assumes the role of the employer of the workers in the target countries, while the business retains control over the work that the employees do.

When a business engages a GEOR, it enters into an agreement with the GEOR that outlines the terms of the relationship, including the services to be provided, the fees to be paid, and the responsibilities of each party. The business typically provides the GEOR with information about the workers it wishes to hire, such as their job duties and compensation, and the GEOR handles the administrative and legal aspects of employing the workers.

Below are some typical benefits for leveraging the Global EOR model:

Compliance: GEOR ensures compliance with local labor laws and regulations in different countries and across jurisdictions.
Payroll Management: a reliable GEOR provides payroll management services that include tax management, social security, employee benefits, and payment processing.
Recruitment and Onboarding: GEORs can also manage the recruitment process for you, from sourcing candidates, conducting interviews, and managing the onboarding process.
Risk Management: Under GEOR, the client company has a reduced risk of exposure to employment-related claims and lawsuits in countries where they have no legal entity.
Flexibility: It offers flexibility for companies to expand or reduce their workforce in various countries, depending on their business needs.
Cultural Adaptation: GEORs provide support and guidance on cultural adaptation and local norms, which helps companies better navigate the unique HR complexities in different countries.
HR Back-Office Support: GEORs offer additional HR back-office support services that include employee handbooks, performance management, and termination support.
Expertise: GEORs bring expertise in global employment laws and regulations, with a team of local experts in various fields to ensure compliance and legal requirements are met for each employee.

A GEOR can play a strategic role in advising businesses on which new markets to enter and how to test those markets. With their expertise and knowledge of local employment laws, regulations, and business practices across multiple jurisdictions, a GEOR can help businesses make informed decisions about which markets to prioritize and how to navigate the labour, tax, or immigration law complexities of entering those markets.

For example, a GEOR can provide businesses with insights into local labor markets, such as talent availability, compensation levels, mandatory benefits, employer burden, ongoing tax intelligence, ongoing compliance intelligence, multi-country payroll budgeting, talent location intelligence, helping them identify the most promising markets to enter and develop a competitive hiring strategy to attract and retain top global talent.

Additionally, a GEOR can advise businesses on the regulatory and compliance landscape in new markets, including local labor laws, employment tax regulations, and employment-related liabilities. This can help businesses avoid global payroll budgeting errors, mitigate permanent establishment, employee misclassification, and under-taxation risks and ensure compliance with local regulations, avoiding potential negative legal and financial consequences. A GEOR like Acumen International can take on all the responsibilities of hiring an employee for you, including the legal and bureaucratic hurdles, and manage the entire employment process.

GEOR services can be highly beneficial for businesses expanding abroad, especially if they are looking to establish a presence in a new country quickly and cost-effectively.

A GEOR can provide businesses with access to local networks and resources, including local vendors, service providers, and industry associations. This can help businesses build relationships and establish a presence in new markets more quickly and efficiently. By working with a GEOR, businesses can focus on their core operations and growth strategies, rather than getting bogged down in administrative and legal details.

A Global Employer of Record (GEOR) can act as a temporary global employment vehicle for businesses exploring new markets or establishing a legal entity in a target country. By providing access to its in-country employment infrastructure, a GEOR can help ensure a smooth and successful transition to a new legal entity.

International businesses without subsidiaries may also use this service if they hire only one employee abroad for specialized roles, such as business development managers who scout for new business opportunities in foreign markets or sales directors who manage sales teams working remotely from other countries.

On the other hand, here are the services not included in GEOR solutions:

Quality control of employees’ work and their promotion;
Decisions regarding contract termination and compensation, except for legal document processing;
Project management.

A company expanding into a new country may find that an GEOR is not the best solution for more than 15 employees. It may consider incorporating an entity and hiring local experts to help manage the payroll process. In that case, the GEOR may only be an interim solution to get employees hired quickly.

Suppose you plan on hiring foreign workers to provide services or generate sales over $100,000 annually in any country. In that case, you should consider setting up an overseas subsidiary or branch office. Doing so will help to mitigate the risk of permanent establishment.

Acumen International’s mission is to provide services that make the world a smaller place. It aims to help businesses of all sizes in any industry reach international growth and expansion through various services.

Looking to hire employees quickly and efficiently in any of 190 countries? Acumen International can help with our Express Global Employment solution. Comprehensive Global EOR Service Portfolio of Acumen International supports employment cycle, guaranteeing compliance and 24/7 support at each of its’ steps:

Recruitment: talent skilled in highly specialized areas, executive search, contingency workforce

Global mobility: employee work visa and work permit sponsorship, dependent visa, visa extensions, application for a sponsor license for a foreign national, relocation assistance

Checks: health, criminal record, background, education

Onboarding: employee agreement drafting, compliant worker onboarding on your behalf, account setup in the payroll and HR systems, employee data entry and records maintenance, probation periods management

Payroll administration: in-country registration with statutory bodies, day-to-day payroll management, pay slips with required frequency, accruals, allowances, 13th and 14th salary

Working time and PTO processing: working hours, overtime, public holidays, annual leave, parental leave, sick leave, additional leave

Benefits administration: health insurance, workers’ compensation, unemployment insurance, share plans for executives, bonuses and equipment provision, expenses reimbursement and business trips processing, dental treatment.

Tax administration and reporting: employer and employee taxes and contributions, withholding tax, local tax payments and reporting to local authorities, end of financial year reporting.

Offboarding: employment agreement termination, dismissal – by the employer, resignation – by the employee, termination by mutual agreement, notice period handling, final settlement and severance payment, de-registration with statutory bodies

Get in touch with our team, follow the links below:

https://expressglobalemployment.com/new-market-expansion/

https://expressglobalemployment.com/solutions/why-choose-our-solution/

Taxation

Taxes on corporate income

The corporate income tax (CIT) is paid by residents and non-resident companies on their income.

Turkmen legal entities are subject to corporate income tax at a rate of 8% (or 2% if the company qualifies as a small or medium-sized enterprise). Branches of foreign legal entities are subject to corporate income tax at a rate of 20%. Enterprises in which the state owns more than 50% of the shares are subject to profit tax at a rate of 20%.

Payee

Non-individual persons or enterprises (companies etc)

Due Date

Due and payable at the end of the company’s financial year.

Filing

Returns are to be filed after the end of the financial year. The company’s financial statement is to be included in the filing.

To determine taxable profit, deductions include income specified in tax legislation, as well as expenses and losses associated with entrepreneurial and other activities aimed at generating profit (income).

Legal entities participating in free economic zones (except for free economic zones of the tourism and recreational type) – during the first ten years of operation – when they carry out activities stipulated by the decision to establish such zones and the agreement concluded in the prescribed manner etc.

The following entities are exempt from income tax:

Investment pension funds
Organizations providing rehabilitation services to individuals with disabilities
Educational institutions
Enterprises of public associations of individuals with disabilities
Agricultural enterprises
Legal entities participating in free economic zones (except for free economic zones of the tourism and recreational type) – during the first ten years of operation – when they carry out activities stipulated by the decision to establish such zones and the agreement concluded in the prescribed manner etc.

Value added tax or local sales taxes

The general value added tax (VAT) rate is 15% for all standard-rated supplies.

The zero rate applies to:

the export of goods (except oil and gas)
international transport services
sales of agricultural products of own production etc.

VAT can be paid by both companies and individuals, such as self-employed people. The taxpayer is obliged to register as a VAT payer. VAT-registered businesses are required to file monthly returns detailing taxable transactions.

The tax and reporting periods for value-added tax are set for legal entities and individuals who are part of a partnership (if it includes at least one legal entity) equal to a calendar month. The tax period for value-added tax for individual entrepreneurs and individuals who are part of a partnership (if it does not include legal entities) is set equal to a calendar year, and the reporting periods are from the 1st of January to the 30th of June and from the 1st of July to the 31st of December.

Withholding tax

The general withholding tax (WHT) rates are:

15% on dividends paid to residents and non-resident companies
15% on dividends paid to residents and non-resident individuals
10% on interest paid to a resident individual
15% on interest paid to a non-resident company
6% on income from ship and airplane lease
1% real estate tax normally applies of the average annual net book value of fixed assets and average annual value of tangible assets used for commercial purposes and located in Turkmenistan
3-5% advertising fee that is charged on the amount of advertising expenses and paid quarterly on the payer’s location in Turkmenistan.

No withholding tax applies to royalties paid to a resident company or a nonresident company with a permanent establishment in Turkmenistan, but the royalties must be included as part of gross income for corporate income tax purposes.

The above rates applicable to non-residents can be reduced or eliminated by the double tax treaties if certain conditions are met.

Employment related taxes

Employee taxes and contributions

Personal income tax

The personal income tax (PIT) is paid by resident and non-resident individuals on their income sourced in Turkmenistan. The general PIT rate is 10%, which applies to employment income, business and professional income, interest, royalties, income from immovable property, and capital gains.

The tax residence

A tax resident is an individual who:

has business in Turkmenistan, or
has a place of residence permanently available to an individual’s family members, or
is physically present in Turkmenistan at least 183 days in any 12-month period

Social security contributions (sickness, maternity and retirement pensions scheme)

Employees may participate in voluntary pension insurance, the minimum rate for which is established at 2% of total remuneration. Income paid to expatriate employees should not be subject to the pension insurance payments.

Tax treatment for non-residents 

Non-residents are subject to PIT and social security contributions (except for end-of-service indemnity scheme contribution) at some rates that apply to residents.

Employer taxes and contributions

Social security contributions

Pension insurance is payable by employers at 20% of the total remuneration provided to local employees. Additional 3.5% obligatory professional pension insurance is levied on employers with respect to employees who work under hazardous conditions.

Employment Regulation

Sources of employment law

The main sources of employment law in Turkmenistan are as follows:

the Constitution of Turkmenistan
the international convention(s)
the employment legislation of Turkmenistan
the company internal regulations
the collective bargaining agreement(s)
the employment agreement(s)

The main employment legislation in Turkmenistan includes:

The Constitution of Turkmenistan: Establishes the framework for governance and protects rights related to property and business
the Labor Code of Turkmenistan

Hiring of employees

Types of employment agreements

There are two main types of employment agreements in Turkmenistan:

Indefinite employment agreements
Fixed-term employment agreements

The indefinite employment agreement has no termination date. Under the indefinite employment agreement, employment relations can be terminated based on the termination grounds envisaged by the law by the notice of either party.

Under the fixed-term employment agreement, an employee can be employed for a specific term or duration of a project. The fixed-term employment agreement ends either on the termination date or upon completion of a project / a specific task.

The maximum duration of fixed-term employment is 5 years. Fixed-term employment agreements are not subject to the requirements regarding advance notice and termination compensation. Termination before the end date may require notice or payment in lieu, depending on the contract terms and the reason for early termination. While they automatically terminate on the agreed-upon end date, repeated use of fixed-term contracts for the same role may, in some circumstances, be interpreted as creating an indefinite employment relationship, potentially granting the employee rights associated with indefinite contracts, such as redundancy pay.

Legislation: The Labor code, Arts 18.

Minimum provisions of the employment agreement

An employment contract is concluded by issuing an employer’s order to hire a person because of his written statement.

The contract usually contains the following conditions:

The number of the identity cards of each of the contractors and the number of the workbook
Names, first names, nationality, age, sex, occupation
Accurate indication of the worker’s residence
The duration and schedule of the working day
Nature of work to be performed
Place or places where the contract will be performed
Wage
Places and date of the conclusion of the contract and the period of time during which the employee will be on probation.

Minimum age for employment in Turkmenistan in the industrial, agricultural and commercial enterprises is 16 years. Any employer shall have a legal identification document with a picture mentioning the age of the employees.

An employment contract may be concluded with a person who has reached the age of fifteen, only with the consent of one of the parents (guardian).

Legislation: The Labor code, Arts, 22-23.

Non-competition clause

Non-compete clauses not regulated by current legislation of Turkmenistan.

Non-competent clauses, which restrict an employee from working for a competitor or starting a competing business after leaving the company, are subject to scrutiny by the courts.

For a non-compete clause to be enforceable, it must be reasonable in terms of:

Geographical area
Duration
Scope of restricted activities
Protection of legitimate business interest (e.g., trade secrets, client relationships).

Written employment agreement

A written format for an employment agreement is obligatory. An employment contract is concluded by issuing an employer’s order to hire a person

because of his written statement.

Legislation: The Labor code, Arts, 17.

E-employment agreement

An electronic document complying with the requirements of the law of Turkmenistan “On Electronic Document” shall be recognized as having equal legal force with paper documents, sealed with their own handwritten signature, only if the authentication result of the electronic digital signature is positive.

Language requirement for employment agreement 

Employment contracts in Turkmenistan can be in Turkmen or Russian. It is best practice to have a written contract that details the terms of employment, such as salary, benefits, and termination clauses, and it should list all compensation.

Hiring checks 

Medical check 

Persons under the age of eighteen, as well as disabled persons employed in jobs with unfavorable working conditions, night work, and jobs related to transport, as well as those employed in healthcare and the medical industry, the food industry, trade, and other sectors directly serving the public, are subject to mandatory preliminary medical examinations upon entering into an employment contract.

Criminal background check

A criminal background check can be conducted with certain restrictions, subject to personal data protection laws.

References and education background checks

References and education background checks are generally allowed, subject to personal data protection laws and privacy restrictions. Background checks, including references and educational verifications, are part of the due diligence process, especially for citizenship by investment and employment. These checks help verify an applicant’s background, ensuring they are of good character and have a clear hist.

Probation period 

When concluding an employment contract, a probationary period may be established by agreement between the parties to verify the employee’s suitability for the assigned work.

The probationary period shall not exceed 3 months, and for company directors and their deputies, chief accountants and their deputies, and heads of branches, representative offices, and other separate structural divisions of companies, it shall not exceed 6 months.

The probationary period does not include periods of temporary disability or other periods of actual absence from work. The probationary period must be specified upon hiring. The absence of a probationary period in the order means that the employee is hired without a preliminary probationary period. During the probationary period, the labor laws of Turkmenistan, as well as the terms of the collective bargaining agreement, apply to the employee. The probationary period is counted toward the employee’s length of service.

Legislation: The Labor code, Art 28.

Working time and time off

Regular working hours

Normal working hours may not exceed 40 hours per week. The employer is required to keep track of the actual hours worked by each employee.

Reduced working hours are established:

for employees aged sixteen to eighteen years – no more than 36 hours per week, and for individuals under sixteen – no more than 24 hours per week.
for employees engaged in jobs with hazardous or particularly difficult working conditions – no more than 36 hours per week.

Legislation: The Labor code, Arts 59-61.

Overtime working hours

Overtime is defined as work performed by an employee at the employer’s initiative beyond the established working hours, daily work (shift), or beyond the standard number of working hours for an accounting period (month, quarter, or year).

The employer may employ overtime only in exceptional cases:

to prevent a natural disaster or industrial accident,
during socially necessary work related to water supply, gas supply, heating, and lighting,
when it is necessary to perform or complete work that cannot be performed (finished) within the normal number of working hours due to an unforeseen delay due to technical production conditions, if failure to perform this work could result in damage to or destruction of state property or the property of the employer,
during temporary work to repair and restore mechanisms or structures in cases where their malfunction could cause the cessation of work for a significant number of employees,
to continue working if the replacement worker fails to show up, if the work does not allow for a break. In these cases, the employer is obligated to immediately take steps to replace the replacement worker with another employee.

Overtime Limits:

Daily: An employee cannot work more than 4 hours of overtime per day for two consecutive days.
Yearly: The total amount of overtime works an employee can perform in a year cannot exceed 120 hours.

Overtime work must not be paid less than twice the standard hourly wage.

Legislation: The Labor code, Art 64.

Annual leave

Employees are entitled to 30 calendar days of paid annual leave after completing 11 months of service.

Annual basic leave is set at a duration of 45 calendar days for:

teaching staff and heads of educational institutions of all types, as well as individuals with disabilities, receive annual basic leave of forty-five calendar days
research workers holding full-time positions in scientific organizations, institutions, and enterprises and holding a doctoral degree.

Annual basic leave must be granted to employees annually. The employer must notify the employee of the start time of annual basic leave no later than fifteen days before the start of the leave.

Annual basic leave before the end of 11 months of continuous service may be granted at the employee’s request:

to a woman – before or after maternity leave
to individuals with disabilities
to a minor
an employee laid off from their previous job due to a reduction in the number of employees or staff, liquidation of the enterprise, or termination of the employer’s operations, or in the event of a transfer to another job
an employee working part-time – unpaid leave concurrently with their annual main leave at their primary place of employment.

Legislation: The Labor code, Arts 86-87.

Additional leave 

Additional leave for the special nature of their work is granted to employees engaged in jobs with increased nervous and mental stress, or other high workloads, to fully restore their ability to work.

The duration of additional leave for the special nature of their work is established:

for employees performing air traffic control who hold a dispatcher’s certificate – up to 7 calendar days
for flight and flight test personnel, depending on their flight hours during the work year – up to 15 calendar days
for individuals with irregular working hours – 3 calendar days.

An additional 10 calendar days of leave is granted to employees for the following purposes:

for funeral ceremonies and memorial services, based on a certificate issued by the civil registry office, for two close relatives of the deceased
for wedding celebrations (marriage of a son, marriage of a daughter), as well as for individuals entering into marriage.

Legislation: The Labor code, Arts 91-94.

Sick leave

There is no mandatory sick leave in the Labor code of Turkmenistan. Usually, employees are entitled to sick leave in case of illness, and it is paid by the employer for a period of up to 14 calendar days. Longer periods of sick leave may be compensated through state social security. Sick leave is not cumulative.

Parental (maternity/ paternity) leave

Maternity leave

Every pregnant woman shall, on production of a medical certificate indicating the expected date of her confinement, be entitled to a maternity leave during which she shall be paid as if she were continuing to work.

Maternity leave is a paid leave of absence. Women in Turkmenistan receive 112 calendar days of social leave for pregnancy and childbirth, 56 days prior to and 56 days after childbirth.

Legislation: The Labor code, Arts 96-97.

Paternity leave

The paternity leave for male employees is currently under consideration by the government.

Unpaid leave to care for a child until he or she reaches the age of 3 years may also be granted to the person caring for the child, including the father or guardian of the child.

Legislation: The Labor code, Art 97.

Parental leave

There is no statutory parental leave in Turkmenistan.

Public holidays

Work at enterprises, organizations, and institutions is prohibited on the following holidays and commemorative days:

New Year – January 1
Memorial Day – January 12
Turkmenistan National Flag Day – February 19
International Women’s Day – March 8
National Spring Festival – March 21-22
Victory Day in the Great Patriotic War of 1941-1945 – May 9
Revival, Unity, and Poetry Day of Magtymguly Pyragy – May 18
National Remembrance Day – October 6
Independence Day of Turkmenistan – October 27-28
National Holiday of Turkmenistan – Neutrality Day – December 12
Eid al-Adha – the specific date of Eid al-Adha is determined annually by an act of the President of Turkmenistan
Oraza Bayramy – the specific date of Oraza Bayram is determined by an act of the President of Turkmenistan.

Compensation

Statutory minimum salary

The minimum monthly wage in Turkmenistan is TMT 1,410 as of January 1, 2025. This rate was established by a presidential decree and is used to regulate monthly wages across the country.

13, 14th salaries

13th and 14th salaries are not legally mandated in Turkmenistan.

Bonuses

Employers in Turkmenistan may offer discretionary or contractual bonuses to their employees. The provision of bonuses is a common practice.

Payroll frequency

The payroll cycle in Turkmenistan is usually monthly, with employees being paid as stipulated in employment contract.

Salary currency

Salary must be paid in a national currency – Turkmenistan manat (TMT).

Benefits

Mandatory benefits

Employees are provided with the following mandatory statutory benefits, which cover:

employment injury benefits
disablement benefit
medical expenses
invalidity benefit
maternity benefit

Voluntary benefits

In addition to the mandatory statutory benefits, employers usually provide their employees with the following benefits:

private health insurance
education allowance
food allowance
participation in the company’s schemes (e.g., bonuses schemes), etc.

Grounds for termination

Employment relations can be terminated:

at the employer’s initiative
at the employee’s initiative
by mutual consent of the parties
on expiry of a fixed-term employment agreement

Employment relations can be terminated at the employer’s initiative based on the following grounds:

with notice

An employment contract may be terminated at the employer’s initiative in the following cases:

liquidation of the enterprise or termination of operations by an individual employer
reduction in the number or staff of employees, including due to changes in production technology, labor organization, or a reduction in the volume of work
the employee’s unsuitability for the position held or the work performed due to insufficient qualifications, including those confirmed by certification results
absence from work for more than four consecutive months due to temporary disability, excluding the period of maternity leave
systematic failure by the employee, without valid excuse, to perform work duties imposed on them by the employment contract or the internal
labor regulations of the enterprise, if disciplinary measures have previously been applied to the employee
absenteeism, including absence from the workplace without valid excuse for more than three hours during the workday
a single gross violation of work duties by the employee
showing up for work under the influence of alcohol, drugs, or other toxic substances, etc.
without notice

In the Turkmenistan employers can terminate an employment contract at their own initiative by immediately canceling the agreement during a probationary period.

Employment relations can be terminated at the employee’s initiative based on the following grounds:

with notice

An employee has the right to terminate an indefinite-term employment contract, as well as a fixed-term employment contract, at their own initiative before its expiration, by giving the employer two weeks’ written notice.

without notice

In the Turkmenistan employees can terminate an employment contract at their own initiative by immediately canceling the agreement during a probationary period.

Employment relations can be terminated by mutual consent of the parties, provided that the employee’s consent is documented in writing.

Employment relations are terminated on the expiry date of the fixed-term employment agreement or when the project is ended. Fixed-term employment agreements are not subject to the requirements regarding advance notice and termination compensation.

Legislation: The Labor code, Arts 40-46.

Notice period

The Labor Code sets a minimum notice period for both employees and employers who wish to terminate the employment contract.

Typically, the notice period for termination is:

Less than 6 months of service: 2 weeks’ notice,

More than 6 months of service: 1 month’s notice.

Legislation: The Labor code, Arts 40-46.

Severance payment

Severance payment is paid upon termination of an employment contract:

at the employer’s initiative, upon termination of the employment contract in cases of enterprise liquidation or staff reduction
due to circumstances beyond the control of the parties
due to the employee’s refusal to continue working in cases of transfer or change in working conditions.

Severance payment in the amount of 2 weeks’ average salary is paid to employees upon termination of an employment contract due to:

the employee’s conscription or enlistment in military service
reinstatement of an employee who previously performed this work
the employee’s refusal to transfer to another job that is not contraindicated for health reasons based on a medical report, or the employer’s lack of suitable work
the employee’s refusal to transfer to work in another location to which the employer is relocating
the employee’s refusal to continue work due to a change in the terms of the employment contract
the employee’s recognition as completely incapacitated in accordance with a medical report.

Immigration procedure for expatriate employees

Permits to hire expatriate employees

Foreign citizens and stateless persons invited by the employer to perform work in Turkmenistan.

When hiring foreign citizens, the employer is obliged to observe the priority right of citizens of Turkmenistan to occupy vacant positions, that is, the number of foreign workers should not exceed 10% of the total number of employees.

A work permit may be issued for up to 1 (one) year and may be extended for up to 1 (one) year.

The employer is typically responsible for initiating the work permit process, and the process may involve submitting various documents, including a job offer, proof of qualifications, and possibly medical examinations.

Procedure & Timeline

The procedures and timelines for hiring expatriate employees in Turkmenistan typically involve several steps.

However, it’s crucial to note that these processes can be subject to change, and it is recommended to check with the State Migration Service of Turkmenistan or seek advice from legal professionals for the most up-to-date information. Here’s a general outline of the procedure:

Procedure:

Job Offer: Letter from employer stating the following: type of employment, wages (daily, weekly, monthly); accepting responsibility for employees; and offer of employment for one year in the first instance

Work Permit Application:

The employer initiates the work permit application process.
The employer submits the necessary documents to the State Migration Service of Turkmenistan

Document Submission:

The required documents may include the job offer, proof of the expatriate’s qualifications, and possibly medical examinations.
Documents may need to be translated into Russian.

Review and Approval:

The State Migration Service of Turkmenistan reviews the application.
If approved, the work permit is issued.

Medical Examination: Some categories of workers may need to undergo a medical examination.

Security Clearance: Depending on the nature of the job, a security clearance may be required.

Issuance of Work Permit: Once all requirements are met, the work permit is issued.

Timeline:

The timeline for obtaining a work permit can vary. It may take one months, depending on the completeness of the documentation, the specific category of work, and any additional requirements.
Employers are advised to initiate the work permit process well in advance of the intended start date for the expatriate employee.

Note:

Different categories of workers (e.g., regular employees, self-employed individuals, artists) may have specific requirements and procedures.
It’s important to stay informed about any changes in immigration and labor laws in Turkmenistan

Documents required for the application

The documents required to hire expatriate employees in Turkmenistan can vary based on the type of employment and the specific circumstances.

However, here is a general list of documents that are commonly required during the work permit application process:

Job Offer Letter: Letter from employer stating the following: type of employment, wages (daily, weekly, monthly); accepting responsibility for employees; and offer of employment for one year in the first instance
Police report: A statement from the Commissioner of Police of the applicant’s home state setting out the applicant’s police record
Two (2) passport-size photographs
Photocopy of Treasury receipt as proof of payment of application fee
Marriage Certificate
Valid passports (passports must be valid for up to six months at any given time)
Extension of stay is required until permit is approved
Photocopy of passport bio-data page
If self-employed – Bank Statement and Certificate of Registration

It’s important to note that the specific requirements can vary based on the type of work and the industry. Additionally, immigration laws and requirements are subject to change, so it’s advisable to check with the State Migration Service or consult legal professionals for the most up-to-date information.

Costs

The cost of a work permit in Turkmenistan varies depending on the type of work, nationality, and length of stay.

It’s essential to check with the State Migration Service for the most accurate and current information regarding fees and costs. Additionally, consulting with immigration experts or legal professionals who specialize in Turkmenistan immigration laws can provide valuable guidance tailored to your specific situation.

Work visa

To legally arrival to Turkmenistan for working purpose, a work visa is also required, which allows the right to stay in the country for the entire period of employment, but not more than the duration of its validity.

There are the following types of visas:

Single entry visa (up to 30 days): issued for short-term visit
Multiple entry visa (up to 1 year): issued to persons who have received a work permit in Turkmenistan.

To apply for a Turkmenistan work visa, person typically needs the next documents:

passport
recent passport-size photo
copy of the employment contract from your sponsor
valid medical health screening report
employment contract etc.

The processing time of a Turkmenistan is visa differs from applicant to applicant. The estimated processing time is 20 business days. However, due to high demand and secondary checks, you might need to wait a little longer.

Turkmenistan offers visas with a fee up to 500 EUR. Fees are subject to change, so it’s best to verify the most current costs on the official source or at the port of entry.

https://www.visahq.com/turkmenistan/