Venture Capital Investment Fund (GSYF)

A venture capital investment fund (GSYF) is an investment fund that invests money raised from qualified investors mainly in venture companies. It is the most common institutional vehicle for venture capital investment in Turkey.

Legal Framework

GSYFs are subject to Capital Markets Law No. 6362 and the Capital Markets Board’s (SPK) Communiqué on Principles Regarding Venture Capital Investment Funds. The fund has no legal personality; it is established and managed by a portfolio management company under internal rules. As a rule, its participation units may only be sold to qualified investors. The Communiqué has been amended several times in recent years and the funds’ portfolio restrictions have been tightened, so the text in force should be checked before setting up a fund.

How It Works

• The portfolio management company establishes the fund and sets its investment strategy and term in the internal rules.
• Investors commit a set amount to the fund; money is called as investments are made.
• The fund acquires shares in venture companies or invests through instruments such as a SAFE or convertible note.
• At the end of the fund’s term, proceeds from exits are distributed to investors.

For a venture company, taking investment from a GSYF is no different from other venture capital investments: it goes through the term sheet, due diligence, investment agreement and shareholders’ agreement stages.

Tax Aspects

• Fund income: The income of venture capital investment funds established in Turkey is exempt from corporate tax.
• Corporate investor deduction: Under Art. 10/1-g of the Corporate Tax Law, companies may set aside and deduct a venture capital fund of up to 10% of their declared profit, not exceeding 20% of their equity in total. The amount set aside must be used by the end of the following year to acquire GSYF participation units or shares in a venture capital investment trust; otherwise a tax loss arises.
• Income from participation units: Withholding tax rates on investors’ income from the fund are frequently changed by Presidential Decision, so the current rate should be checked at the time of investment.