Establishing Liaison Office in Türkiye

The Turkish foreign direct investment regime is regulated under (i) Foreign Direct Investment Law (“Law”) No. 4875 and (ii) Regulation on Implementation of the Law (“Regulation”). In principle, foreign investors are treated equally with domestic investors under Turkish law. Therefore, they too can establish ordinary partnerships or commercial companies or participate in them without getting approval from the Turkish authorities. On the other hand, a liaison office is one of the exceptions to this principle, with its establishment being subject to the permission of the Ministry of Industry and Technology (“Ministry”).

This memorandum will summarize (i) the legal nature of liaison offices, (ii) their field of activities, (iii) advantages of liaison offices and (iv) the establishment procedure. This memorandum has been prepared in a Q&A format for ease of reading.

Liaison office is a representative office of a foreign company which seeks to establish commercial activities in Türkiye in the future. It is not a branch of a company, nor is it a separate legal entity. Its establishment is subject to the permission of the Ministry.

Liaison office can conduct one or more of the following activities, with regard to their foreign companies’ activities:

 

(i) Market Research,

(ii) Promotion of the products and services of the company,

(iii) Representation and Hosting,

(iv) Control, Inspection and Provision of Local Suppliers,

(v) Technical Support, (vi) Communication and Transfer of Information,

(vii) Regional Management Headquarter,

(viii) Other (The specific field of activity must be stated)

Liaison offices cannot conduct commercial activities and cannot generate any revenue. Therefore, all expenses to be made by the liaison office shall be covered by the foreign company.

There is no mandatory minimum capital requirement for the liaison office under Turkish law since it does not have its own capital. It is also exempted from the corporate income tax but must be registered at the tax office and obtain a tax number. It files monthly or quarterly tax declarations for withholding tax. It also keeps petty cash book registering their expenses.

Furthermore, the salaries of the employees of liaison office are not subject to personal income tax and stamp tax, provided that the salaries are paid in foreign currency with the income generated outside of Türkiye. However, liaison offices must pay the social security premiums. The work permit for foreign employees is subject to the Turkish law, work permit evaluation criteria.

The required documents for the establishment of liaison office are (i) the Application Form, (ii) the Letter of Commitment indicating the scope of activity of the liaison office and including a statement that the liaison office will not engage in commercial activities, (iii) the authorization document of foreign company official, (iv) the “Certificate of Activity” of the foreign company, either approved by the relevant Turkish Consulate or Apostilled, (v) operational report or balance sheet and income statement of the company, (vi) the certificate of authority issued to the person who is appointed as the representative of the liaison office, (vii) the power of attorney in case the establishment transactions will be carried out by a proxy. In addition to these documents, any reference letter from Turkish authorities would be highly useful.

The Ministry would grant a permit for up to 3 years at the first application. It is possible to get an extension for certain fields of activities up to 5-10 years. The permit granted for (i) market research and (ii) promotion of the goods and services cannot be extended as per Article 8 of the Regulation.

However, the Ministry is generally unwilling to extend the period granted for liaison offices. Therefore, foreign companies are expected to open a branch, establish a company in Türkiye or close the liaison office at the end of the 3-year period.

Following the issue of the permit, the liaison office must be registered in a tax office and must execute a lease agreement for its registered address in Türkiye. The tax office registration documents and the lease agreement of the liaison office must be submitted to the Ministry within 1 month from the date on which the permit is granted.

Other than this, liaison office must annually submit the Information Form on the Activities of Liaison Offices and the accompanying documents (containing the office's activities and expenses in the previous year) to the Ministry by the end of May at the latest.

Yes, it does. As a result of this inspection, liaison offices that were found to be operating outside the scope of the permit, are granted 30 (thirty) days to apply for a permit for the actual activity. The permit of the liaison office will be cancelled by the Ministry if any application is not made at the end of the given period. However, the Ministry may also directly cancel the permit of the liaison office that are found to be carrying out commercial activities in Türkiye.

Should you have any questions or require further information, please do not hesitate to contact us.