Some foreign investors planning to invest in Turkey wish to be present in the country to observe the investment environment, job opportunities, and understand the market without the obligation of establishing a new company or opening a branch, i.e., without assuming the risks of trade. One of the common methods used by companies that do not want to start commercial activities immediately is to open a liaison office.
Where should foreign companies apply to open a liaison office in Turkey?
The authority to permit a foreign company to open a liaison office and to extend these permissions lies with the Ministry of Economy – General Directorate of Incentive Implementation and Foreign Capital.
For which sectors can liaison offices be opened in Turkey?
While there is no specific restriction on sectors, the requests of foreign companies to open liaison offices in financial areas with special regulations such as money and capital markets, insurance, are evaluated by institutions or organizations authorized within the framework of relevant special regulations. If deemed necessary, the Ministry can conclude the requests of foreign companies to open liaison offices in other sectors where permits, licenses, or similar authorizations are required by taking into account the opinions of the relevant institutions or organizations issuing such permits or licenses.
How long does it take to open a liaison office in Turkey?
Applications for establishment are concluded within 15 business days from the application date, provided that the required documents are submitted in full and without deficiencies. The Ministry may require that companies applying for permission to open a liaison office in Turkey should have at least one year elapsed since the establishment of the company, evaluating them based on factors such as the company’s business activities, capital, and the number of employees.
What are the required application documents to establish a liaison office in Turkey?
1- Application form (to be signed by the authorized representative of the foreign company),
2- Declaration stating the scope of activities to be carried out by the liaison office and that the office will not engage in commercial activities (to be signed by the authorized representative of the foreign company),
3- Document showing the signature authority of the authorized representative of the Foreign Company (apostilled and translated),
4- Activity certificate of the Foreign Company (apostilled and translated),
5- Activity report or balance sheet and income statement of the Foreign Company,
6- Power of attorney to the person(s) appointed to carry out the activities of the liaison office (apostilled and translated),
7- Power of attorney (apostilled and translated) in case the establishment procedures of the liaison office are conducted by another person.
Are liaison offices in Turkey required to obtain a tax number?
After completing the application process, the liaison office that has received the establishment permit must obtain an identity number from the relevant tax office. For this purpose, the liaison office, within one month at the latest, must submit a copy of the registration certificate and a sample of the lease agreement for the location where the liaison office will operate to the General Directorate. Offices must also report changes in address, office officials, or changes in the foreign company’s name, along with relevant documents, within one month from the date of the change.
How long is permission granted to liaison offices in Turkey?
For initial applications, liaison offices are granted permission for a maximum of 3 years for the declared activity. Entrepreneurs wishing to extend the activity period must reapply to the General Directorate before the expiration of the activity period. Extension is only possible after the expiration of the period. Applications for extension must include a detailed report covering the liaison office’s past activities, the foreign company’s business plan and objectives in Turkey, detailed expenditure amounts, and the number of employees. The General Directorate, based on the detailed report, may renew the permission for the liaison office for periods of 5 to 10 years, in line with the nature of the activity to be carried out. The activity periods of offices permitted for market research or promotion of foreign company products or services are not extended.
What legal notifications are liaison offices in Turkey obligated to make?
Liaison offices must send the Information Form and attached documents to the Ministry by the end of May each year, regarding the previous year’s activities. Liaison offices failing to send these documents may have their extension requests disregarded, and their activity permits may be canceled. In the event of the termination of activities, a closure procedure must be initiated, and the leaving-checklist from the relevant tax office must be sent to the General Directorate.
How are the expenses of liaison offices in Turkey covered?
Liaison offices established in Turkey cannot engage in any income-generating activities, and therefore, profit transfers are not possible. All office expenses in Turkey are covered with foreign currencies brought in from abroad. In the event of terminating activities, the liaison office must send the leaving-checklist from the relevant tax office to the General Directorate. Apart from the balance created during the closure and liquidation process, offices cannot request money transfers.
What types of payments can liaison offices in Turkey make?
However, liaison offices make payments to individuals, institutions, and organizations resident in Turkey. These include, but are not limited to, payments such as salaries and National Insurance (SGK) premium payments to office personnel, office rent, payments to professionals who keep the records if bookkeeping is done, translation payments for documents prepared abroad in a foreign language to be translated into Turkish, and payments to individuals occasionally brought in for office cleaning.
How can money transfer be made to liaison offices in Turkey?
Employees working for employers subject to limited tax liability with no legal and business headquarters in Turkey are exempt from income tax on the wages paid in foreign currency by the employer for the gains obtained outside Turkey. Therefore, if the salaries of the personnel to be employed in liaison offices are covered in foreign currency by the parent company abroad, and if it is desired to be exempt from the withholding tax that the employer is obliged to make as a responsible party, the remuneration must be made in the form of foreign currency by the parent company. Also, to apply the exemption, the salary in question must be paid in Turkish lira to the employee in Turkey, by converting the foreign money into Turkish currency through authorized banks, and documents related to the exchange of money must be added to the wage payroll. Thus, liaison offices have reporting and payment obligations under the Stamp Tax Law and National Insurance (SGK).
In which activities can liaison offices in Turkey engage?
Liaison offices in Turkey cannot engage in commercial activities, in other words, they cannot conduct any activity that will generate income. The activities that liaison offices can engage in are limited and include market research, promoting goods and services provided by the parent company, controlling suppliers, providing technical support, communication and information, regional management, and other similar activities.
What happens if liaison offices in Turkey do not comply with legal regulations?
The activities of liaison offices can be inspected by the Ministry based on written notifications or on its own initiative to determine whether they are being carried out in accordance with the legislation and the specified field of activity. As a result of the inspection, offices found to operate beyond the scope of the granted permission are given a 30-day period to apply for permission for the activity they are actually carrying out. This period can be extended for a maximum of 30 days in the presence of justified reasons. If offices do not apply within the given period, their activity permit is canceled. In the case of offices found to conduct commercial activities during the inspection, their activity permits are canceled, and relevant authorities are notified.
How are liaison offices represented in Turkey?
Individuals are appointed or employed to carry out the activities of the liaison office. The legal relationship between the person(s) appointed to carry out the activities of the liaison office and/or the persons and the foreign company may be based on a power of attorney or an employment contract. The person managing the liaison office may be referred to as a manager, general manager, or director.
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- Representation with local authorities, financial institutions, and other third parties
- Monthly management reporting to keep your headquarters informed of Turkish market trends
Reach out for dependable assistance in establishing a compliant and effective liaison office in Turkey.
FAQ
1. What is a liaison office in Turkey?
Answer:
A liaison office in Turkey is a type of office established by a foreign company to conduct non-commercial activities such as market research, promotion, and coordination. It cannot engage in any revenue-generating activities and serves as a representative arm of the parent company.
2. What activities can a liaison office in Turkey perform?
Answer:
A liaison office in Turkey is permitted to carry out non-commercial activities, including market research, promoting the parent company, gathering information, and coordinating activities between the parent company and Turkish entities. It cannot engage in sales, contracts, or generate income within Turkey.
3. How can a foreign company establish a liaison office in Turkey?
Answer:
To establish a liaison office in Turkey, a foreign company must apply to the Ministry of Industry and Technology with required documents, including a business plan and proof of the company’s existence. Once approved, the liaison office is granted an initial permit, usually valid for up to three years.
4. What are the tax obligations for a liaison office in Turkey?
Answer:
A liaison office in Turkey is exempt from corporate income tax as it cannot engage in commercial activities or generate revenue. However, it must comply with employment-related tax obligations, including withholding tax on employee salaries and social security contributions.
5. Can a liaison office in Turkey be converted into a full-fledged company?
Answer:
Yes, a liaison office in Turkey can be converted into a full-fledged company. If the foreign parent company decides to engage in commercial activities, it can establish a new legal entity such as a Limited Liability Company (LTD.) or a Joint Stock Company (A.Ş.) and transfer operations from the liaison office.
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