Establishing a Turkish Branch of a Foreign Company: Legal Framework and Advantages

Establishing a Turkish Branch of a Foreign Company: Legal Framework and Advantages

Entering Turkey offers foreign companies access to a dynamic market with strategic advantages. The most common form of international expansion is by opening a branch office. This article provides the legal framework, benefits, documentation needed, and step-by-step process to open a foreign company branch in Turkey.

What Is a Foreign Branch Office in Turkey?

Foreign branch is a business unit of a foreign parent company conducting business in Turkey. The branch does not have a separate legal personality and is a direct extension of the parent company. Therefore, all the rights, liabilities, and obligations undertaken by the branch are directly undertaken by the parent company.

Unlike liaison offices, branches can engage in commercial activity and generate revenue. They are, nevertheless, liable under Turkish tax legislation, accounting legislation, and legislation on labour.

Major Benefits of Setting Up a Branch in Turkey

• No requirement for separate legal existence, thus easy to set up.

• Operates directly in the name and image of the parent company.

• Internal decision-making is faster due to close integration.

• Leverages any available brand trust of the parent company.

• It is simpler to replicate the operation model of the parent company in Turkey.

Documents Needed to Establish a Branch

Required documents may slightly differ depending on the parent company's location. However, the following list is general:

1. Parent company articles of association

2. Certificate of registration or incorporation (proof of recent business activity)

3. Board resolution sanctioning the opening of a branch in Turkey

4. Decision of appointment of the branch manager in Turkey

5. Notarised and translated passport and address proof of the branch manager

6. Lease contract or title deed of the Turkish branch office

7. Power of attorney to the branch manager or local representative

Important Note:

If the country of origin is not a signatory to the Hague Apostille Convention, foreign documents must be legalised in advance by the respective foreign ministry as well as by the Turkish Embassy or Consulate in the foreign country. If the country is a signatory to the Apostille Convention, an apostille is sufficient in advance of certified Turkish translation.

Step-by-Step Procedure to Open a Foreign Branch in Turkey

1. Preparation and legalization of the required corporate documents.

2. Translation to Turkish by a sworn translator and notary verification.

3. Submission to the relevant Trade Registry Office.

4. Registration with the Turkish Tax Authority.

5. Social security registration with SGK (Social Security Institution).

6. Acquiring a municipal operating license from the relevant local authority.

Role and Responsibilities of the Branch Manager

The branch manager is the legal representative of the foreign company in Turkey. His responsibilities are:

• Overseeing day-to-day operations of the branch

• Representing the branch before all public institutions

• Dealing with employees and enforcing agreements

• Ensuring tax and regulatory compliance

• Signing on behalf of the branch and, indirectly, the parent company

Tax and Accounting Obligations for Foreign Branches

Branches are taxed in the same manner as Turkish resident companies. The main tax obligations are:

• Corporate Income Tax (Kurumlar Vergisi)

• Value Added Tax (KDV)

• Stamp Duty on applicable transactions

• Income Tax Withholding for employees

In addition, branches ought to:

1. Maintain books of record statutorily in accordance with the Turkish Commercial Code

2. Make financial statements and annual reports

3. Report to the Turkish authorities and, if required, to the parent company's home regulators

Employment and Work Permits

Foreign branches can employ Turkish nationals and foreigners. For foreign employees:

4. Get a work permit from the Ministry of Labour and Social Security

5. Get a residence permit from the Immigration Authority

6. Obtain a work visa from Turkish missions overseas (if required)

Closing a Branch in Turkey: Deregistration Process

If the parent company decides to shut down the operations of the branch in Turkey, the following steps are required:

• Board decision for approval of shutting down the branch

• Deregistration with the Trade Registry

• Notice of closure to the Tax Office

• Submission of final employee exit declarations to SGK

• Notice of termination to the Municipality

• All monetary and tax issues must be settled before the deregistration of the branch.

CCS Law: Your Trustworthy Partner for Branch Registration in Turkey

Our London & Istanbul-headquartered corporate law team at CCS Law provides full legal support to overseas clients to establish a Turkish foreign company branch. Our professionals ensure total adherence to Turkish commercial, tax, and labour legislations and accomplish every phase of the incorporation process on your behalf.

Regardless of whether your company is from an Apostille Convention nation or requires consular legalisation, we support you every step of the way.

You can contact us to initiate your expansion journey to Turkey.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.

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