Establishing Liaison Offices in Turkey: A Guide for Foreign Companies
Turkey places great importance on foreign investors and offers various opportunities under Turkish law. One such opportunity is the establishment of liaison offices by foreign companies. This comprehensive guide outlines the essential details for foreign companies looking to set up liaison offices in Turkey, leveraging the latest information to ensure accuracy and relevance.
What is a Liaison Office?
A liaison office, or "Liaison Office" in English, is an establishment that researches market conditions, connects with individuals and organisations, investigates the market and legal system of the investment country, follows business opportunities, and provides information to its headquarters. These offices are prohibited from engaging in commercial activities, ensuring they are closely monitored but not subjected to intrusive inspections.
Opening a Liaison Office in Turkey
Foreign companies can open liaison offices in Turkey to conduct non-commercial activities such as promotion, research, and representation, with the permission of the Ministry of Economy. The initial permission is granted for a maximum period of three years, which can be extended by the General Directorate of Incentive Implementation and Foreign Investment.
Key Regulations and Requirements
1.Regulatory Framework:
4875 Direct Foreign Investment Law: Governs the establishment and operation of liaison offices.
Implementation Regulation No. 25205: Provides detailed rules for foreign investors.
International Private Law No. 5718: Addresses private law disputes involving foreigners.
Administrative Procedure Law No. 2577: Applies to disputes between liaison offices and the Turkish government.
2.Duration and Activities:
Initial Permit: Granted for up to three years.
Extension: Can be extended based on the office’s previous activities, the parent company's future plans, current and anticipated expenditures, and staff count.
Permissible Activities: Representing and hosting, quality control of suppliers, technical support, communication and information transfer, regional management, market research, and promotion. Notably, market research and promotion permits cannot be extended.
3.Establishment Conditions:
The parent company must be a legally established entity under foreign laws.
The liaison office cannot engage in commercial activities in Turkey.
The Ministry of Economy’s approval is mandatory.
The company must have been operational for at least one year (in some cases).
4.Required Documents:
Application form
A declaration of the scope of activities and a commitment not to engage in commercial activities
Documentation proving the signatory authority of the foreign company’s representative
An activity certificate verified by the Turkish Consulate or according to the Hague Apostille Convention
The company’s activity report or balance sheet and income statement
Authorization for the office manager or representative
If applicable, a power of attorney
5.Additional Administrative Steps:
Registering with the tax office
Submitting the office’s lease agreement and tax office registration certificate to the General Directorate of Incentive Implementation and Foreign Investment within one month of establishment
Important Considerations
1.Changes in Office Details: Any changes in address, authorized personnel, or the parent company’s name must be reported within one month, including supporting documents.
2.Expenditures: Liaison offices must finance their operations through foreign exchange provided by the parent company.
3.Employee Regulations:
Liaison offices can employ both Turkish and foreign personnel.
Social Security Institution (SGK) reporting is mandatory for all employees.
Foreign employees must obtain a work permit and comply with regulations such as employing five Turkish citizens for each foreign worker (except for key personnel).
4.Tax Obligations: Liaison offices are exempt from income tax due to their prohibition from commercial activities but must handle stamp duty for employee payments and comply with related declarations and payments.
5.Termination of Activities:
Voluntary closure or prohibition due to non-compliance with regulations must be reported to the relevant authorities.
The remaining assets can be transferred back to the parent company.
Advantages of Establishing a Liaison Office
Liaison offices provide significant tax advantages and help prevent unnecessary investments by allowing companies to conduct thorough market research and planning. They contribute to creating a favorable business environment and are supported by various incentives due to their importance in attracting foreign investment.
Establishing a liaison office in Turkey offers foreign companies a strategic entry point to explore and understand the Turkish market without engaging in direct commercial activities. For detailed assistance and to ensure compliance with all legal requirements, it is advisable to consult with experienced legal professionals.
CCS Law provides expert legal guidance and support to foreign companies looking to establish liaison offices in Turkey. Contact us for personalised legal advice and assistance with your liaison office establishment and operations.
You can access the official page for the legal regulations via this link:
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.
