How to Open a Branch of a Foreign Company in Turkey

How to Open a Branch of a Foreign Company in Turkey

Introduction

Venturing into the Turkish market as a foreign entity may seem daunting. This venture often begins with choosing between opening a subsidiary, a branch, or a separate entity owned by the same beneficial shareholders. Notably, Turkey offers incentives such as contact offices, which provide certain tax exemptions to assist investors in familiarising themselves with the Turkish market. Each of these options involves distinct aspects, typically influenced by tax-driven business decisions. In this article, our focus will be on elucidating the process of opening a branch in Turkey, offering a detailed guide on the legal and procedural steps required.

Legal Framework for Establishing a Branch in Turkey

A branch is essentially an extension of the parent company and not a separate legal entity. It operates under the same corporate identity as the parent company but must adhere to Turkish laws in its operations. The Turkish Commercial Code (TCC) and the Direct Foreign Investment Law underpin the legislative framework for foreign companies establishing branches in Turkey.

Detailed Steps for Opening a Branch

1. Initial Approval:

• Obtaining Government Approval: The primary step involves securing approval from the Turkish Ministry of Trade. This necessitates the submission of an application inclusive of the parent company's resolution to open a branch, evidence of its legal existence in the originating country, among other relevant documents (as referenced in Turkish Commercial Code).

2. Registration Procedures:

• Trade Registry Registration: Following government approval, the branch must be registered with the local Trade Registry Office. Required documents include:

• A petition signed by the designated branch manager.

• Notarised and apostilled copies of the parent company’s articles of association and incorporation certificate, translated into Turkish.

• A power of attorney in favour of the branch manager, empowering full operational authority in Turkey.

3. Tax and Social Security Obligations:

• Once registered, the branch must obtain a tax identification number and register with the local tax office and the Social Security Institution. This ensures compliance with Turkish tax and employment laws.

4. Financial Setup:

• Banking Arrangements: The branch can now set up bank accounts in Turkey to start its financial operations.

5. Ongoing Compliance:

• Branches must maintain books and records according to Turkish accounting standards, undertake annual audits if applicable, and file tax returns in accordance with local laws.

Compliance and Annual Obligations

Branches must adhere to strict compliance measures, including the preparation of annual financial statements and reporting any structural changes in the parent company or branch activities to the Trade Registry. This adherence ensures operational continuity and legal conformity.

Conclusion

Establishing a branch in Turkey offers foreign companies a direct presence and control in the Turkish market, facilitating access to a dynamic economic landscape. The process, governed by robust regulatory requirements, promises substantial business growth opportunities. At CCS Law, we specialise in guiding foreign entities through the intricate process of establishing and managing their branches in Turkey, ensuring all legal prerequisites are meticulously met.

For companies looking to expand into Turkey, understanding the detailed process of opening a branch, as outlined above, is crucial. By adhering to these guidelines and seeking expert legal counsel, foreign companies can effectively navigate the complexities of Turkish business regulations and thrive in this vibrant market.

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