As the world continues to globalize and businesses look to expand their reach, setting up a liaison office or branch office in a foreign country can provide a number of benefits. One such country that has recently seen a surge in interest from businesses is Turkey. With its strategic location at the crossroads of Europe and Asia, a rapidly growing economy, and a young and well-educated workforce, Turkey offers a wealth of opportunities for companies looking to establish a presence in the region. In this article, we will explore the benefits of setting up a liaison office or branch office in Turkey, and provide a comprehensive guide to help businesses navigate the process. Whether you are a multinational corporation or a small start-up, establishing a presence in Turkey can be a smart move for your business.
Joint Ventures in Turkey
- A joint venture is generally considered an ordinary partnership (Adi Ortaklık), which is not a legal entity under the Turkish law, but shareholders usually choose to establish a commercial company.
- The preferred option is joint stock companies due to the ability to establish groups of shares and the limited aspect of shareholder liability in comparison to those of limited liability companies.
- There is no specific legislation governing joint ventures in Türkiye which are governed by the laws applicable to the type of company established. It is a common practice to enter into a shareholders’ agreement to govern the relationship between the joint venture parties and the maintenance of the joint venture.
- There are no restrictions on the nationality of shareholders and those holding management rights except for specific sectors such as TV broadcasting, maritime and civil aviation.
Branch Office in Turkey
- No shareholder.
- Not an independent legal entity. Its duration is limited to the duration of the parent company.
- No capital requirement, however, it would be wise to allocate a budget for the operations of a branch office.
- A branch office may be incorporated only for the same purposes as those of the parent company.
- Repatriation of branch profit is allowed. The branch profit transferred to the headquarters is subject to dividend withholding tax at a rate of 15 percent, which may be reduced by Double Taxation Prevention Treaties.
An application with the following documents must be submitted to the relevant Trade Registry Directorate for the registration of a branch:
- Petition (must be signed either by an authorized signatory under the company seal or by proxy; if signed by the latter, then the original or the notarized copy of the power of attorney must be attached to the petition)
- The resolution of the competent organ of the parent company to open a branch
- A certified original copy of the parent company’s articles of association
- Certificate of Activity of the parent company or any equivalent documentation that sets forth registration and current status of the parent company
- A power of attorney granted by the parent company in favor of its resident representative, assigning full representation and accountability
- Five copies of the Establishment Declaration Form (the related fields must be filled and signed by the authorized person)
- Two copies of the power of attorney stating the representative in Türkiye
- If the branch representative is a Turkish national, a notarized copy of his/her ID card. If not, a notarized copy of the authorized representative’s passport translated into Turkish
- Two copies of the signature declarations of the branch representative under the branch title
- A letter of commitment (must be signed by authorized person)
- A Chamber Registry Declaration Form Statement to be obtained from the Trade Registry Directorate (including photographs of the branch representatives)
It should be noted that all the necessary documents that will be issued and executed outside Türkiye must be notarized and apostilled or alternatively ratified by the Turkish consulate where they are issued. The original executed, notarized, and apostilled documents must be officially translated and notarized by a Turkish notary.
Liaison Offices in Turkey
Any company incorporated under the laws of a foreign country may establish a liaison office (aka representative office) in Türkiye upon obtaining a license from the Ministry of Industry and Technology, provided that the company does not engage in any commercial activities in Türkiye. To establish a liaison office, the following documents should be submitted to the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Investment (GDIIFI).
- Application form*
- Statement outlining the works to be conducted by the liaison office, an undertaking that the office shall not engage in any commercial activities*, and proof that the signatory to the statement is fully authorized by the company
- A certificate of activity issued by the foreign country and verified by the relevant Turkish Consulate or in accordance with the provisions of the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents (the Apostille Convention)
- A certificate of activity issued to foreign companies or balance sheet and income statement
- A certificate of authorization issued to the individual(s) appointed to conduct the activities of the liaison office
- A power of attorney in the event that the procedures for establishing the liaison office are carried out by another representative
*May be obtained from the Ministry of Industry and Technology
In the event of the original documents are submitted to GDIIFI, copies of these documents shall be approved by GDIIFI. The originals shall be returned to the applicant.
The Process for setting up Liaison Office
During the initial application for liaison offices, licenses are granted for a maximum of three years within the scope of the declared activities. Liaison offices willing to extend their term of operation shall apply to GDIIFI before the expiration of their terms of operation. GDIIFI may conclude applications for the extension of their tenure based on the nature of activities of the office over the previous year, business plan, the company’s future objectives in Türkiye, existing and anticipated amount of expenditure and the number of employees. The tenure of operation of offices licensed to conduct market research or promotion of foreign company products or services shall not be extended.
Applications for establishment and tenure extension shall be concluded in fifteen working days from the date of application provided that the requested information/documents is/are complete and accurate.
Applications submitted by foreign companies to set up a liaison office to conduct financial activities subject to special legislation such as money and capital markets or insurance shall be evaluated by competent agencies such as the Capital Markets Board of Türkiye and the Banking Regulation and Supervision Agency – both being the duly authorized bodies pursuant to special legislations. The ministry may conclude foreign companies’ applications to set up liaison offices in other industries that require licenses for operations or similar authorizations, if necessary, upon consulting competent bodies that are duly authorized to issue such permits or licenses.
Copies of tax registration and tenancy agreement for the liaison office shall be submitted to GDIIFI within a maximum of one month. Liaison offices shall notify GDIIFI of any changes with regard to the office representative(s) or foreign company title within a maximum of one month following the change. Liaison offices shall produce a new tenancy agreement comprising the new address, the certificate of authorization of the newly appointed representative or the document(s) related with the change of title of the foreign company.
In the event that a liaison office terminates its operations, it shall furnish GDIIFI with a statement of termination obtained from the relevant tax office. Offices may not claim transfers of funds except for balances that remain outstanding upon termination and liquidation thereof.
This part of the article was retrieved from the Turkish investment agency on the 30 August 2022
In conclusion, when considering setting up a presence in Turkey, companies have the option to choose between three types of liaison offices: a joint venture, a branch office, or a liaison office. Each type offers different benefits and drawbacks, and it is important for companies to carefully evaluate which type is the best fit for their needs before making a decision. Whether it’s for business expansion, exploring new opportunities, or enhancing market presence, choosing the right type of liaison office can help ensure a successful entry into the Turkish market.