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Establishing a Branch and Liaison Office in Turkey: Strategic Market Entry for Global Companies
One of the safest strategies preferred by international companies when integrating into Turkey's dynamic and growing market is to create structures linked to the main headquarters rather than directly establishing a new capital company (LTD/A.Ş.). Choosing the right legal model plays a critical role in achieving your business objectives. At this point Establishment of branches and liaison offices in Turkey, Akal CPA offers two different yet highly functional legal grounds for global companies to familiarize themselves with the local market, conduct feasibility studies or start direct commercial operations. As Akal CPA, thanks to our strategic location in the bureaucratic heart of Ankara, we can assist foreign-based companies with all registration and approval processes before the Ministry of Industry and Technology and Trade Registry Directorates. with the principle of zero error and we finalize them at top speed.
What is a Branch and What are the Limits of Commercial Activity?
A parent company incorporated abroad has a direct presence in Turkey engage in commercial activity, issue invoices and generate income The legal units opened for the purpose of providing legal services are called “Branches”. Although branches appear to be independent in their internal functioning, they are legally and financially completely dependent on the parent company (headquarters) abroad. In the establishment of a branch, the trade name of the parent company must be used (Ex: X Company Turkey Istanbul Branch). Earnings of branches in Turkey are subject to Corporate Tax. At this point, in order to minimize the impact of the branch's tax liabilities on the head office and to benefit from double taxation avoidance agreements, our expert team offers tax consulting and planning strategies are vital.
What is a Liaison Office and Why is it Preferred?
Liaison offices are designed for global companies that want to conduct market research, audit suppliers, prepare feasibility reports and follow up on investment opportunities before entering the Turkish market. non-commercial units. Liaison offices They absolutely cannot engage in commercial activities, issue invoices and generate income. All expenses and employee salaries must be covered by foreign currency (capital) to be transferred to Turkey by the parent company abroad. The permission to establish liaison offices is granted directly by the Ministry of Industry and Technology (General Directorate of Incentive Implementation and Foreign Capital) in Ankara. Akal CPA's Ankara-based operational strength ensures that these ministry approvals are obtained within days, not months.
Bureaucratic Steps in the Foundation Phase
Establishing a branch and liaison office requires much more intensive international paperwork than establishing a local company (LTD/Company). It is important to ensure that the Articles of Association, operating documents and board resolutions of the parent company Apostilled brought to Turkey and certified by sworn translators. The process steps are as follows in general terms:
- Preparation and Approval of Documents: The official registry summaries of the headquarters abroad and the power of attorney of the company officials are prepared and apostilled/consular approval is obtained.
- Ministry Permission (for Liaison Offices): The prepared files and the activity reports of the parent company are submitted to the relevant Ministry in Ankara and permission for establishment is requested. Initially, permission is granted for a maximum of 3 years.
- Trade Registry Registration (For Branches): The decision to open a branch and the documents of the head office are submitted to the Trade Registry Office and the branch is officially registered and announced. For investors looking for an alternative roadmap company formation for foreigners procedures are also always kept on the table.
- Tax and Social Security Records: After installation approvals, a potential tax number is obtained from the tax office and an SSI file is opened for employees. Although liaison offices are not corporate taxpayers, they are obliged to submit withholding and SSI declarations.
Your Strategic Business Partner for Your Processes in the Turkish Market
For flawless compliance with foreign investor legislation and IFRS reporting processes, turn to Akal CPA's Ankara-based operational powerhouse.
Technical Comparison of Liaison Office and Branch Structures
When moving your overseas-based operation to Turkey, you need to have a clear understanding of the legal and financial limits to choose the structure that best suits your objectives. The comparison table below will directly support your strategic decision-making process:
| Criteria / Feature | Branch (Branch) | Liaison Office |
|---|---|---|
| Commercial Activity and Invoice | Engage in direct commercial activity, sell goods/services and issue invoices. | Absolutely cannot engage in commercial activities, can't invoice, can't generate revenue. |
| Corporate Tax Liability | It is liable to pay Corporate Tax and VAT on its earnings in Turkey. | Corporate Tax and VAT liability as it does not generate profit does not exist. |
| Establishment and Approval Authority | Ministry of Industry and Technology permission not necessary. It is registered by the Trade Registry Directorate. | Ankara Ministry of Industry and Technology (General Directorate of Foreign Investment) with special permission. |
| Tax Status of Employees | Standard Income Tax (Withholding Tax) is deducted from staff salaries. | If salaries are imported and paid in foreign currency, employees' salaries It is completely exempt from Income Tax. |
| Activity Duration | It is established and operates indefinitely. | Maximum by the Ministry 3 years is allowed. At the end of the period, an extension must be requested or closed. |
Taxation of Employees and Employment of Foreign Personnel
One of the most preferred reasons for liaison offices by global companies advantages of large personnel costs income. In accordance with the Income Tax Law, if the salaries of the personnel working in liaison offices are paid in foreign currency transferred to Turkey by the parent company abroad, these salaries It is completely exempt from Income Tax. In this way, the company avoids a large tax burden on gross salaries. Residence and work permits for expat (foreign expert) staff working in both branches and liaison offices work permit consultancy While the correct application of income tax exemption and making legal declarations without any problems are carried out by our staff payroll services is legally secured by our experts.
IFRS Reporting and Financial Integration with the Center
The financial statements of branches operating in Turkey have to be kept in accordance with the local Tax Procedure Law (TPL). However, this data must be translated into International Financial Reporting Standards (IFRS/TFRS) in order to be integrated into the global balance sheet of the parent company abroad (consolidation). Akal CPA does not only provide local bookkeeping services, but also the translation of your financial data so that it speaks the same language as the global center. general accounting services and IFRS conversion processes. Provided where necessary independent audit services With this, the financial transparency of your Turkey branch is reported to the main investors in an international format.
Ankara Based Akal CPA: Your Solution Partner in Bureaucracy
The presence of the Ministry of Industry and Technology in Ankara, which is the approval authority especially in liaison office establishment processes, makes it mandatory to work with a strong consultancy partner in the capital. As Akal CPA, we minimize the establishment times by managing the approval processes on-site, instantly and proactively. With our expert staff who closely follow the legislative changes, we build the legal armor of foreign capital in Turkey on a solid foundation and solve the risks at the source for your sustainable growth.
Frequently Asked Questions
No, absolutely not. Liaison offices are only established to conduct market research, monitor investment opportunities and provide information to the parent company abroad. They are strictly prohibited by law from engaging in commercial activity, generating income and issuing invoices. All their expenses must be covered by remittances from the headquarters abroad.
Although the new Turkish Commercial Code does not set a minimum legal capital limit for the establishment of a branch, in the practice of the Trade Registry Directorates, it is expected that a capital figure independent of the parent company's capital and allocated for the Turkish branch will be registered in order for the branch to continue its activities.
If the salaries of the liaison office employees are paid by the foreign parent company directly in foreign currency, no withholding tax is deducted from these salaries according to the Income Tax Law. This is one of the biggest cost advantages for liaison offices. Social Security premiums continue to be paid as standard.
Branch openings of foreign companies in Turkey are approved and registered directly by the local Trade Registry Directorates. However, in order to establish a Liaison Office, official approval and "establishment permit" must first be obtained from the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Capital in Ankara.
Yes, it is subject. Branches opened in Turkey are considered as "limited taxpayers". Therefore, they are only liable to pay Corporate Tax and Value Added Tax (VAT) according to the laws of the Republic of Turkey on the profits from their commercial activities in Turkey and the Turkish market. Tax planning within the framework of double taxation avoidance agreements is of great importance.
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