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Opening a Liasion Office in Turkey

GOZDE GOKYILDIRIM
Opening a Liasion Office in Turkey

In accordance with Foreign Direct Investments Law No. 4875 dated 05.06.2003 (“Law”) and Implementing Regulation on Foreign Direct Investments Law No. 25202 dated 20.08.2003 (“Regulation”)  of the Republic of Turkey; companies established pursuant to the laws of foreign countries (“Foreign Company”) are authorized to open a liaison office in Turkey, provided that they do not engage in commercial activities within the territories of Turkey. Foreign companies must apply to and get permission from official institutions in charge to open a liaison office in Turkey. Institutions to render authorization in Turkey are as follows:

A. Establishment of Liaison Offices in Turkey

The Ministry is the authorized body that gives permission to foreign companies to open liaison offices in Turkey and extends these permissions. The liaison offices to be established cannot engage in any commercial activity to generate any income in Turkey. According to the Regulation, the Ministry can issue a liaison office opening certificate to any Foreign Company, provided that service is provided in at least one of the five areas. These fields are as follows;

  • Representation of the parent company and corporate hospitality,
  • Control and Inspection Suppliers in Turkey in terms of Quality and Standards, finding Suppliers,
  • Technical support,
  • Communications, and
  • Regional Management Center.

The Ministry evaluates the requests of newly established foreign companies to open liaison offices in Turkey within the framework of factors such as the company’s field of activity, capital, and the number of personnel employed. It may be stipulated that a period of at least one year has elapsed since the establishment of the foreign company for the issuance of an operating permit.

The Foreign Company is required to appoint one or more representatives to carry out the business of the liaison office in the permitted field of activity. This appointment is made by a power of attorney given to the representative or representatives by the Foreign Company.

It is possible to employ local and foreign personnel in the liaison office, apart from the authorized representative(s). In case of employment of foreign personnel, it will be necessary to obtain a work permit and residence permit from the relevant Turkish authorities in order to work in the liaison office.

B. What Are The Application Documents For Opening a Liasion Office in Turkey?

In order to establish a liaison office in Turkey, the following required documents must be submitted to the General Directorate with a petition;

  • Application form (must be signed by a foreign company official),
  • A declaration containing the scope of the work to be carried out by the liaison office and the commitment that the office will not carry out commercial activities (must be signed by a foreign company official),
  • Document showing the signing authority of the Foreign Company official who signed the declaration (apostilled and translated),
  • Foreign Company’s activity certificate (apostilled and translated),
  • Foreign Company’s activity report or balance sheet and income statement,
  • Power of attorney (apostilled and translated version) to be given to the person(s) appointed to carry out the activities of the liaison office,
  • Power of attorney (apostilled and translated version) in case the establishment procedures of the liaison office are carried out by another person.

In addition to the documents mentioned above, it is seen that a letter of intent, including the business and investment plans of the Foreign Company in Turkey, is requested for the liaison offices that will operate as “Regional Management Centers”.

In addition, if the activity document shows the signing authority of the Foreign Company official, there is no need to submit a separate document. This situation differs according to the country where the activity certificate is obtained.

Applications for establishment and extension of time are concluded within fifteen days from the date of application, provided that the requested information and documents are complete and complete.

C. Transactions of Liaison Offices in Turkey

In their first application for opening a liaison office, a maximum of 3 years of operating permit is given. In order to extend the permit, liaison offices must apply to the General Directorate before the permit expires.

The General Directorate takes into account the office’s activities in the past year, the future business plan and targets of the Foreign Company in Turkey, the current and projected expenditure amount, and the number of personnel employed in the extension requests; however, permission is required to conduct market research or to promote the products or services of the Foreign Company. The operating periods of the offices are not extended.

Liaison offices should start to perform tax opening procedures after establishment. Following the submission of the necessary documents to the tax office, the officer from the tax office comes to the liaison office address and makes the necessary inspection. However, the liaison office, which has obtained the establishment permit, must submit a copy of the tax office registration document and the lease agreement to the General Directorate within one month at the latest.

In case of a change in the address, office official/officials, or the title of the Foreign Company, the office must notify the General Directorate within one month at the latest. In addition, liaison offices must notify the Ministry of the past year’s activities of the office by the end of May at the latest every year. If this notification is not made properly, the time extension requests of the liaison offices are not taken into consideration. In addition, it may be possible to cancel the activity permits ex officio.

The Ministry is authorized to audit whether the activities of the liaison offices are carried out per the legislation and the field of activity specified in the permits, ex officio, or upon written notifications of the relevant institutions and organizations. As a result of the inspection, the Ministry gives a period of thirty days to the offices operating outside the permit’s scope to enable them to apply for a permit for the actually carried out activity. This period may be extended for another thirty days in the presence of justifiable reasons. The offices’ operating license that does not apply at the end of the given period will be canceled by the Ministry. Suppose the Ministry determines that the liaison offices are engaged in commercial activities due to the audit. In that case, it also cancels the activity permits of these offices and notifies the relevant authorities.

In order for the liaison office to carry out the accounting and financial management operations, it is necessary to open a bank account in foreign currency, and the expenses of the liaison office affiliated with the Foreign Company must be brought to Turkey in foreign currency. All transactions and activities of the liaison office must be financed directly by the Foreign Company. Accordingly, the salaries and social security payments of the representative(s) and other personnel must be paid from the amounts transferred by the Foreign Company to the bank account of the liaison office.

Since liaison offices cannot generate income, they are not subject to corporate tax and value-added tax. However, the employer is obliged to cover the social security costs of its employees in Turkey.

D. Closing of Liaison Offices in Turkey

In the event that the liaison offices terminate their activities, it is required to obtain a “work stop-attendance slip” from the relevant tax office and submit it to the General Directorate for the closing process. Liaison offices are not allowed to request money transfers, except for the balance resulting from closing and liquidation.


Related Article: Establishing a Company in Turkey.

Keywords: Opening a Liasion Office in Turkey, Open a Liaison Office in Turkey, Establishment of Liaison Offices in Turkey, Establishing a Liaison Offices in Turkey.