by kooperatifdanismanikemalozmen

Liaison Offices and Branches in Turkey: Differences and Similarities

Foreign-Based Companies Establishing Liaison Offices and Branches in Turkey: Differences and Similarities

Establishing liaison offices and branches in Turkey has become an essential step for foreign-based companies looking to establish commercial connections with Turkish entrepreneurs.

Contact offices offer a practical and streamlined approach to establishing a presence in Turkey. They provide an efficient application process, allowing companies to explore and strengthen their business connections in the Turkish market. However, it’s important to note that contact offices are not authorized to engage in commercial activities within Turkey.

In contrast, branches serve as fully-fledged entities that can actively conduct commercial operations. While the establishment and authorization process for branches may be more involved, they enable companies to engage in profit-generating activities and benefit from Turkey’s business environment.

Selecting between a contact office and a branch involves carefully considering business objectives, desired level of involvement, and the preferred scale of operations in Turkey. Each option carries distinct advantages and considerations.

Contact offices offer a low-risk entry point, ideal for market research and establishing initial connections. On the other hand, branches provide a comprehensive business presence, facilitating direct commercial engagement.

Ultimately, companies must assess their specific requirements and long-term business strategy when choosing between these two options. By aligning the choice with their unique goals, companies can effectively navigate the Turkish market and optimize their success

In recent years, numerous international firms have decided to open liaison offices in Turkey after forging substantial connections worth millions of dollars.

These companies leverage Turkey’s advanced network to expand their businesses, initiate partnerships, or invest in joint ventures and production facilities.

 

A-)Advantages of Opening Liaison Offices in Turkey:

  1. Strengthening Established Connections: Liaison offices in Turkey can reinforce existing partnerships and enhance interactions between companies.
  2. Access to Advanced Infrastructure: Turkey’s physical solid infrastructure and increasing strategic importance offer significant advantages to companies.
  3. Cost Reduction: Opening a liaison office in Turkey can lead to reduced production costs for firms.

Procedure for Opening Liaison Offices:

  • Obtaining permission from the Ministry of Industry and Technology.
  • Necessary establishment and extension procedures at the General Directorate of Incentive Implementation and Foreign Capital.
  • The foreign-based company intending to open a liaison office in Turkey must have been operational in its home country for at least one year. After evaluating factors such as the company’s activities, capital, turnover, and personnel, the necessary permission is granted.

Initial Application Requirements:

  • Application Form
  • Information Form
  • Declaration and Commitment (stating that the liaison office will not conduct commercial activities)
  • Activity Certificate (with apostille) from the foreign company
  • Income statements and balance sheets of the foreign company
  • An activity report prepared by the foreign company
  • Document proving the signatory’s authorization (with apostille)
  • Power of attorney if the establishment procedures are conducted by another person

Extension Requests after Opening Liaison Offices:

  • Initially, a maximum of 3 years of permission is granted.
  • To extend the permission, a request should be made to the General Directorate of Incentive Implementation and Foreign Capital before the expiration of the current period.
  • The extension request should include past year activities, future business plans, expenditure details, and personnel information, depending on the nature of the activities.

Duration of Extensions and Permissible Years:

  • Representation and hosting activities: 5 years
  • Technical support: 5 years
  • Information and communication transfer: 5 years
  • Regional management center: 10 years
  • Quality control and supplier sourcing: 5 years

Responsibilities of Liaison Offices:

  • Liaison offices are not required to keep accounting records, but they should maintain banking records, and all expenses should be paid from foreign funds.
  • They are not subject to income tax, corporate tax, or value-added tax (VAT).
  • They are not required to register with the Chamber of Commerce or be subject to the Turkish Commercial Code (TCC).
  • They are liable for withholding taxes on rental payments and taxes for employing an accounting consultant..

B-)Establishing Foreign-Based Branches in Turkey:

  • Having a branch in Turkey offers numerous advantages for international companies. Turkey provides favorable commercial and economic conditions for both small and large-scale businesses.
  • Opening branches in Turkey allows foreign-based companies to benefit from tax advantages, including lower corporate tax rates and customs duty discounts.
  • The legal norms and regulations in Turkey facilitate the process of establishing branches.

Procedures for Opening Branches:

  • Registration and establishment documents of the branch must be submitted to the Chamber of Commerce where the branch will operate.
  • Branches are deemed limited taxpayers and are only taxed on income generated in Turkey.

After Opening Branches:

  • Branches follow similar procedures as liaison offices and report their activities to the General Directorate of Incentive Implementation and Foreign Capital.

Both liaison offices and foreign-based branches offer unique opportunities for international companies seeking to connect with the Turkish market. Understanding the differences and similarities between these two options is crucial for making informed decisions and establishing a successful presence in Turkey.

For more information and our services please do not hesitate to contact us

info@ozmconsultancy.com

by kooperatifdanismanikemalozmen

How to establish a company in Turkey/Cpa Turkey

<!–

–>

How to establish a company in Turkey
 info@ozmconsultancy.com
I admire people establishing companies in other countries and conducting cross-border trade. Without them, we would have missed out on most of the pleasures coming in from other parts of the world. For those who would like to set up a company in Turkey, I would like to provide some brief information.
 

The main company types in Turkey are limited companies and joint stock companies. A simple company is also use for joint ventures and consortiums under Turkish company law practice. Academically speaking, commandite and collective companies also exist but I have never come across any in my 20 years of legal practice. Holding companies are subjected to some special regulations and they are in the form of joint stock companies.

If a foreign investor is unwilling to set up company, then there is the option of establishing a liaison office — also called a representative office under Turkish legal practice — or a branch office in Turkey.

The first and biggest question in Turkish company law is, “Can foreigners or companies establish a 100 percent foreign shareholding Turkish company?” The answer to this question is a big “YES.” A foreigner can incorporate a company and own it as a full 100 percent shareholder.

Regulated sectors such as banks, private financial institutions, insurance, financial leasing, factoring, holdings, foreign currency exchange offices, public warehousing and the founders and operators of free trade zones and companies are subjected to the Capital Markets Law and must register with the ministry of commerce and industry. There are industry specific regulations for some sectors and this must be considered when establishing a company in Turkey.

Setting up a company in Turkey

To sum up in a very simple way: The major steps to establishing a company are to prepare and notarize the articles of association, deposit 0.04 percent of the capital with the central bank and register the company at the Trade Registry Office and the Chamber of Commerce. Thereafter, the articles of association are published in the Trade Registry Gazette. Once established, the company must be registered with a tax office and will receive its tax certificate, which must be clearly displayed at the place of business. A tax inspector will make a visit to verify this and the place of business within a few days of incorporation.

The Registry Office also notifies the Ministry of Labor and Social Security of the incorporation and both the company and its employees must be registered with that administration. The company’s registered address is stated in the articles of association and any changes must be registered. The legal books of the company — the journal, ledger, case book and inventory — must be certified by a notary on the day the company is registered.

Do not forget to prepare a rental agreement as well as a contract with a local accountant in Turkey for bookkeeping and payroll services. Drafting the articles of association is key to a company’s incorporation and the scope of the company is the heart of the articles of association, which is the constitution of the company.

Please also pay attention to preparing the signing powers for company directors. Please note that a company in Turkey can be managed by foreign directors. There is no requirement to have a Turkish director, but having a local director at least during the establishment process will help you accelerate the process.