The companies which are registered outside of Turkey prefer to found liaison offices in Turkey in order to advertise their commercial activities and to do their market research. Liaison offices, which differ from limited liability companies; joint companies and branches, do not engage in income generating activities.
Considering that the law does not include a clear definition, liaison offices can be defined as ” Foundations which were established by the companies in abroad and -on condition that commercial activities are not covered- which were founded in order to communicate, host, contact, do market research and follow the business opportunities and so on”.
The main and the most important restriction on liaison offices is that it is obliged for them to not engage in income generating activities. For this reason, liaison offices which were founded in Turkey are not under the obligation to pay corporate and value added tax. Although there is not a direct regulation in Turkish Commercial Code regarding liaison offices, the Law on Direct Foreign Investments and the Governing Regulation Direct Foreign Investments and other law and regulations have provisions on liaisons offices.
Turkish citizens who are residing outside of Turkey, the real foreign persons, legal entities, international organizations which are established according to the foreign laws making foreign direct investment to Turkey are defined as “Foreign Investors”.
According to the Article 3/h of Law on Foreign Direct Investments with the Law No 4875, “On the condition that they shall not engage in commercial activities, the Undersecretariat is authorized to empower the foundation of liaison offices which are founded under foreign laws”.
Liaison offices’ establishment transactions are as follows:
– Gain a permission from the Directory General of Foreign Capital
If a Liaison Office is a Banking Liaison Office, permission from the Banking Regulation and Supervision Agency (BDDK) must be received.
• Letter of application notarized and translated into Turkish and apostille certified (or translated into Turkish and certified by the Turkish Consulate). Original copy of certificate of activity and its notarized translation
• The last activity report (annual report) or balance sheet and income statement of the main company, translated into Turkish, notarized and apostille certified (or translated into Turkish and certified by the Turkish Consulate)
• Power of attorney (proxy) given to the Director of Liaison Office with notarised translation
• The power of attorney (proxy) given to the person who carries out establishment operations with notarised translation.
If all documents are completely presented to the Directory General of Foreign Capital, the application results in 10-15 days.
– Making application to Tax Administration
• A permission obtained from the Directory General of Capital
• Lease Agreement
• The power of attorney given to the Director of Liaison Office
• Notification form to commence business
• Statement of signature of the Director of Liaison Office underneath the title
• A certified copy of identity of the Director of Liaison Office with notarization and his certificate of residence
Following the presentation of documents to the Tax Administration, an inspection officer does the necessary inspection at the related Liaison Office.
The notification to the Undersecretariat of Treasury
• Registration note to the Tax Administration
• Lease Agreement
• Establishment license of the Liaison Office
• Notification form on the activities of liaison offices
• Making application to the Social Security Authority (SGK)
• Making application to the Turkish Employment Organization (it is made on the Internet)
• The operations under the Regional Directorate of Ministry of Labour and Security
• Gaining permission from the related Municipality
Permission for a liaison office is granted for 3 years at the first time. It may be reapplied in order to extend it before a month its expiration time. It can be extended for 3 years every time. If it has been determined that the office involved in a commercial activities, the extension application is refused.
The necessary transaction for closing down of a liaison office:
– A decision taken from the parent company in relation to closing down ( translated into Turkish and notarized and apostille certified ( or translated into Turkish and certified by the Turkish Consulate)
– All the property ownership belongs to the liaison office must be disposed. All cash in the bank account should be sent to the parent company and all assets should be sold.
– The certificate of authorization is being revoked.
– A closing down notice must be made to the Social Security Authority, the Ministry of Labour and Security, the Turkish Employment Organization, the Municipality, the Undersecretariat of Treasury.
After providing the necessary information about establishment and closing down of liaison offices, the information regarding tax exemptions will be provided with an evaluation within the legal framework.
According to the Article 6 of the Governing Regulation Direct Foreign Investments, the Undersecretariat allows to the foreign companies to establish liaison offices in Turkey on condition that the offices should not engage in commercial activities.
According to the law, liaison offices cannot engage in commercial activities. Their main field of activity is to provide communication, investigation and connection.
In respect of the definition of liaison offices given in the Governing Regulation Direct Foreign Investments, expenses of the liaison offices should be provided from abroad. The related payments are made in a foreign exchange to the liaison office’s bank account in Turkey. As so the liaison offices cannot engage in commercial activities, they also cannot engage in activities in which they are not authorized. It is also forbidden to transfer profit except in case of a closedown or liquidation.
According to the Article 23/14 of the Income Tax Law, salaries of employees of the liaison offices are exempted from income tax.