Liaison office can be described as a representative office of the main foreign company which is established primarily to explore and understand the business and investment climate in Turkey as it can be a powerful tool to understand Turkish market before making the investing and incorporating a fully organized legal entity in Turkey.
Liaison offices does not have a separate legal entity from the parent foreign company and the rights and obligations of the liaison office directly belong to its main company. Therefore, the main company is fully liable for the debts and obligations of its liaison office.
How to establish a Liaison Office in Turkey?
According to Foreign Direct Investments Code No. 4875 (“FDI Code”) liaison offices, application to open a liaison office in Turkey, should be made to the Ministry of Economy together with the documents and information specified in the FDI Code and related regulation. Please note that there is no mandatory minimum capital requirement for the liaison offices under Turkish law.
After obtaining the permit from the Ministry of Economy, tax registration of the liaison office should be completed. Following the tax registration, a document showing the tax registration and a lease agreement for liaison office must be submitted to Ministry of Economy.
What are the permitted fields of operation for Liaison Offices?
Engaging in commercial activity is strictly forbidden under Turkish law for liaison offices and if a liaison office does not obey such rule, its permit will be cancelled by the Ministry. Consequently, liaison offices may not pursue income-generating activities, cannot make business deals, issue invoices or make advertisements for any goods and services.
Below is the list of activities which a liaison office can carry out:
- Market research
- Promotion of the goods and services of the parent company,
- Representation and hosting,
- Control of the suppliers,
- Technical support,
- Communication and information transfer,
- Regional management center,
- Other similar activities.
Representatives and employees of the Liaison Office
According to Turkish Law, all liaison offices must have a representative. The representatives manage and represent the liaison office towards third parties and responsible for the day-to-day activities of the liaison office. A foreigner who has a permit to reside in Turkey can be appointed as representative as well. The representatives of the liaison offices are not required to be Turkish nationals or residents in Turkey.
In addition, it is possible to hire local or foreign employee (work permit may be required) at the liaison office. The salaries and social security payments of the representative and other employee must be paid from the amounts sent by the foreign company to the liaison office’s bank account.
Tax advantages of Liaison Offices
As mentioned before, liaison offices cannot generate income, as a result of that they are not subject to corporate income tax and value added tax. In other Word, liaison offices Liaison offices are exempt from income tax, corporation tax and stamp duty tax. They are, however, may be liable for the social security premiums of their local employee (if they have any).
Closing of the Liaison Office
According to Article 8-d of the Regulation on Implementation of the Foreign Direct Investments Code following actions must be takin in order to close a liaison office; The Board of Directors of the main company must take a resolution on the closing of the liaison office, the balance amount must be sent abroad to the main company, all subscriptions like electricity, water and gas, telecommunication must be terminated and The Social Security Institution must be informed, a certificate about closing must be obtained from the tax office with which the liaison office is registered, a notification must be made to the Ministry with other required documents.
Please note that, above information is generic and may be subject to change. Therefore, we highly recommended for foreign companies wishing to open a liaison office in Turkey to consult a lawyer before taking any action.
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