Establishing a liaison office in Turkey can serve as a channel of communication between parent companies and local operations, offering numerous benefits. A presence in Turkey through a representative office builds relationships with local partners and potential customers. It can also enhance understanding of the local market and facilitate smoother business transactions, without engaging in any commercial activities. Our company registration agents in Turkey can help you open this liaison office.
Liaison office in Turkey - definition
A liaison office in Turkey is an establishment that acts as a communication channel between a foreign parent company and its suppliers or customers in Turkey, without engaging in any commercial activities.
Activities performed by liaison offices in Turkey
- market research,
- promotion for the goods and services provided by the parent company,
- control of the suppliers,
- technical support,
- communication and information,
- regional management center, etc.
Procedure of opening a liaison office in Turkey
- obtain approval from the General Directorate of Foreign Investments,
- submit the necessary documents,
- foreign investors need to obtain an identity number from the tax department
The parent company is responsible for all activities of the representative office in Turkey.
Minimum share capital required (YES/NO)
Necessary documents for opening a representative office
- the parent company's certificate of registration,
- a short presentation,
- the previous year's balance sheet,
- a declaration outlining future plans for the liaison office, etc.
Can it hire employees? (YES/NO)
Accounting and financial operations
The foreign company is responsible for directly financing all transactions and activities of the liaison office, including salaries and social security payments for representatives and personnel.
For assistance with financial matters, you can contact our accountants in Turkey.
Differences from a branch
Branches are allowed to conduct commercial activities, whereas liaison offices are limited to non-commercial services and must be fully financed by the parent company.
Branches also have financial independence and operate as separate entities.
Differences from a subsidiary
A subsidiary in Turkey is a separate legal entity with its own identity.
It can engage in commercial activities and must comply with the provisions for annual accounting and reporting.
Since a representative office does not engage in commercial activities, it does not have to pay any taxes, except for the social security tax for employees (if appliable).
Closing liaison offices in Turkey
- Obtain a "termination and examination of business note" document from the tax office and social security institution;
- Submit it to the Trade Ministry along with a closure notification;
- Only the remaining balance after fulfilling all debts and obligations can be transferred out.
Timeframe for opening the representative office (approx.)
Advantages of opening a representative office in Turkey
- no taxes paid, fast and straightforward incorporation process,
- hired employees do not pay income tax or stamp tax liabilities,
- a great opportunity to research a potential new market in Turkey
Our team can help you in opening a liaison office, as well as in the process of setting up a company in Turkey.
Activities performed by a liaison office in Turkey
A representative office can perform only a few categories of activities, according to the Turkish laws:
promotion for the goods and services provided by the parent company;
control of the suppliers;
communication and information;
regional management center and others.
The purpose of the liaison office in Turkey
Cautious entrepreneurs have an adequate solution to test the market – opening a liaison office, in accordance with the Law on Foreign Direct Investments. The Turkish authorities – especially the General Directorate of Foreign Investments - approve the opening of a liaison office, after the foreign investors present the documents required.
The authorization is available only for three years and after that, the entrepreneur must request another approval after he presents a report about its past activity and the future plans for the next three years, which represents the maximum period for which he will receive an extension.
The registration procedure takes no more than five working days and after the procedure is completed, the foreign investor needs the identity number given by the tax department.
Please note that The Ministry of Trade has the authority to audit the liaison offices in Turkey to ensure compliance with legislation and the permitted scope of activities. If the inspection reveals that a liaison office is engaged in commercial activities and violates the permit rules, the Ministry will cancel the activity permit and notify the relevant authorities.
The representative office can’t make profits from commercial activities and it’s not a legal entity. If the businessmen intend to perform commercial activities in Turkey, they can open firstly a liaison office for marketing purposes or information gathering and then set up a company in Turkey, after they have studied the competitors.
The parent company must provide the funds necessary for the representative office. It is not mandatory to deposit a minimum share capital upon the registration of a liaison office in Turkey. On the other hand, you might want to discover the following infographic on this subject:
Responsibilities of a liaison officer in Turkey
Opening a liaison office in Turkey also requires the appointment of a local agent from the country of origin of the represented company. Among his or her responsibilities, we mention the following, specifying that the business direction of the foreign business needs to be well known:
• A good communication is important to be able to establish business relations with potential clients in Turkey. Thus, the liaison officer must know the company he represents and know how to promote it.
•All promotion and marketing activities of the representative office in Turkey must be reported to the parent company. Various reports can be prepared in this regard.
•The liaison officer must know international business relations and how business is done in Turkey. This is the first step before the implementation and promotion of foreign business in this territory.
•If there are other promotional tools, favorable to the company in question, the liaison officer in Turkey can propose and even implement them, if it concerns the acceptance of the foreign company represented.
•Various business contracts can be drawn up that the liaison officer in Turkey can conclude, after presenting them to the owners of the foreign company.
•Mediation of conflicts that may arise during the promotion of foreign business is another important aspect related to the qualities of a good liaison officer. He or she must have at hand various strategies for solving possible problems that may arise at a given moment.
Accounting and financial operations
To handle accounting and financial management operations, representative offices in Turkey need to open a bank account in foreign currency. All expenses of the liaison office, which are related to the foreign company, must be brought into Turkey in foreign currency. The foreign company must directly finance all transactions and activities of the liaison office, including salaries and social security payments for representatives and personnel. You can contact our accountants in Turkey for financial matters.
You can watch the video below, for more information on how to set up a representative office in Turkey:
What taxes must a representative office in Turkey pay?
Because a representative office in Turkey does not develop commercial activities, it is not subject to the taxation system of this country. However, in the case of purchases of goods and services in Turkey, the imposed VAT is paid. Detailed reports will be made regarding the purchases made by a liaison office in Turkey.
We recommend our payroll services in Turkey if you have plans to open a business in this country. We offer all the necessary support in this endeavor, but also for those who want to open a company in Turkey.
Who financially supports a representative office in Turkey?
Even if a liaison office in Turkey does not have commercial activities, it does have certain expenses. These are fully supported by the parent company, which can establish a specific budget in this regard. Accounting reports are made periodically.
All the documents obtained for the purchase of goods and services in Turkey are used here. We recommend the services of our specialists if you want to learn more about this topic.
Can I hire staff through a liaison office in Turkey?
There are no restrictions regarding hiring personnel for a liaison office in Turkey. Depending on the needs of the foreign business represented in Turkey, the owners of the respective company may agree to hire staff. However, it is good to consider the immigration formalities in this case, if foreigners from the company's country of origin or other countries will be employed. In some cases, it is not necessary to obtain a visa, but the residence permit is important, regardless of the country of origin of the foreign workers, who are the subject of a stay longer than 90 days.
Advantages of opening a liaison office in Turkey
Opening a representative office in Turkey serves as a valuable initial step for companies looking to establish a presence in the country, as well as in the Special Investment Zones. It also comes with several other benefits:
- If liaison offices in Turkey do not engage in any commercial activities, they are not required to pay corporate income tax;
- The same condition applies when registering for value added tax (VAT). Representative offices are exempt from registering for VAT, if they do not engage in commercial activities;
- Employees' wages at liaison offices are not subject to income tax or stamp tax liabilities;
- If an employee working at a liaison office provides the necessary records showing that he/she has already been paying social security, the representative office doesn't have to pay those premiums again;
- To qualify for tax exemption, the salaries paid by the liaison office need to be in foreign currency instead of Turkish Lira.
Why is expanding businesses to Turkey a good idea?
Investors interested in setting up a company in Turkey or setting up a liaison office to establish their presence can find these statistics useful:
- In 2021, there were 2,373 firms in Turkey affiliated with foreign companies;
- The revenue generated by these affiliates was 74.7 billion dollars in 2021;
- The affiliated companies involved in trade activities collectively generated a total revenue of 34.6 billion dollars in the same year;
- In 2021, Germany had the highest number of affiliated companies with 207 affiliates in Turkey.
Working with our Turkish company formation agents
Our company formation agents in Turkey have the necessary experience and can help foreign entrepreneurs establish their business presence through a liaison office in Turkey, by managing the procedures and formalities. Each case has its particularities and therefore attention to detail is needed. We are here to help you in any endeavor, with complete services and personalized offers.
Call us now at +90 532 351 66 77 to set up an appointment with Cagatay Altunsoy, one of our specialists in company formation in Istanbul, Turkey. Alternatively you can incorporate your company without traveling to Turkey.
As a client of CS Yonetim, you will benefit from:
- 24 hour response time guaranteed;
- cost- efficiency;
- dozens of articles and free information on the Turkish structures.