The Complete Guide to Liaison Office Establishment in Turkey

What is a Liaison Office in Turkey?

A liaison office is a non-commercial representative entity that foreign companies establish in Turkey to facilitate communication, market research, and representation. Unlike subsidiaries or branches, liaison offices do not conduct sales or income-generating activities but support the parent company’s presence in the local market.

Key Benefits of Establishing a Liaison Office in Turkey

Foreign companies frequently choose liaison offices to test market viability with minimal risk. The key advantages include:

• Strategic Market Insight: Conduct market research, gather business intelligence, and evaluate market conditions.
• Cost Efficiency: Lower operational expenses compared to branches or subsidiaries, thanks to tax exemptions.
• Local Presence: Enhance brand recognition and establish connections with Turkish stakeholders without immediate commercial risks.
• Simplified Compliance: Reduced regulatory obligations, facilitating easier management and compliance.
• Foundation for Expansion: Gain experience in Turkey, paving the way for potential commercial expansion.

Authorized Activities For Liaison Offices in Turkey

Liaison offices must strictly avoid commercial or income-generating operations. The permitted activities include:

• Representation and Hosting: Managing business interactions and coordinating local meetings for the parent company.
• Market Research: Gathering and analyzing market data and trends.
• Control and Inspection: Ensuring quality standards of local suppliers.
• Technical Support: Providing training or technical assistance to local partners or distributors.
• Information Transfer: Facilitating effective communication between local entities and the parent company.
• Regional Management Center: Coordinating management and strategic operations across multiple regions, subject to extended permits.

Regulatory Framework For Liaison Offices in Turkey

So, what is the regulatory framework? Let’s take a look.

Approval and Permit Requirements

Liaison offices are governed under Turkey’s Foreign Direct Investment Law (FDI) and require authorization from the Ministry of Industry and Technology. The essential criteria include:

• The parent company must be operational for at least one year.
• Submission of audited financial statements from the parent company.
• Clear evidence of non-commercial intent.

Initial permits are granted for up to three years, with the possibility of extension.

Financial Obligations and Bank Account Setup

Establishing bank accounts in Turkish currency (TRY) and foreign currencies is mandatory. The parent company must fund all expenses, including salaries and operational costs, exclusively via these local accounts. Funds transferred from abroad are annually audited, ensuring compliance. Essential documents for bank account opening include:

• Ministry authorization documents.
• Parent company’s incorporation documents and financial statements.
• Tax Identification Number (TIN) from the Turkish Tax Office.
• Lease agreements proving local office presence.
• Passports or IDs of authorized representatives.

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Taxation and Compliance

Although liaison offices are exempt from corporate tax, specific tax obligations still apply:

• Value Added Tax (VAT): Payable on purchased local goods and services; non-refundable.
• Stamp Duty: Applicable on certain contracts executed locally.
• Income Tax Exemptions: Salaries paid from abroad in foreign currency are exempt from Turkish income tax.
• Mandatory Record-Keeping: Statutory accounting and regular reporting to the local tax office are compulsory.

You can also benefit from our Tax Law services in Turkey.

Social Security Contributions and Staffing Requirements

Liaison offices must contribute to the Turkish Social Security System (SGK) for local employees. Special conditions apply to foreign personnel:

• Foreign staff from countries with bilateral social security agreements may be exempt from Turkish SGK, provided coverage in their home country is maintained.
• Liaison offices benefit from a simplified hiring process for expatriate employees, contingent upon specific capital transfers from the parent company.

Permit Extension Procedures

Permit extensions require comprehensive documentation illustrating liaison office activities, financial transfers, and local engagement:

• Proof of Activity: E-mail communications, market reports, event participations, and reference letters from local businesses.
• Financial Documentation: Bank receipts proving the continuous transfer of funds from the parent company.
• Future Plans: A detailed letter outlining strategic objectives for the upcoming period.

Extensions depend on demonstrated contributions to the Turkish economy and may be granted for up to 5 or 10 years, depending on the nature of operations.

Annual Reporting and Audits

Liaison offices are subject to annual compliance audits by the Ministry. Submission of comprehensive annual reports is mandatory each May, detailing:

• Yearly expenditures funded by the parent company.
• Activities conducted within the permitted scope.
• Employee information and contributions to Turkish economic interests.

Non-compliance or failure to submit annual reports can result in revocation of operational permits.

Restrictions and Operational Limitations

Liaison offices must strictly adhere to regulatory restrictions, including:

• No engagement in commercial transactions or revenue-generating activities.
• No direct participation in sales, invoicing, or profit-making operations.
• Restricted transfer of funds abroad, except during liquidation.
• Prohibition on acquiring real estate or direct investments in Turkey.

Termination and Liquidation Process

Liaison offices may terminate operations voluntarily or face mandatory closure due to non-compliance. The liquidation requires:

• Obtaining a “Termination and Examination of Business Note” from the local tax office.
• Submission of relevant closure documentation to the Ministry.
• Repatriation of residual funds to the parent company.

How CKAY Law Firm Supports Your Liaison Office Setup

At CKAY Law Firm, we manage all legal, regulatory, and administrative processes involved in establishing your liaison office in Turkey. Our legal services include:

• Complete preparation and submission of all required documentation.
• Expert liaison with Turkish regulatory authorities.
• Ongoing compliance management and reporting services.
• Assistance with bank account setup, staffing, and social security matters.
• Strategic advisory on market entry and business development.

By entrusting your liaison office establishment to CKAY Law Firm, you ensure smooth operations, regulatory compliance, and strategic insight to leverage opportunities in Turkey effectively.

Your Gateway to Turkey’s Business Opportunities

Establishing a liaison office in Turkey is a strategic move for global companies aiming for market insights and local presence without immediate commercial risks. With the expert guidance of CKAY Law Firm, navigating legal complexities, maintaining regulatory compliance, and maximizing the benefits of liaison office operations becomes straightforward. Contact us today and seamlessly establish your presence in the vibrant Turkish market.