Companies registered abroad may open liaison offices or branches in Turkey to promote their commercial activities. Unlike branches, liaison offices may not conduct revenue generating commercial activities and all expenses shall be covered with the foreign currency which will be brought to Turkey from abroad.
Activity process of liaison offices:
In first applications, permits are granted to liaison offices for maximum 3 years within the scope of the declared activity. Offices which want to extend their period of activity shall apply to the Directorate General before the expiration of the period of activity. The Directorate General shall evaluate the extension request within the framework of the previous year activities of the office, future business plans and targets of the foreign company in Turkey, current and estimated expenditure amounts and the number of employed personnel and grant time extension according to the quality of the activity to be conducted; however, no time extension shall be granted for the offices which obtained permit to carry out Marketing research or to promote the products or services of the foreign company.
In order to open a liaison office in Turkey, the legal entity must be incorporated in accordance with the laws of the foreign country and have a company status. After these conditions are met, required documents are:
- Application form,
- Statement indicating the scope of the works to be carried out by the liaison office and that the office shall not carry out commercial activities and the certificate showing the authority to sign of the executive of the foreign company who signed the statement.
- Certificate of Activity of the foreign company which is certified by the related Turkish Consulate or in accordance with the provisions of “Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents” which was drawn up within the framework of The Hague Conference on Private International Law.
- Activity Report or balance and income table of the foreign company.
- Power of Attorney, in the event that the procedure for the establishment of the liaison office was carried out by another person.
After starting their activity in Turkey, liaison offices must keep files of bank receipts in time in order to document that the previous year expenditures were paid by the foreign currency which was sent to the account of the liaison office from abroad and they are obliged to fill in Information Form in relation to their previous year activities and submit it to the related organization, Undersecreteriat until the end of May each year.
Since offices, which may carry out activities in Turkey for 3 years, cannot carry out revenue generating activities, it is not possible for them to request profit transfer.
In relation to the payment to their personnel and their other tax liabilities; the wages that the employers, whose registered office and business headquarters are not located in Turkey and who are subject to limited tax liability, pay to their employees based on the revenues obtained abroad in foreign currency are exempt from income tax.
Provision of making the payment from abroad:
Wages to be paid to the personnel and expenses regarding the opening of the office shall be paid by the parent company of the employer abroad and sent to Turkey in foreign currency. It must be proved that the transfer is made directly to the bank account of the related personnel.
Documents which must be preserved and submitted:
It is essential that the wage payments and expenses for the office are received in foreign currency from abroad and such payments are made based on the foreign currency exchange area. In order to control these conditions, bank receipts, foreign currency purchase documents, abroad transfer receipts, etc. must be provided and preserved.
Stamp Duty Deduction:
In accordance with the Stamp Duty Law, stamp duty shall be deducted from the wage payments to the personnel working at liaison offices and it must be stated with tax statement and paid within legal term.
Insurance of the Employees:
Personnel to be employed at the liaison offices must be insured within the scope of the Social Security Law. Liaison office is obliged to have the limited tax liability employer status registered at the Institution.
Liaison offices are obliged to notify the workplace declaration to the related Provincial Directorate of Insurance before the insured person are employed.
Income and corporate tax:
Unless they are involved in commercial activities, liaison offices are not responsible for income and corporate tax and value added tax.
Interest income of the money at the bank or practices such as renting or selling some properties which belong to the office face generating income. In such circumstances, necessary statement must be submitted to the related organizations.
Limited tax liability:
Due to reasons such as monitoring and controlling liaison offices, they are considered as taxpayers in limited tax liability.
Buying Real Estate:
It is essential that the liaison offices carry out transactions within the limits specified in the law. Acquiring a separate real estate is considered as an activity beyond purpose for the liaison office.
Although liaison offices have limited tax liability, they must have their tax liability registered in order to document their expenditures and payments which are made by the parent company abroad in relation to such expenditure such as tax, charge, etc. and they must pay attention to keeping books, issuing documents and preserving such books and documents.