Not every foreign company needs a Turkish subsidiary. A branch lets the foreign company itself trade in Turkey (Türkiye) through a registered local office. A liaison office gives it a permitted presence for research, promotion and coordination without any commercial activity. Both are established and widely used, but their legal consequences differ considerably from those of a subsidiary, and both are easy to misuse.
This guide explains how each works, how they are set up, how they are taxed and staffed, and when a company is the better option. It also covers a different but related question that often causes confusion: how a Turkish company opens additional branches or locations within Turkey.
Key points
- A branch is part of the foreign company. It can trade, but the foreign parent is directly liable for all of its obligations.
- A branch must be registered with the trade registry and needs a representative resident in Turkey with full authority.
- A liaison office needs a permit from the Ministry of Industry and Technology and may only carry out non-commercial activities.
- A liaison office's expenses must be funded from abroad in foreign currency. It may not sell, invoice or earn income in Turkey.
- Using a liaison office to negotiate or close sales can lead to the permit being cancelled and to tax exposure.
What is a branch of a foreign company?
A branch (şube) of a foreign company is a place of business in Turkey through which the foreign company carries on its own activities. It has a degree of commercial independence, with its own management, books and accounts, but it is not a separate legal person. Contracts made through the branch are contracts of the foreign company, and creditors of the branch can generally pursue the foreign company's assets.
A branch can carry out the same commercial activities as its parent, within the scope registered for it and subject to any sector licensing rules. It can employ staff, lease premises, import and export, invoice customers and hold bank accounts.
Why choose a branch?
Branches tend to be chosen where:
- the parent wants to keep the Turkish operation on its own balance sheet, for example for project, contracting or engineering work;
- the home-country tax treatment of branch profits is favourable or simpler;
- a client, regulator or tender requires the contracting party to be the foreign company itself;
- the operation is expected to be temporary or tied to a single project.
Why many groups prefer a subsidiary
The main disadvantage is liability: the foreign company's assets are exposed to the branch's debts, employment claims and tax liabilities. Branches can also be less familiar to some counterparties and banks, and the parent's own corporate documents become relevant to every significant step, which adds document preparation abroad. For most long-term operations, a subsidiary is the more common choice. The comparison is set out in choosing a business structure.
How is a branch of a foreign company registered?
The process resembles a company incorporation, but the documents come from the foreign parent:
- Parent documents. A certificate of good standing or register extract, the parent's articles of association where required, and a resolution of the parent's board deciding to open the branch, naming its representative and setting out its scope and address. These are normally notarised, apostilled or legalised and translated into Turkish by a sworn translator.
- Representative. A branch needs a representative (or representatives) resident in Turkey with full authority to represent it. The representative may be a Turkish citizen or a foreign national lawfully resident in Turkey.
- Tax numbers. The foreign company, and its representatives where relevant, obtain Turkish tax numbers.
- Application. The application is prepared through MERSİS and filed with the trade registry where the branch will be located, together with the branch's trade name (which normally includes the parent's name and indicates that it is a Turkish branch) and the representatives' signature declarations.
- Capital. Turkish law does not set a statutory minimum capital for a branch of a foreign company. Registries may nonetheless ask for a capital amount to be declared or allocated to the branch, and practice varies.
- Registration and publication. Once registered, the branch is published in the Turkish Trade Registry Gazette and becomes a member of the local chamber.
- Post-registration steps. These are the same as for a company: tax office inspection and tax certificate, statutory books, electronic invoicing, bank account, SGK workplace registration if staff are employed, and municipal licences.
Our articles on how to open a branch of a foreign company in Turkey and establishing a Turkish branch of a foreign company give further detail.
How is a branch taxed?
A branch of a foreign company is generally treated as a permanent establishment and is a limited taxpayer in Turkey. It is subject to Turkish corporate income tax on income attributable to its Turkish activities, at the standard corporate tax rate (25% at the time of writing) unless a special rate or deduction applies. It must keep Turkish statutory books, register for VAT and file returns in the same way as a company.
When a branch transfers its after-tax profits to the head office, the transfer may be subject to Turkish withholding tax, generally in line with the treatment of dividends paid to non-resident shareholders and subject to any reduction available under an applicable double tax treaty. Transfer pricing rules apply to dealings between the branch and its head office, and allocating head office expenses to the branch needs careful documentation.
The interaction with the home country's taxation of branch profits is often the deciding factor. See the tax guide for an overview of Turkish taxes.
What is a liaison office?
A liaison office (irtibat bürosu) is a presence that a foreign company may establish in Turkey with permission from the Ministry of Industry and Technology, through its General Directorate of Incentive Implementation and Foreign Investment. It is designed for activities that support the parent's business without generating income in Turkey.
What can a liaison office do?
Typical permitted activities include:
- market research and feasibility studies;
- representing and promoting the parent and its products;
- liaison and coordination with Turkish customers, suppliers, distributors and public bodies;
- supplier selection, quality control and inspection for the parent's purchases;
- providing information and technical support for the parent's products.
What can a liaison office not do?
A liaison office may not engage in commercial activity. In practice this means it should not:
- sell goods or services or issue commercial invoices in Turkey;
- negotiate and conclude sales contracts on the parent's behalf in a way that amounts to commercial activity;
- generate revenue in Turkey;
- import goods for sale.
All of its expenses must be met by the parent, with funds transferred from abroad in foreign currency and converted locally as needed. If a liaison office in practice functions as a sales office, the Ministry may cancel the permit, and the tax authorities may treat the foreign company as having a permanent establishment in Turkey, with corporate tax, VAT and penalty consequences.
How is a liaison office permit obtained?
The application is made to the Ministry of Industry and Technology. It is typically supported by:
- the application form and a description of the planned activities;
- the parent's certificate of good standing and, where requested, its financial statements or activity report;
- a board resolution of the parent approving the liaison office and appointing its representative;
- a power of attorney for the representative;
- information on planned staff and premises.
Foreign documents are usually apostilled or legalised and translated into Turkish. The Ministry reviews the file and may request further information. Liaison office permits are commonly granted for an initial period of up to three years and can be renewed. A renewal is generally granted where the activities remain within the permitted scope and the office has met its reporting obligations, and the application should be made before the permit expires.
After the permit is issued, the office registers with the tax office to obtain a tax number, opens a bank account, leases premises and, if it employs staff, registers with the SGK. Certain documents, such as the tax registration and lease details, are usually reported back to the Ministry within a short period after establishment. See also our article on establishing liaison offices in Turkey.
What are the ongoing obligations?
- Annual activity report. Liaison offices are generally required to report their activities to the Ministry each year, together with information on the foreign currency brought into Turkey to cover expenses. In practice the deadline is around the end of May for the previous year.
- Payroll and social security. Employees are hired under Turkish employment law, registered with the SGK, and payroll withholding taxes and social security contributions are paid in the usual way.
- Notifications. Changes of address, representative or activities are notified to the Ministry.
- Closure. When the office closes, the Ministry, the tax office and the SGK are notified and employment relationships are terminated in accordance with Turkish law. See termination and offboarding.
Branch, liaison office or subsidiary: comparison
| Branch | Liaison office | Subsidiary (Ltd. or A.Ş.) | |
|---|---|---|---|
| Legal personality | None; part of the foreign company | None | Separate Turkish legal entity |
| Commercial activity | Permitted within registered scope | Not permitted | Permitted within its business purpose |
| Liability | Foreign parent directly liable | Foreign parent | Generally limited to the company's assets |
| Approval | Trade registry registration | Ministry permit | Trade registry registration |
| Duration | Unlimited | Fixed-term permit, renewable | Unlimited |
| Representative | Resident representative with full authority required | Representative appointed by the parent | Managers or board, no residence requirement |
| Funding | Parent and own income | Only from abroad in foreign currency | Capital, own income and financing |
| Taxation | Corporate tax on Turkish-source income as a permanent establishment | No corporate tax as no income, but payroll taxes and VAT on purchases apply | Corporate tax on worldwide income as a resident company |
| Profit repatriation | Branch profit transfer, possible withholding tax | Not applicable | Dividends, possible withholding tax |
| Typical use | Projects, contracting, parent-level contracts | Market research, sourcing, coordination | Long-term operations of any kind |
Converting a branch or liaison office into a company
Businesses often start with a liaison office or branch and later move to a subsidiary. Turkish law does not provide a simple automatic conversion of either into a company. In practice the steps usually are:
- incorporate a new subsidiary (see setting up a company);
- transfer the activity, assets and contracts to it, considering tax and stamp duty consequences;
- transfer employees, considering accrued seniority, which may follow the employee in a transfer of the business;
- close the branch or liaison office and deregister it with the trade registry or Ministry, the tax office and the SGK.
Timing the move carefully avoids a period in which a liaison office is doing work that only a trading entity should do. Where a branch is transferred to a subsidiary as a going concern, tax-neutral transfer rules may be available in some circumstances, which should be checked with tax advisers before the transfer.
Opening further branches and locations of a Turkish company
A Turkish company, including a foreign-owned subsidiary, can open additional branches (şube) in other cities or districts, such as a regional office, a store, a warehouse or a plant. This is a different matter from a branch of a foreign company:
- the decision is taken by the company's managers or board;
- the branch is registered with the trade registry where it is located and published;
- the tax office is notified and, depending on its activities, the branch may be treated as a separate place of business for tax purposes;
- a separate SGK workplace registration is made if staff work there;
- the premises need their own workplace opening and operating licence and any sector permits.
For retail locations see opening a retail store, and for warehouses and offices see leasing offices and warehouses. Our corporate and commercial law in Türkiye page describes how we support foreign groups with these steps, alongside Turkish-qualified professionals.
Frequently asked questions
Is a branch of a foreign company a separate legal entity in Turkey?
No. A branch is part of the foreign company and has no separate legal personality. Contracts made through the branch bind the foreign company, which is directly liable for the branch's debts, employment claims and tax obligations. A subsidiary, by contrast, is a separate Turkish legal entity.
Does a branch need a minimum capital in Turkey?
Turkish law does not set a statutory minimum capital for a branch of a foreign company, unlike companies. Trade registries may still ask for a capital amount to be declared or allocated to the branch, and practice varies. Banks and counterparties may also have expectations about the funds available to the branch.
Who can be the representative of a branch?
A branch of a foreign company must have at least one representative who is resident in Turkey and holds full authority to represent the branch. The representative can be a Turkish citizen or a foreign national lawfully resident in Turkey. A foreign representative who works in Turkey will generally need a work permit.
How is a branch of a foreign company taxed in Turkey?
A branch is generally treated as a permanent establishment and pays Turkish corporate income tax on income attributable to its Turkish activities, at the standard rate of 25% at the time of writing unless a special rate applies. Transfers of branch profits to the head office may attract withholding tax, subject to double tax treaty relief. See the tax guide.
What activities can a liaison office carry out in Turkey?
A liaison office may carry out non-commercial activities such as market research, promotion, coordination with customers and suppliers, quality control and technical information. It may not sell, invoice, import goods for sale or generate income in Turkey. All its expenses must be funded by the parent from abroad in foreign currency.
Who issues liaison office permits in Turkey?
Liaison office permits are issued by the Ministry of Industry and Technology through its General Directorate of Incentive Implementation and Foreign Investment. The application includes the parent's documents, a description of the planned activities and the appointment of a representative. Foreign documents are usually apostilled and translated.
How long is a liaison office permit valid?
Liaison office permits are commonly granted for an initial period of up to three years and can be renewed. Renewal generally depends on the activities remaining within the permitted scope and the reporting obligations having been met. The renewal application should be filed before the permit expires.
Can a liaison office employ staff in Turkey?
Yes. A liaison office can employ staff under Turkish employment law, registering them with the Social Security Institution and paying payroll taxes and contributions. Foreign staff need work permits. See hiring employees in Turkey.
What happens if a liaison office carries out commercial activities?
The Ministry may cancel the liaison office permit. The tax authorities may also take the view that the foreign company has a permanent establishment in Turkey, which can lead to corporate tax, VAT and penalties. If the business wants to sell in Turkey, it should set up a company or a branch.
Can a liaison office be converted into a company?
There is no simple automatic conversion. In practice the foreign company incorporates a subsidiary, moves staff and activities to it and then closes the liaison office with the Ministry, the tax office and the SGK. Employees' accrued rights should be considered when they move. See setting up a company.
Is a branch or a subsidiary better for a foreign company?
It depends on the activity, the parent's appetite for direct liability and the home-country tax treatment. Branches suit some project-based and contracting businesses, while subsidiaries are more common for long-term operations because they ring-fence liability. The comparison is set out in choosing a business structure.
How does a Turkish company open a new branch in another city?
The managers or board resolve to open the branch, which is then registered with the trade registry where it is located and published in the Trade Registry Gazette. The tax office is notified. A separate SGK workplace registration and municipal workplace licence are usually needed if staff work there.
This guide is general information about Turkish law and practice at the date shown above. It is not legal, tax or customs advice and should not be relied on as such. Rules, thresholds and procedures in Türkiye change frequently and their application depends on the facts, so take advice on your own circumstances before acting. Advice on Turkish law is provided through lawyers qualified in Türkiye.