Formation of liaison offices in Turkey produces several advantages for particularly foreign investors. However, emerging challenges particularly in terms of taxation must be carefully analyzed before any decision.
Table of Contents
- Introduction
- Is Turkey good for business through the formation of liaison offices in Turkey?
- What are the main legal instruments applicable to commercial activities in Turkey in terms of Tax?
- Who may be a taxpayer under Corporate Tax Law?
- What is the difference between liaison office and branch office for a foreign company?
- What are the rules applicable to the formation of liaison offices in Turkey?
- What type of activities can be performed by liaison offices in Turkey?
- Conclusion
Introduction
Overall, the available article is dedicated to providing a full-fledged guide in formation of liaison offices in Turkey and|or, in other words, the formation of a liaison office in Turkey. Undoubtedly, Turkey encourages foreign-centric investment projects by taking business-friendly policies at the nexus of Europe, Asia and Africa.
For our work and all legal services on the matter of investment, please click on our "Practice Areas", titled "Investment Advice".
Is Turkey good for business through the formation of liaison offices in Turkey?
Turkey represents one of the most safe and investment-friendly countries around the globe. Considering the strengthening rates of foreign currencies, cost-effective opportunities and government support for foreign direct investments, Turkey is becoming a more popular investment area for alien investors. Additionally, several Turkish companies are keen on growing their business in Turkey. Investment advice by Turkish business lawyers in Istanbul and in Ankara play a crucial role in supporting their investment projects for foreign and local investors.
What are the main legal instruments applicable to commercial activities in Turkey in terms of Tax?
There are three core legal instruments particularly applicable to tax-oriented issues in Turkey:
firstly, Income Tax Code (Numbered 193),
secondly, Corporate Tax Code (Numbered 5520),
thirdly, Value Added Tax Code (Numbered 3065).
In addition to law-centric regulations, it is noteworthy emphasizing that communiqués play an essential role in articulating specific rights and tax obligations into line with relevant legislation.
For more information, take a look at our practice areas titled "Tax"
Commercial activities for foreign or domestic companies in Turkey will have direct consequences upon the taxation of relevant investment projects.
Who may be a taxpayer under Corporate Tax Law?
Article 1 of Corporate Tax Law stipulates that following legal entities are responsible for paying taxes:
-Capital companies
-Cooperatives
-Public economic enterprises
-Economic enterprises owned by associations and foundations
-Joint ventures.
What is the difference between liaison office and branch office for a foreign company?
Contrary to liaison offices, branch offices are completely free to engage in commercial activities in Turkey. Fundamental idea behind this difference is that the liaison office is not seen as a separate entity from the business or legal center of foreign company.
What are the rules applicable to the formation of liaison offices in Turkey?
Pursuant to Article 3 of Foreign Direct Investment Law (Numbered 4875), the permit for the formation of liaison offices is only granted provided that they do not engage in commercial activities in Turkey. Article 6 and 7 of the Regulation on the Implementation of Foreign Direct Investment Law reiterates the same principle by underlining the need for the commitment of relevant companies for non-commercial activity in Turkey. It necessarily follows that a foreign company cannot carry out commercial activity through formation of liaison offices in Turkey, but the same company is completely free to engage in commercial activity through all other methods in Turkey.
What type of activities can be performed by liaison offices in Turkey?
As clearly observed, liaison offices of a foreign company in Turkey can perform very limited activities including:
- Representation and Hosting,
- Control, Inspection and Provision of Local Suppliers,
- Technical support,
- Communication and Transfer of Information,
- Regional Management Headquarter.
It necessarily means that the relevant liaison office will not be able to carry out any commercial activity or not be able to invoice to anybody on behalf of the Client. The violation of non-commercial activity of foreign companies through liaison offices is subject to severe sanctions by national authorities.
Conclusion
In the light of the foregoing consideration, this article concludes that foreign companies have limited opportunities in Turkey for business activities through formation of liaison offices in Turkey. Reviewing and understanding the rationale behind investment rules applicable to foreign companies is a required step for the beginning. A full-fledged legal guidance represents such a significant component of proceeding safely for foreign direct investments through formation of liaison offices in Turkey.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
