Some amendments have been introduced to the Regulation for Implementation of Foreign Direct Investment Law (the "Implementation Regulation") with the Regulation regarding Amendments to the Regulation for Implementation of Foreign Direct Investment Law (the "Regulation") published in the Official Gazette dated 3 July 2012. With the aforesaid legislation, the provisions regarding the establishment and the operation of the liaison offices and the required documents for the application for establishment have been materially changed. Moreover, the authority of the Undersecretariat of Treasury to implement the Regulation is abandoned and ceased, this authority is handed over to the Ministry of Finance.
Amendments Concerning the Establishment of the Liaison Office
The main modification regarding the establishment of the liaison offices introduced by the Regulation is that the permits in order to establish a liaison office and extensions of the term of these permits will be given by the Finance Ministry instead of the Undersecretariat of Treasury. Furthermore, the Regulation provides for a new provision concerning the companies, which have recently been established under to the law in their home country and wish to found a liaison office in Turkey. According to this provision, before granting an operational permit for these types of companies, the Ministry requires the lapse of a period which at minimum is one year after the foundation of the company by considering aspects such as the field of the operation, the capital, and the number of the employed workers of the company.
Furthermore, there is also a change concerning the time of consideration for the applications made to request the establishment or the extension of the duration. Now, the applications will be concluded within fifteen business days after the date of application, provided that all the required information/documents are whole and complete.
The rule regarding assessment of the requests of foreign companies to establish a liaison office in order to execute operations in the financial areas regulated with special legislation such as money and capital markets and insurance, by the authorized agency and institutions, in context of the special legislation, has not been changed with the new legislation. However, with the new provision introduced, it is set forth that, in the cases where the Ministry deems necessary, the request to establish a liaison office of the foreign companies in the others sectors where obtaining permits, licenses or similar competence to realize the operations are necessary, will be concluded by receiving the opinion of the agency or institutions which give the above-mentioned permit or license.
Amendments Regarding the Required Documents for the Application
New documents are introduced to the required documents for the application to the Finance Ministry in order to establish a liaison office. In addition to the documents mentioned in the article 7, the application form annexed to the Regulation, the declaration concerning the content of the operations carried out by the liaison office, and including the undertaking that the liaison office may not carry out any commercial activities, and indicates document indicating the authority of signature of the representative signing the abovementioned statement are set forth among required documents..
Amendments Regarding the Operation of the Liaison Office
Before the amendment to the Implementation Regulation, the permits of operation to liaison offices were granted for a maximum term of 3 years and extended each time for maximum periods of 3 years, taking into consideration of the past year's operations and plans and targets oriented to the future. The rule of granting permits for maximum 3 years at the first application for operation permits of liaison offices is not amended. However, from now on, whether the term will be extended and the duration of the extension will be decided according to the characteristics of the executed operation of the liaison office. Pursuant to the Regulation, operation permits of liaison offices authorized for conducting marketing research or to advertise the products or the services of the foreign company shall not be extended. Apart from that, the Regulation sets forth 5 different categories regarding the characteristic of the operation and according to these 5 categories, the duration of extension can be varied as 5 or 10 years. The operation permits of the liaison offices which conduct operations in the following will be extended for 5 years: (i) representation and entertainment (the representation of the foreign company before the sectorial institutions and the relevant organizations, the coordination and the organization of business contacts of the foreign company's officials in Turkey, providing an office to such persons), (ii) control and supervision of the suppliers in Turkey with regards to the quality and standard and procurement of suppliers (the supervision of the companies which produce in the name of the foreign company with regards to its quality standards, the satisfaction of the demand of products and producers of the foreign company), (iii) provision of technical support (providing training and technical support to the distributors, providing support services to the supplier producers in order to increase their quality standards), (iv) Communication and information transfer (gathering and transmitting information regarding the developments in the market tendency of consumers, sale scores of the rival firms and distributors, performance of the distributor company, etc.in order to transfer to the foreign company which has business relations with Turkey, ). The permits of liaison offices, which conduct operation as a regional head office (for the units of the foreign company in the other countries, providing management service and coordination in context of the activities such as the creation of strategies of investment and management, planning, promotion, sale, post-sales services, brand management, financial management, technical support, r&d, foreign procurement, testing of newly developed products, laboratory services, research and analysis, education of employees, etc.) may be extended for 10 years.
On the other hand, the characteristics of the realized operations are not the sole element which will be taken into consideration in order to grant an extension of the duration of the operation. The applications for the extension of duration are made to the General Directorate of the Incentive Implementation and Foreign Capital. The Directorate may conclude the request of the extension of duration considering not only the operations but also the past year's operations of the office, the future business plan and the objectives in Turkey of the foreign company, current and foreseen amount of expense and the number of workers employed.
In the cases where a change of address, representative(s) of the office or title of the foreign company comes into question, at latest within 1 month after the realization of the change, the liaison offices will notify to the General Directorate the lease contract indicating the new address, the certificate of authority relating to the new appointed person or the document(s) with respect to the change of title of the foreign company.
The Regulation gives the Ministry the authority to audit the operations of the liaison offices on whether they operate in accordance with their field of operation stipulated under the law and the permits. This control can be made ex officio or upon the written notification of the relevant agency and institutions. As a result of the audit, the offices which are determined to operate out of scope of the granted permit will be given a period of thirty days as of their application in order to receive the permit for the currently executed operation. This period can be extended for a maximum period of thirty days in existence of valid reasons. At the end of the given time, the operation permits of the offices which do not make any applications will be cancelled. At the end of the audit, the permits of the offices, which are determined to carry out commercial operations, will be cancelled and the situation will be notified to relevant authorities.
With the Regulation, the provision regarding the establishment and the operation of the liaison offices and the required documents for the application in order to establish a liaison office have been materially changed, the Undersecretaries of Treasury has been replaced with the Finance Ministry. The General Directorate of the Incentive Implementation and Foreign Capital will decide whether to extend the duration of permits concerning the liaison offices which desire to extend the duration of operation permits by taking into consideration the operation areas. Furthermore, the Ministry is granted the authority to audit the operations of the liaison offices to determine whether they execute their operations in compliance with the law and with the mentioned operation in their permit, or not.
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.