Today, in global cash flow around the world made multinational
companies to think more on tax benefits and cost effectiveness
before they invest in a country. Industrial zone, free trade zone,
off-shore or whatever the legal name is "tax-exempt"
areas of a business facility to fulfill the expectations in this
Turkey as an emerging market offers further for those whom are
looking for the tax efficiency before they penetrate to the market
or running Turkey related businesses through their headquarters in
abroad: Liaison Offices in Free Trade Zones
Turkish free trade zones are defined as the areas which are
exempted from the laws regarding foreign trade regime. In general,
all kind of activities can be performed such as: Research and
development, storing, manufacturing, packing, software, general
trading. Moreover, it is allowed to run business through branches.
As it is applied for establishment of a regular company in Turkey,
the leasing, banking, insurance, factoring companies and special
financial institutions also require permission for establishment in
free trade zones.
On the other side, the liaison office are alike representation
offices having no legal entity, subject to permission to be
established, can only be used for the purpose of coordinating a
business and restricted to conduct commercial income generating
transactions within the country. However such establishments have
wider allowances in Turkey depending on field of activities and
shown as the "best-fit" for multinational companies in
start up, short and midterm processes since the employees and the
liaison office are exempt from income taxes under Turkish Law.
As of 03 July 2012 the liaison offices have been subject to new
regulations both in permission and operation proceedings.
Accordingly, the foreign companies running business in money and
capital markets, insurance-based financial areas that have special
rules and requirements for opening liaison office are subject to
permissions of relevant authorities supervising those sectors in
The time period for operating as a liaison office depends on
validity of permission. The first period of operating liaison
office is limited for a period of three years. The permits of
foreign companies for market research or to promote the products or
services are not allowed to extend. However five years extension
for representation and hosting activities, control, inspection and
provision of local suppliers, technical support, communication and
transfer of information and ten years extension for regional
management headquarters are applicable.
Especially the activities related to the "regional
management headquarter" is considerable as it is subject to
ten years extension which is a reasonable period of time to realize
the potential in the country by having the form of
distance-controlling structure and tax exempts for the first
thirteen years. Such activities are deemed as coordination and
management of some operations such as management and investment
strategies, sales, promotion, financial management, training that
are particularly oriented to other units of the foreign company in
foreign countries and as obviously shown the "whole pack"
for multinationals operated from headquarters.
Therefore the "control, inspection and provision of local
suppliers" and "communication and transfer of
information" as a fields of activity are satisfactory as the
regulation defines what it means. Accordingly, the provision of
local producers and products for the foreign company and inspection
of those suppliers in terms of the quality standards of a foreign
company are deemed as the "control, inspection and provision
of local suppliers".
Communication and transfer of information means the collection
and transmission of information to the foreign company having
business contacts in Turkey such as the market conditions,
consumption trends, sales of competitors and distributors,
performance of distributors.
As clearly shown the liaison offices in free trade zones offer
more than one advantage for multinational companies especially in
taxation and operation side. Today there are many multinational
companies operated in free trade zones in form of liaison offices
benefiting such advantages.
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.
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