In recent years, with the increase of global economic integration and the acceleration of liberalization in international trade and financial activities; countries that can be categorized as rising value has gained importance for foreign investors and paving the way for foreign companies to invest in developing economies. Foreign companies that want to take part in active trade and looking for opportunities to increase their annual profits; integrating their perspective through forming establishments in the host countries and strengthen their position in the industry.
With the help of the visionary and innovative approach of the Turkish government and newly issued policies regarding the digital transformation of industries and reducing red tape lead to agile in the country of increase in the trade volume day by day. The latest digital breakthrough facilitates the shortening and expediting the process of establishing a company in Turkey. One of the easiest and most practical way to enter the market in Turkey for foreigners by establishing a liaison office for searching the high yielding possibilities and marketing analysis.
Legal Background and Term of Authorization
To establish a liaison office in Turkey, the necessary actions that should be taken and obligations that should be complied with, business limitations are legally regulated by 4875 numbered Foreign Direct Investment Act ('Act') and Regulation for Implementation of Foreign Direct Investment Act ('Regulation').The purview of the Act is; providing convenience to foreign investors in Turkey for risen their activity in-country, encourage the foreign investments, protecting the rights of the investors, aligning with the terms of investor and investment as the global basis, converting the performing of direct foreign investment from authorization and confirmation system to notification system and aimed to increase foreign investments by established policies.
As the Article 2 of the Act stated that; foreign investor: legal entities that established based on foreign country's law and international establishments, direct foreign investment: supplied by the investor domestically; the profit that reused in the investment, revenue, pecuniary claim or material rights such as the right to search for and extraction of natural resources to establish new company or open a branch via economic assets. As Article 3 of the Act states; terms related to freedom of investment. The act ensures that unless otherwise stipulated by international treaties and special provisions of law, freedom to make direct investments in Turkey by foreign investors and foreign investors shall be treated equally with domestic investors.
Regulation issues the terms and conditions regarding the establishment of liaison office by foreign investors and determines the establishment procedure and activity areas. As Article 6 of the Regulation determines the establishment procedure of liaison office states that; legal entities that established based on foreign country's law shall be authorized to establish a liaison office on condition that not to perform any commercial activities in Turkey. The Ministry of Industry and Technology competent to issue such authorization and its extention. The initial authorization can be issued for three years which can be extended up to five years. Depending on the area; the authorization of regional headquarters maintain their activities for up to ten years with no additional extension.
Regulated Activity Areas
In this regard, the foreign companies that are willing to establish a liaison office in Turkey able to establish only those limited areas of activities that are issued in Regulation and those liaison offices are banned from any type of commercial activities. Commercial activities include any type of occupation, transaction and any commercial contract concluded by the liaison office. In so far that at the beginning of establishment procedure; required documents consist of the undertaking explaining the activity area of the office and the undertaking declares that the office would not execute any commercial activities. Those are;
(a) Representation and Hospitality: representation of the company regarding the industrial establishments and related organisations, coordination and organisation of business inquiries of company officials, fulfilment of needs arisen from the office usage of company officia
(b) The inspection of suppliers in Turkey in terms of quality and standards, audition and recruitment of suppliers: the audit process of manufacturing companies in terms of quality standards, recruitment of companies product demands and manufacturer demands,
(c)Technical Support: providing tech support or training regarding distributors, providing support services to supplier manufacturers to increase their quality standards,
(d) Communications and information transfer: collecting and transferring information on topics of market developments, consumer trends, sales status of competitors and distributors, distributor company's performance, etc. to be conveyed to the company.
(e)Regional Headquarters: providing coordination and management services for, the constitution of investment and management strategies, planning, promotion, sales, follow-up services, brand management, financial management, tech support, R&D, foreign procurement, testing of the newly developed products, lab services, research and analysis, training of employees and for such activities regarding the other units of the company located in other countries.
The activity areas mentioned above are limited and numerus clausus for liaison offices by the Regulation. Performing on any other activity area other than mentioned in Regulation is strictly prohibited.
The recommended method for foreign companies, investors and international organizations that willing to discover opportunities and to sum up detailed knowledge about the market and benefit from the advantages being offered by Turkey; the best way to accomplish all to establish a liaison office. As a liaison office established in the country; foreigners would benefit from the prominent aspects in commercial life such as the image of trust, visibility, and ease of communication.
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.