Setting-up of Liaison Offices under Turkish Law
Introduction
A foreign company aiming to enhance its commercial and economic relations in Turkey has multiple options in terms of institutional setup. These options should be carefully evaluated in accordance with the needs of the companies and their aims in Turkey.
A foreign company may choose to handle its economic relations with actors residing in Turkey directly from its headquarters located abroad. This way of involvement is usually preferred by companies which aim to conduct a one-time activity in Turkey. However, one should take into account that if the relevant activity involves Turkish actors/elements such as hiring Turkish employees, or getting a work permit for foreign employees, etc., some bureaucratic hurdles are likely to come up.
Therefore, foreign companies which have business relations in Turkey usually prefer to set up a branch office or establish an affiliate company in Turkey. In addition to this, it is seen that, nowadays, foreign companies also choose to set up liaison offices for their presence in Turkey. This note provides an overview of the concept of and regulations regarding the liaison offices. Information about branches and affiliates will be shared later in our blog.
Definition and Concept
A liaison office can be defined as the representation office of a foreign company which aims to conduct non-commercial activities in the given territory. Liaison offices can be established for the purposes of representation, control of suppliers, technical support, communication, and information transfer or ensuring regional management.
Whereas establishment of liaison offices is a common application in international commerce, it has been incorporated into Turkish legislation in 2003 with the Foreign Direct Investment Law (numbered 4875 and dated 5/6/2003, hereinafter ‘the Law’)1.
Relevant Legislation
As mentioned, establishing liaison offices has become possible with the enactment of the Turkish Foreign Direct Investment Law. The procedures and principles that apply to liaison offices are specified in the Regulation on the Implementation of the Foreign Direct Investment Law (‘the Regulation’).
In addition to the Law and the Regulation, the circulars and memorandums of the relevant authorities must also be considered during establishment and activities of liaison offices, especially as regards taxation and social security issues.
Limitations
While liaison offices offer a number of advantages and exemptions to foreign companies in Turkey, they are also subject to additional restrictions compared to branch offices and affiliates under Turkish law. In particular, certain activities that can be done through branch offices and affiliates cannot be done by liaison offices, since they are an extension of their foreign parent company and do not have an independent legal personality. They cannot acquire rights or incur liabilities through their own actions. Their activities must be restricted to the purposes of representation, control of suppliers, technical support, communication, and information transfer or ensuring regional management in accordance with Article 8 of the Regulation.
Procedure
During the establishment procedure of the liaison offices in Turkey, the relevant authority to make the application is the Ministry of Trade pursuant to Articles 3 and 6 of the Regulation, and as per the information provided by the Ministry, the relevant directorate is the General Directorate of Incentive Implementation and Foreign Investment (GDIIFI).
It is stipulated in Article 7 of the Regulation that the applications for establishment shall be concluded within 15 working days from the date of application, provided that the required information/documents are complete. The liaison offices are allowed for a maximum period of 3 years which is extendable upon application, subject to certain requirements.
Both in Article 7 of the Regulation and on the website of Ministry of Trade, the required documents for setting up a liaison office have been listed as follows2 :
– Application form,
– A statement outlining the works to be conducted by the liaison office, an undertaking that the office shall not engage in any commercial activities, and proof that the signatory to the statement is fully authorized by the company,
– A certificate of activity issued by the foreign country and verified by the relevant Turkish Consulate or in accordance with the provisions of the Apostille Convention.
– A certificate of activity issued to foreign companies or balance sheet and income statement,
– A certificate of authorization issued to the individual(s) appointed to conduct the activities of the liaison office,
– A power of attorney in the event that the procedures for establishing the liaison office are carried out by another representative.
As with all legal procedures related to doing business in Turkey, we advise working with experienced Turkish lawyers who can provide the necessary expert assistance in completing these procedures in the most efficient and smooth way.
1 4875 sayılı Doğrudan Yabancı Yatırımlar Kanunu
2 http://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/EstablishingABusinessInTR.aspx