ESTABLISHMENT AND CONDITIONS FOR FOREIGN INVESTORS' LIAISON OFFICES

WHAT IS A LIAISON OFFICE?

A liaison office refers to an office established in the Turkish market by a foreign-origin company to identify investment opportunities on behalf of the company, in order to continue market research and feasibility studies. Liaison offices do not have permission to conduct commercial activities or engage in any service sales. Liaison offices facilitate establishing connections between the brand, sector, and customer base. A foreign company considering entry into the country's market must first establish an office in accordance with the Liaison Office Legislation.

DOCUMENTS REQUIRED TO ESTABLISH A LIAISON OFFICE

The necessary documents to establish a liaison office in Turkey include: Application form (available directly in the form of a template document in the foreign investment law enforcement regulation), a declaration containing commitments regarding the scope of work to be carried out by the liaison office and stating that the office will not engage in commercial activities (available in the form of a template document in the regulation), and a document showing the signatory authority of the foreign company representative who signs the declaration, an Activity Certificate certified in accordance with the provisions of the Convention on the Abolition of the Requirement of Legalization of Foreign Official Documents prepared by the Turkish Consulate or within the framework of the Hague Conference on Private International Law, a Activity Report or balance sheet and income statement prepared for the foreign company, an authorization certificate to be given to the person(s) appointed to carry out the activities of the liaison office, and in case the establishment procedures of the liaison office are carried out through another person or with an attorney as specified in the law. Along with these documents, an application is made to the Ministry of Industry and Technology. Liaison offices obtaining establishment permission shall submit to the General Directorate within 1 month at the latest a copy of the registration document with the tax office and the lease agreement related to the office. The offices shall inform the General Directorate, within 1 month at the latest from the realization of the change, of changes in address, office manager(s), or foreign company name, together with the lease agreement indicating the new address, the authorization certificate for the newly appointed person, or the document(s) regarding the change in the foreign company name.

In case of termination of the activities of liaison offices, an "exit-notice" form to be obtained from the relevant tax office shall be sent to the General Directorate. Offices cannot request a transfer except for the balance resulting from the closure and liquidation.

ACTIVITIES AND DURATION OF LIAISON OFFICES

Liaison offices are initially granted permission for a maximum of 3 years for the declared scope of activities. Offices wishing to extend their activity period can apply for an extension of time to the Directorate General of Incentive Implementation and Foreign Capital before the end of the activity period. The General Directorate can evaluate the requests for extension of time in accordance with the nature of the activity to be carried out, within the framework of past year activities of the office, future business plans and objectives of the foreign company in Turkey, current and estimated expenditure amount, and the number of personnel employed. Offices that cannot request an extension of time are those that have been granted permission to conduct market research or promote the products or services of the foreign company. It should be noted that in the extensions of liaison offices, considering past year activities and future plans and objectives, a maximum extension of 3 years can be granted each time. Liaison offices shall send to the Ministry, by the end of May each year, the "Information Form on the Activities of Liaison Offices" (Annex-4) included in the Regulation and the attached documents. Liaison offices that do not send this form and attached documents will not have their extension requests evaluated. Activity permits may also be cancelled ex officio.

Whether liaison offices are conducting their activities in accordance with the legislation and the activities specified in their permits may be inspected by the Ministry upon written notifications from relevant authorities or institutions. Offices found to be operating outside the scope of their permits are given thirty days to apply for permission to conduct the activity actually carried out. This period may be extended for up to thirty days in the presence of justifiable reasons. Offices failing to apply within the given period will have their activity permits cancelled. Offices found to be conducting commercial activities as a result of the inspection will have their activity permits cancelled and will be reported to the relevant authorities.

ADVANTAGES OF LIAISON OFFICES IN TERMS OF TAXATION

Liaison offices are exempt from income tax, corporate tax, value-added tax, and stamp duty. Although they are obliged to submit a summary declaration, they are not required to make any payment for the declaration. Liaison offices provide foreign investors conducting sectoral research with the opportunity to carry out such research within a suitable budget.

Attorney Tolga Güner Koncagül