Turkey, with its dynamic economy and strategic geographical position, continues to be a magnet for foreign businesses seeking to expand their global reach. For companies not yet ready for full-scale commercial operations, establishing a Turkish representative office, also known as a liaison office, presents an ideal entry point.
Akkas & Associates Law Firm outlines the critical steps and important considerations for establishing a representative office in Turkey in 2025, providing guidance to ensure a smooth and fully compliant setup process.
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Setting up a representative office in Turkey has become an increasingly attractive option for international companies seeking to establish a foothold in this dynamic market. As Turkey continues to strengthen its position as a bridge between Europe and Asia, understanding the legal framework for representative office formation is crucial for foreign businesses aiming to expand their operations.
Understanding Turkish Representative Office
A representative office serves as a liaison between a foreign company and the Turkish market without engaging in direct commercial activities. Unlike subsidiaries or branches, representative offices cannot generate revenue or enter into binding contracts on behalf of the parent company. Instead, they focus on market research, promotional activities, and facilitating business relationships.
The Turkish Commercial Code provides the legal foundation for representative office establishment, offering foreign entities a streamlined entry point into the Turkish business environment. This structure proves particularly beneficial for companies testing market waters before committing to more substantial investments.
The Strategic Edge: Why a Turkish Representative Office?
A representative office serves as a crucial bridge between a foreign parent company and the vibrant Turkish market. Unlike a branch office or a fully incorporated company, a liaison office is strictly prohibited from engaging in commercial or revenue-generating activities.
Its primary functions are non-commercial, focusing on market research, communication, information gathering, and fostering business relationships. This structure offers significant advantages, including simplified compliance and attractive tax exemptions.
Key Steps for Turkish Representative Office Formation in 2025
Establishing a representative office in Turkey requires meticulous adherence to specific legal procedures. Here are the critical steps to guide your formation process:
Step 1: Understanding the Legal Framework and Permitted Activities
Before embarking on the application, it’s vital to grasp the regulatory landscape. Turkish representative offices are governed primarily by the Foreign Direct Investment Law No. 4875 and its implementing regulations. The Ministry of Industry and Technology‘s General Directorate of Incentive Implementation and Foreign Investment is the primary authority for approvals and oversight.
Permitted activities typically include:
- Market research and feasibility studies.
- Gathering information about the Turkish market and industry trends.
- Promoting the parent company’s products or services.
- Establishing business contacts and networking.
- Representing the parent company in non-commercial capacities.
- Providing technical support or quality control for existing partners.
- Acting as a regional management center.
Any activity that generates income or commercial transactions is strictly forbidden. This distinction is paramount and failing to adhere can lead to penalties or even revocation of the permit.
Step 2: Preparing Essential Documentation
A comprehensive and accurate application package is crucial for a smooth approval process. Documents issued abroad must be apostilled or attested by the Turkish consulate in the country of origin, then officially translated into Turkish and notarized. Key documents generally include:
- Application Form and Commitment Letter: A formal request outlining the liaison office’s scope of work and a commitment that it will not engage in commercial activities.
- Parent Company’s Documents:
- Certificate of Good Standing (or equivalent) proving the parent company’s active status.
- Operational report, balance sheet, and income statement of the parent company. The parent company should generally have been operational for at least one year.
- Board Resolution approving the establishment of the representative office in Turkey.
- Articles of Association or equivalent corporate documents.
- Representative’s Documents:
- Power of attorney issued to the individual appointed to manage the liaison office.
- Scanned passport copy of the representative.
- Signature declaration of the authorized person.
- Other Supporting Documents:
- Rental contract for the office space in Turkey.
- Bank letter indicating funds transferred from abroad (important for work permit applications for foreign personnel).
For detailed guidance on required documents and processes for various business structures, you can explore our services on Turkish Company Formation.
Step 3: Obtaining Ministry Approval
Once all documentation is prepared, the application is submitted to the Ministry of Industry and Technology. The Ministry reviews the application based on the company’s activity area, capital, and personnel. Provided all documents are complete, the Ministry typically processes applications within 15 business days. Initial permits are usually granted for a maximum of three years.
Step 4: Post-Permit Registrations and Obligations
Upon receiving the establishment permit, further steps are necessary to ensure full compliance:
- Tax Office Registration: The liaison office must register with the local tax office to obtain a tax identification number (TIN) and comply with withholding tax liabilities (e.g., on rental payments).
- Social Security Registration: If the liaison office employs Turkish citizens, it must register with the Social Security Institution.
- Bank Account: Open a local bank account in the liaison office’s name for operational expenses. All expenses must be covered by foreign currency transferred from the parent company abroad.
- Reporting: Liaison offices are required to submit an “Information Form Concerning the Liaison Office Activities” (Annex 4) and its attachments to the Ministry annually by the end of May. Failure to submit this form can lead to permit extension denials or even cancellation.
For broader legal support concerning business operations in Turkey, consider visiting our page on Doing Business in Turkey.
Step 5: Managing Extensions and Compliance
The initial permit for a representative office is typically for three years. Extensions can be granted for up to five years at a time, based on the office’s past activities, future plans, current and estimated expenditure, and employee count. Applications for extension must be made before the current permit expires.
Maintaining strict compliance with the non-commercial nature of the liaison office is paramount. The Ministry may conduct inspections to ensure activities remain within the permitted scope. Any changes in address, liaison representatives, or parent company details must be reported to the General Directorate within one month.
FAQs About Turkish Representative Office Formation
Q1: What is the main difference between a Turkish representative office and a branch office? A: The key distinction lies in their commercial activities. A representative office cannot engage in any commercial or profit-generating activities, serving purely as a liaison. A branch office, however, is an extension of the parent company that can conduct commercial activities and generate revenue in Turkey.
Q2: Are representative offices in Turkey subject to corporate tax? A: No, provided they do not engage in commercial activities, liaison offices are generally exempt from corporate income tax and Value Added Tax (VAT). However, they must register for withholding tax liabilities, such as on rental payments.
Q3: How long does it take to establish a Turkish representative office? A: Once all required documents are complete and properly prepared, the Ministry of Industry and Technology typically processes the application within 15 business days.
Q4: Can a foreign company’s newly established subsidiary open a representative office in Turkey? A: Generally, the parent company needs to have been operational for at least one year to qualify for a liaison office permit. Newly founded companies may face rejection.
Q5: What happens if a representative office engages in commercial activities? A: If a liaison office is found to be conducting unauthorized commercial activities, the Ministry will issue a warning and grant 30 days to apply for the appropriate commercial license (e.g., convert to a branch or a company). Failure to comply can result in the cancellation of the operating permit.
Contact us for Turkish Representative Office Formation
Establishing a Turkish representative office in 2025 offers an excellent opportunity to explore and penetrate the Turkish market without the full commitment of a commercial entity. Navigating the intricate legal landscape requires specialized expertise. Our dedicated team at Akkas & Associates Law Firm, with decades of experience in Turkish company formation and foreign investment, is adept at guiding international businesses through every step of the process.
For unparalleled legal assistance with Turkish representative office formation, company incorporation, or any other foreign direct investment needs in Istanbul, please do not hesitate to contact Akkas & Associates Law Firm. We are here to ensure your expansion into Turkey is successful and fully compliant.
