Establishment of Liaison Offices in Turkey by Companies Incorporated under Foreign Laws

Foreign companies may prefer to establish liaison offices in Turkey for purposes such as market research, promotion, supplier procurement, or communication and information transfer before directly commencing commercial activities. This method offers a low-cost and lower-risk initial model.

Legal Basis

The process of establishing liaison offices in Turkey by companies incorporated under foreign laws is carried out by the General Directorate of Incentive Implementation and Foreign Investment of the Ministry of Industry and Technology of the Republic of Turkey, within the framework of the provisions of Law No. 4875 on Direct Foreign Investments ("Law") and the Regulation on the Implementation of the Law on Direct Foreign Investments ("Regulation") prepared pursuant to this Law.

Characteristics and Fields of Activity of Liaison Offices

Liaison offices cannot engage in commercial activities in Turkey, cannot generate revenue, and do not have legal personality. However, they may only engage in non-commercial activities that are not aimed at generating income. Within this scope, the activities that liaison offices may carry out include:

• Conducting market research or promoting the products or services of the foreign company,
• Representing the foreign company before sectoral organizations and in relevant events, coordinating and organizing the business contacts of foreign company representatives in Turkey, and meeting the office use needs of these persons,
• Inspecting firms that manufacture on behalf of the foreign company in line with the foreign company's quality standards, and procuring the foreign company's product and manufacturer requirements,
• Providing training or technical support to distributors and support services to supplier manufacturers to improve quality standards,
• Collecting and transferring information on market developments, consumer trends, the sales status of competitors and distributors, distributor performance, etc., to be conveyed to the foreign company engaged in business relations with Turkey,
• Providing coordination and management services to the foreign company's units in other countries in relation to activities such as forming investment and management strategies, planning, promotion, sales, after-sales services, brand management, financial management, technical support, R&D, outsourcing, testing newly developed products, laboratory services, research and analysis, and training of employees.

Application Process and Required Documents

In order for companies incorporated under foreign laws to establish liaison offices in Turkey, they must apply to the Ministry of Industry and Technology of the Republic of Turkey with the following documents:

• Application form,
• A declaration including the scope of the works to be carried out by the liaison office and a commitment that the office will not engage in commercial activities, and a document showing the signatory authority of the foreign company official who signed the declaration,
• A Certificate of Activity belonging to the foreign company, notarized either by the relevant Turkish Consulate or in accordance with the provisions of the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents,
• An Activity Report or balance sheet and income statement prepared regarding the foreign company,
• A power of attorney to be granted to the person(s) appointed to carry out the activities of the liaison office,
• A power of attorney in cases where the establishment procedures of the liaison office are carried out through another person.

Applications regarding establishment and extension of the term are finalized within fifteen business days from the date of application, provided that the requested information/documents are complete and accurate.

Term of Activity

At the initial application, liaison offices are granted permission for a maximum of three years within the declared scope of activity. Liaison offices wishing to extend their term of activity must apply to the General Directorate of Incentive Implementation and Foreign Investment before the expiry of their current activity term.

The General Directorate evaluates extension requests in accordance with the nature of the activities to be carried out, considering the liaison office's past activities, the foreign company's future business plans and objectives in Turkey, the amount of current and projected expenditures, and the number of personnel employed.

The term of activity of liaison offices established for the purpose of conducting market research or promoting the foreign company's products or services is not extended.

Supervision and Termination of Activities

Liaison offices granted establishment permits must submit a copy of their tax registration certificate and their office lease agreement to the General Directorate of Incentive Implementation and Foreign Investment within one month at the latest. Offices must notify the General Directorate within one month of any changes to their address, office representative(s), or the trade name of the foreign company, by submitting the new lease agreement showing the new address, the authorization certificate regarding the newly appointed person, or the document(s) concerning the change in the company's trade name.

By the end of May each year at the latest, liaison offices must submit to the Ministry of Industry and Technology the Information Form on Liaison Office Activities included in the annex of the Regulation, along with its attachments, regarding the activities of the previous year. Extension requests of liaison offices that fail to submit this form and its attachments will not be considered. Their activity permits may also be canceled ex officio.

Whether liaison offices carry out their activities in compliance with legislation and the scope of activity specified in their permits may be audited ex officio by the Ministry of Industry and Technology or upon written notification by relevant institutions and organizations. If it is determined as a result of an audit that the offices are engaged in activities outside the scope of the permit, they are given thirty days to apply for a permit for the actual activity carried out. This period may be extended for up to thirty more days if there are valid reasons. If no application is made by the end of this period, the liaison office's activity permit is canceled. If it is determined as a result of the audit that the office is conducting commercial activities, its permit will be canceled, and the matter will be reported to the relevant authorities.

Conclusion

In conclusion, a liaison office is a legal and practical structure that allows companies incorporated under foreign laws to operate in Turkey in a limited scope before directly commencing commercial activities. Since it does not permit income-generating operations, the scope of a liaison office's activities must be carefully defined and carried out in compliance with the legislation. Obtaining proper legal consultancy throughout the process, renewing permits on time, and fulfilling obligations completely are of great importance. Within this framework, we provide support to our clients in the establishment of liaison offices, in the necessary applications before the Ministry of Industry and Technology, and throughout all stages of the process.

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