Establishment and Activity Process of Liaison Offices in Türkiye
The conditions of international trade force companies to open liaison offices in different countries. Liaison offices are established by foreign companies aiming to invest in Turkey to conduct market research, monitor business opportunities, and relay information to their headquarters without engaging in commercial activities. The legal framework for establishing liaison offices is primarily governed by the Foreign Direct Investment Law No. 4875, effective since June 5, 2003, and its Implementing Regulation.
Permit Application Process
To open a liaison office, foreign companies must obtain permission from the Ministry of Industry and Technology's General Directorate of Incentive Implementation and Foreign Investment. The Ministry evaluates applications based on the company's area of activity, capital, and personnel count. For newly established companies, the Ministry may require a one-year operational period before granting permission. Applications for establishment and extension are processed within fifteen business days, provided all required documents and information are complete. Permissions are initially granted for up to three years and can be extended based on the office's past activities and future plans. Extensions must be requested before the current permit expires.
Post-Permit Obligations
Upon receiving the establishment permit, liaison offices must submit a copy of their tax office registration and rental contract to the General Directorate within one month. Any changes in address, liaison representatives, or the parent company's job title must be reported within one month, accompanied by relevant documentation.
Operational Restrictions
Liaison offices are prohibited from engaging in any commercial or profit-generating activities beyond their permitted scope. All expenses must be covered with foreign currency brought from abroad. To ensure compliance, liaison offices must register as limited taxpayers and maintain records as stipulated by the Tax Procedure Law, including a journal, general ledger, and inventory register on a balance sheet basis.
Taxation and Social Security
Provided they do not engage in commercial activities, liaison offices are exempt from corporate and value-added taxes. However, they must register with the tax office for withholding tax liabilities, such as on rental payments and professional service fees. Salaries paid to employees are exempt from income tax under Article 23, Paragraph 1, Subparagraph 14 of the Income Tax Law, provided payments are made in foreign currency from income generated abroad. If salaries are not paid in foreign currency, employees must declare their income and pay the relevant taxes.
As of January 1, 2025, social security premiums are calculated on salaries ranging from a minimum of TRY 26,005.50 to a maximum of TRY 195,041.40 per month. The employee's contribution is 15%, while the employer's contribution is 22.5%, including unemployment insurance. For retired employees, the total premium is 32%. Turkish citizens employed in liaison offices must be registered with the Social Security Institution. Foreign employees temporarily assigned to Turkey and covered by their home country's social security system are exempt from Turkish social security contributions, provided they can document their coverage.
Employment of Foreign Personnel
After obtaining the initial permit for the liaison office, foreign personnel must secure a work permit from the Ministry of Labour and Social Security and apply for a residence permit within 30 days. According to Article 6 of the Implementing Regulation of Foreign Direct Investments Law No. 4875, liaison offices that have brought at least USD 200,000 or an equivalent amount of foreign currency into Turkey in the past year may be granted a work permit for one person with an authorization certificate.
Annual Reporting and Inspections
Liaison offices are required to submit the "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 may result in the denial of extension requests or cancellation of operating permits. The Ministry may conduct inspections to ensure that liaison offices operate within the scope of their permits. Offices found to be conducting unauthorized activities will be given 30 days to apply for the appropriate license; failure to comply may result in permit cancellation.
Termination Procedures
If a liaison office decides to terminate its activities, it must submit a termination and examination of business note from the relevant tax office to the General Directorate. Liaison offices are not permitted to transfer any funds except for balances arising from termination and liquidation.
Required Documents for Establishment Application
The following documents are required when applying to the Ministry to establish a liaison office:
Dr. Sadettin Orhan
Labor and Social Security Expert
The conditions of international trade force companies to open liaison offices in different countries. Liaison offices are established by foreign companies aiming to invest in Turkey to conduct market research, monitor business opportunities, and relay information to their headquarters without engaging in commercial activities. The legal framework for establishing liaison offices is primarily governed by the Foreign Direct Investment Law No. 4875, effective since June 5, 2003, and its Implementing Regulation.
Permit Application Process
To open a liaison office, foreign companies must obtain permission from the Ministry of Industry and Technology's General Directorate of Incentive Implementation and Foreign Investment. The Ministry evaluates applications based on the company's area of activity, capital, and personnel count. For newly established companies, the Ministry may require a one-year operational period before granting permission. Applications for establishment and extension are processed within fifteen business days, provided all required documents and information are complete. Permissions are initially granted for up to three years and can be extended based on the office's past activities and future plans. Extensions must be requested before the current permit expires.
Post-Permit Obligations
Upon receiving the establishment permit, liaison offices must submit a copy of their tax office registration and rental contract to the General Directorate within one month. Any changes in address, liaison representatives, or the parent company's job title must be reported within one month, accompanied by relevant documentation.
Operational Restrictions
Liaison offices are prohibited from engaging in any commercial or profit-generating activities beyond their permitted scope. All expenses must be covered with foreign currency brought from abroad. To ensure compliance, liaison offices must register as limited taxpayers and maintain records as stipulated by the Tax Procedure Law, including a journal, general ledger, and inventory register on a balance sheet basis.
Taxation and Social Security
Provided they do not engage in commercial activities, liaison offices are exempt from corporate and value-added taxes. However, they must register with the tax office for withholding tax liabilities, such as on rental payments and professional service fees. Salaries paid to employees are exempt from income tax under Article 23, Paragraph 1, Subparagraph 14 of the Income Tax Law, provided payments are made in foreign currency from income generated abroad. If salaries are not paid in foreign currency, employees must declare their income and pay the relevant taxes.
As of January 1, 2025, social security premiums are calculated on salaries ranging from a minimum of TRY 26,005.50 to a maximum of TRY 195,041.40 per month. The employee's contribution is 15%, while the employer's contribution is 22.5%, including unemployment insurance. For retired employees, the total premium is 32%. Turkish citizens employed in liaison offices must be registered with the Social Security Institution. Foreign employees temporarily assigned to Turkey and covered by their home country's social security system are exempt from Turkish social security contributions, provided they can document their coverage.
Employment of Foreign Personnel
After obtaining the initial permit for the liaison office, foreign personnel must secure a work permit from the Ministry of Labour and Social Security and apply for a residence permit within 30 days. According to Article 6 of the Implementing Regulation of Foreign Direct Investments Law No. 4875, liaison offices that have brought at least USD 200,000 or an equivalent amount of foreign currency into Turkey in the past year may be granted a work permit for one person with an authorization certificate.
Annual Reporting and Inspections
Liaison offices are required to submit the "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 may result in the denial of extension requests or cancellation of operating permits. The Ministry may conduct inspections to ensure that liaison offices operate within the scope of their permits. Offices found to be conducting unauthorized activities will be given 30 days to apply for the appropriate license; failure to comply may result in permit cancellation.
Termination Procedures
If a liaison office decides to terminate its activities, it must submit a termination and examination of business note from the relevant tax office to the General Directorate. Liaison offices are not permitted to transfer any funds except for balances arising from termination and liquidation.
Required Documents for Establishment Application
The following documents are required when applying to the Ministry to establish a liaison office:
- Application form (Annex 6).
- Letter of commitment detailing the scope of the liaison office's activities and an assurance not to engage in commercial activities (Annex 7), along with the authorization document of the foreign company official who signed the letter.
- The parent company's Certificate of Activity, approved by the relevant Turkish Consulate or in accordance with the Hague Apostille Convention.
- Operational report or the parent company's balance sheet and income statement.
- Certificate of authority for the person(s) appointed to operate the liaison office.
- Power of attorney if another person will conduct the establishment procedures of the liaison office.
Dr. Sadettin Orhan
Labor and Social Security Expert
İş ve Sosyal Güvenlik Atölyesi offers counsulting services in labor and social security legislation under coordination of Dr. Sadettin Orhan.
