Liaison Offices in Turkish Law - ONGUR&PARTNERS

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Liaison Offices in Turkish Law


LIAISON OFFICES AS PER TURKISH LAW

 

1. Introduction

 

For a foreign company aiming to enhance its commercial and economic relations in Turkey, it is possible to mention some possibilities in terms of institutional setup. These different possibilities should be carefully evaluated in accordance with the needs of the companies and their aims in Turkey.

 

First of all, a foreign company may prefer to have an economic relationship with actors residing in Turkey, directly from its headquarters located abroad. This way of involvement is usually preferred by companies which aim to conduct one-time activity in Turkey. And one should take into account that if the work to be carried out involves Turkish actors/elements such as hiring Turkish employees, getting a work permit for foreign employees, etc., some bureaucratic hurdles are likely to come up.

 

Therefore, it is possible to note that foreign companies which have business relations in Turkey usually prefer to set up a branch office or establish an affiliate company. In addition to that, it is possible to see that along with setting a branch office or establishing an affiliate company, nowadays foreign companies also prefer setting up liaison offices in Turkey in order to enhance their commercial activities. In this paper, details regarding the liaison offices will be presented. On the other hand, information about branches and affiliates will be shared later on this blog.

 

2. 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.

 

Establishment of liaison offices is a common application in the international commercial realm which has also been incorporated into Turkish legislation in 2003 with the Foreign Direct Investment Code (numbered 4875 and dated 5/6/2003, hereinafter ‘the Code’)1.

 

 

3. Relevant Legislation

 

Establishing liaison offices has become possible with the enactment of the Foreign Direct Investment Code. However, the Code does not provide detailed guidelines for establishment and activity processes. Procedures and principles regarding liaison offices are regulated in the Regulation on the Implementation of the Foreign Direct Investment Law (‘the Regulation’).

 

In addition to the Code and the Regulation, it should also be stated that the circulars and memorandums of the relevant authorities should also be considered during the establishment and activity processes especially for the taxation and social security issues.

 

4. Limitations

 

Although liaison offices offer a number of advantages and exemptions to foreign companies, it is also subject to some additional restrictions comparing to the branch offices and affiliates.

 

In this context, it should be noted that, as per Turkish law, the aims and activities of the liaison offices should be restricted with the below-specified borders. In more concrete terms, it is not possible to conduct all the activities, that can be done through branch offices and affiliate companies, by liaison offices.

 

In accordance with Article 8 of the Regulation, liaison offices may be established for the purposes of representation, control of suppliers, technical support, communication and information transfer or ensuring regional management.

 

5. Procedure

 

In the establishment procedure of the liaison offices, the authorized official authority is Ministry of Trade pursuant to the 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).

 

Therefore, the application shall be made to the Ministry of Trade. 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. In the first applications, the liaison offices are allowed for a maximum period of 3 years which is extendable upon application.

 

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.

 

1   4875 sayılı Doğrudan Yabancı Yatırımlar Kanunu