Primetax Guide: Setting Up a Liaison Office in Türkiye

1. Introduction

A company incorporated under the laws of a foreign country may establish a liaison office in Türkiye after obtaining an operating licence from the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Investment (GDIIFI). A liaison office is not a separate legal entity from its foreign parent and, as a matter of principle, may not conduct commercial activities or generate income in Türkiye.

The liaison-office model is therefore intended for foreign companies that require a local presence for non-commercial functions such as representation, market research, supplier supervision, technical support, information gathering or regional coordination. The precise activities that may be carried out depend on the scope stated in the licence granted by the Ministry. The office must remain within that scope throughout its operation.

The distinction between a liaison function and a commercial function is fundamental. A liaison office should not issue sales invoices, collect customer payments, accept customer orders, conclude sales contracts in Türkiye as principal, or otherwise perform activities that amount to the generation of business income in Türkiye. Commercial negotiations, pricing decisions and contractual execution should remain with the foreign parent or another properly established group entity.

2. Legal Framework and Competent Authority

The current legal framework for liaison offices is principally based on Foreign Direct Investment Law No. 4875 and the Regulation for the Implementation of the Foreign Direct Investment Law. Law No. 6224 on the Encouragement of Foreign Capital, which is still referred to in some older publications, was repealed by Law No. 4875 and should no longer be presented as the current legal basis.

The competent authority is the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Investment. Accordingly, older references to the Ministry of Economy, the Treasury or former foreign-investment directorates are no longer current.

Foreign companies operating in sectors that are subject to specific regulatory regimes, including banking, insurance and capital markets, may also be subject to the requirements of the relevant sectoral authority. In other regulated sectors, the Ministry may seek the opinion of the relevant public authority before granting a liaison-office licence.

For recently incorporated foreign companies, the Ministry may also consider factors such as the parent company's field of activity, capital, number of employees and operational history. In appropriate cases, the Ministry may require at least one year to have elapsed since the incorporation of the foreign parent before granting a liaison-office licence.

3. Establishment of a Liaison Office

An application must be submitted to GDIIFI before the liaison office commences activities. Where the application file is complete and accurate, establishment and extension applications are intended to be concluded within 15 working days, although the actual processing period may vary depending on the circumstances of the application.

The application file generally includes the official liaison-office application form, a statement describing the proposed activities and confirming that the office will not conduct commercial activity, evidence of the authority of the person signing that statement, a current certificate of activity or equivalent corporate-status document for the foreign parent, the parent's annual report or alternatively its balance sheet and income statement, an authorisation certificate for the person or persons appointed to conduct the office's activities, and a power of attorney where the establishment procedures are handled by a third-party adviser.

Foreign corporate documents must be prepared with the applicable legalisation or apostille formalities. Where required for use before Turkish authorities, notarised Turkish translations should also be obtained.

After the liaison-office licence has been granted, the office should be registered with the relevant tax office and a Turkish tax identification number should be obtained. The relevant tax registration document and tenancy agreement should then be submitted to GDIIFI within the prescribed period. Changes in the office address, authorised representatives or the foreign parent's corporate name should also be notified to the Ministry together with supporting documents.

4. Permitted Activities

The activities of a liaison office are limited to the category or categories approved in its operating licence. The principal activity categories recognised under the current regulatory framework include market research, promotion of the foreign parent's products and services, representation and hosting, supplier supervision and sourcing, technical support, communication and information transfer, and regional management-centre functions.

Market research consists of researching the Turkish market for the foreign parent. Promotion activities may involve promoting the foreign parent's products or services, but without undertaking sales or other commercial transactions in Türkiye. Representation and hosting activities may include representing the foreign company before sectoral organisations and at relevant events, coordinating the business contacts of foreign-parent representatives in Türkiye and meeting the office needs of such visiting representatives.

Supplier supervision and sourcing may include reviewing Turkish suppliers for compliance with the foreign parent's quality and other standards and identifying suppliers or manufacturers in accordance with the parent's requirements. Technical support may include training or technical assistance for distributors and support to supplier manufacturers for the improvement of quality standards, provided such activities do not become direct revenue-generating repair or customer-service activities.

Communication and information-transfer functions may cover the collection and transfer of market developments, consumer trends, competitor information, distributor performance and similar business intelligence to the foreign parent. A regional management centre may, where specifically authorised, coordinate and manage services for the foreign parent's units in other countries, including strategy, planning, promotion, sales coordination, after-sales coordination, brand management, financial management, technical support, research and development, procurement, product testing, research, analysis and employee training.

References to sales or after-sales services in the regional management-centre category should not be understood as permitting the liaison office itself to sell goods or services to customers in Türkiye. They refer to coordination and management functions performed for foreign group units.

5. Duration of the Licence and Extensions

An initial liaison-office licence may be granted for a maximum period of three years. The extension rules differ depending on the authorised activity and older guidance referring to a general three-year extension period is no longer accurate.

Liaison offices established for market-research activities or for the promotion of the foreign parent's products or services are not eligible for an extension after the initial licence period. Liaison offices carrying out representation and hosting, supplier supervision and sourcing, technical support, or communication and information-transfer functions may generally be granted extensions of up to five years. Regional management centres may be granted extensions of up to ten years.

An extension application should be submitted before the existing licence expires. When considering an extension, GDIIFI may review the activities carried out during the previous period, the foreign parent's future business plan and objectives in Türkiye, actual and projected expenditure levels and the number of employees working in the office.

6. Employees and Work Permits

A liaison office may employ Turkish personnel without a specific numerical cap under the liaison-office rules. Foreign personnel, however, are subject to Turkish work-permit legislation.

Under the special work-permit rules applicable to liaison offices, a work permit may be granted to a maximum of one foreign national for whom the overseas parent has issued an authorisation certificate. The liaison office must also document that at least USD 200,000, or the equivalent in another foreign currency, was brought into Türkiye from abroad during the preceding year for the activities of the office. This foreign-funding threshold is relevant to the work-permit documentation for the authorised foreign employee.

The work-permit application is made through the electronic system administered by the Ministry of Labour and Social Security. The liaison-office operating licence, the foreign parent's authorisation and evidence of the required foreign-currency funding are among the documents specifically relevant to such applications.

Employment arrangements should also be documented in a manner consistent with Turkish labour and social-security requirements. For foreign personnel, a signed employment or service agreement is normally part of the work-permit documentation. The fact that an employee's salary may qualify for an income-tax exemption does not by itself remove social-security or employment-law obligations.

7. Taxation

7.1 Corporate Income Tax

A liaison office that is validly established and remains within its authorised non-commercial scope does not generate taxable business income in Türkiye. In that case, a corporate income tax registration and annual corporate income tax return are generally not required for the liaison office.

This treatment depends on the substance of the activities actually carried out. If the office goes beyond its permitted liaison functions and conducts commercial or other income-generating activities, the foreign parent may become subject to Turkish taxation, including potential permanent-establishment exposure, and the liaison-office licence may also be at risk.

7.2 Income Tax on Employee Remuneration

Salaries paid by a non-resident employer may qualify for the exemption under Article 23/14 of the Turkish Income Tax Law where the statutory conditions are satisfied together. In the ordinary liaison-office context, the employer must have neither its legal seat nor its business centre in Türkiye and must not carry on an income-generating activity in Türkiye through the liaison office. The recipient must be an employee and the payment must constitute salary or remuneration. The remuneration must be funded from the foreign employer's earnings generated outside Türkiye and must be paid in foreign currency. In addition, the exempt remuneration should not be recorded as an expense against taxable Turkish income of the non-resident employer.

Where these conditions are met, the remuneration is exempt from Turkish income tax and the related salary papers are also exempt from stamp duty. The foreign-currency payment condition is particularly important. Payment in Turkish lira does not satisfy the statutory condition merely because the underlying funds were transferred from abroad. Other cash or in-kind benefits should not automatically be assumed to fall within the exemption; their treatment should be reviewed by reference to the nature of the benefit and the relevant payment mechanics.

7.3 Withholding Tax on Other Payments

Although the liaison office does not normally pay corporate income tax, it may still have withholding obligations in respect of certain payments made in Türkiye. Examples include rent paid to individuals, which is generally subject to 20% withholding, and many independent professional-service payments to individuals, which are also generally subject to 20% withholding. The precise treatment depends on the nature of the payment, statutory exemptions and, where relevant, the provisions of an applicable double tax treaty.

7.4 Value Added Tax

A compliant liaison office does not itself carry out commercial transactions and is therefore generally not registered as a normal output-VAT taxpayer for its liaison activities. VAT charged on goods and services purchased in Türkiye is consequently generally treated as a cost rather than as recoverable input VAT.

A separate issue arises where the liaison office procures services from non-resident suppliers and the services are used or benefited from in Türkiye. Depending on the nature of the service, Turkish VAT may be payable under the reverse-charge mechanism and a No. 2 VAT return may be required even though the liaison office is not registered as a normal VAT taxpayer.

7.5 Stamp Duty

The fact that the foreign parent rather than the liaison office is the contracting party does not create a general exemption from Turkish stamp duty. Documents executed in Türkiye may fall within the scope of stamp duty. Documents executed abroad may also become subject to Turkish stamp duty if they are submitted to Turkish authorities or if their legal effect is otherwise relied upon in Türkiye. Material agreements should therefore be considered individually rather than assuming that contracts signed by the foreign parent are automatically outside the Turkish stamp-duty regime.

8. Tax Registration, Filings and Record-Keeping

A liaison office should obtain a Turkish tax identification number and maintain the tax registration necessary for withholding and other compliance obligations, even though no corporate income tax return is generally required where the office remains within its permitted non-commercial scope.

Where the office employs personnel or makes payments subject to withholding, the relevant income-tax withholdings and social-security information are reported through the Muhtasar ve Prim Hizmet Beyannamesi (MPHB). For employers with personnel, the social-security component is reported monthly. Eligible employers with no more than 10 employees may, subject to the applicable rules, report the tax-withholding component on a quarterly basis while continuing monthly social-security reporting.

Other transaction-specific filings may also arise. A No. 2 VAT return may be required where reverse-charge VAT applies to services or other transactions received from non-residents. Stamp-duty returns may be necessary where a document is subject to stamp duty and a filing obligation arises. Other returns may become relevant if the liaison office or the foreign parent undertakes an exceptional transaction that falls outside the ordinary non-commercial liaison-office profile.

A compliant liaison office is not ordinarily subject to the full commercial tax-bookkeeping regime applicable to a Turkish trading enterprise. Nevertheless, it should maintain complete and auditable records of all funds received from abroad, bank movements, payroll, taxes and social-security filings, contracts, invoices, expense documents and supporting evidence. Such records are important both for tax purposes and for annual Ministry reporting.

9. Social Security

Local employees are generally subject to the Turkish social-security system. The income-tax exemption available for qualifying foreign-funded salaries does not itself create an exemption from Turkish social-security contributions.

The position of foreign employees depends on the applicable social-security framework. Where Türkiye has a bilateral social-security agreement with the employee's home country, an employee who is validly temporarily assigned to Türkiye may remain within the home-country social-security system for the period permitted under that agreement, provided the required certificate of coverage is obtained.

Where no bilateral social-security agreement applies, Turkish domestic legislation provides only a limited temporary-assignment exclusion for a person sent by a foreign employer on its own account who proves continuing foreign social-security coverage. As a general rule, this domestic-law exclusion is limited to three months. Once the applicable treaty-based or domestic-law exemption period expires, Turkish social-security registration and contributions should be assessed under the ordinary rules.

Accordingly, the social-security position should be reviewed separately for each foreign employee. Merely showing that the employee remains covered by a foreign social-security system does not create an indefinite exemption from Turkish SGK obligations.

10. Annual Reporting, Inspections and Closure

Each liaison office must submit the Liaison Office Activities Information Form and the relevant supporting documents to the Ministry by the end of May each year for the preceding calendar year. The annual filing contains information on the activities of the office, the foreign-currency funds brought into Türkiye from abroad and the expenses financed by those amounts.

Failure to submit the annual form and supporting documentation may prevent an extension application from being considered and may also lead to the ex officio cancellation of the liaison-office licence.

The Ministry may inspect whether the office is operating in accordance with the legislation and within its approved activity scope. Where the office is found to be conducting activities outside that scope, it may be given a period to regularise the position by applying for permission for the activities actually carried out. If the office is found to have conducted commercial activity, the operating licence may be cancelled and the matter may be referred to the relevant authorities. Cancellation of the licence does not prevent separate tax, social-security, labour-law or other liabilities from arising under the applicable legislation.

When the liaison office is closed, the relevant tax-office cessation or inspection documentation should be submitted to GDIIFI. After the office has been terminated and its liabilities have been settled, the remaining cash balance may be transferred abroad.

11. Key Legal References

The principal sources relevant to the matters covered in this guide are Foreign Direct Investment Law No. 4875; the Regulation for the Implementation of the Foreign Direct Investment Law; current guidance and forms published by the Ministry of Industry and Technology concerning liaison offices; the Turkish Income Tax Law, particularly Article 23/14; the Value Added Tax Law and related administrative guidance; the Stamp Tax Law; current work-permit guidance published by the Ministry of Labour and Social Security; and the applicable Turkish social-security legislation and bilateral social-security agreements.

Because the tax and employment treatment can depend on the precise facts, the foreign parent's business model, the wording of the liaison-office licence, the nationality and assignment status of employees and the terms of relevant tax or social-security treaties should be reviewed before implementation.