Branch Establishment of a Foreign Company

Branch Establishment of a Foreign Company

Subsidiary (Local Company with a Foreign Company as the Shareholder) vs. Branch (Branch Office with Permanent Establishment)

We offer complete support to companies that choose to establish their presence in Turkey through a branch, moving them forward.

Most foreign investors in Turkey prefer to establish themselves as subsidiaries since this establishment form allows for more flexibility in terms of company structure and greater ability to act expeditiously during permit phases. From a legal point of view, the difference between a branch and a subsidiary generally boils down to independence from the parent company. In the Turkish legal system, branches are not considered separate entities from the parent company whereas subsidiaries are. Therefore, a subsidiary is a completely different company that can be formed as a Limited Liability Company (LLC) or a Joint Stock Company (JSC).

Corporate Company Types in Turkey

The Turkish legal system allows for 5 different corporate establishment types:

Limited Liability
Company (LLC)

Joint Stock
Company (JSC)

Commandite
Company

Collective
Company

Cooperative
Company

The widely preferred entity types are the LLC and the JSC. The three remaining types are very uncommon and not preferred by multinational companies.

JSCs have a complex liability and operation structure, i.e., the obligation to hold general assembly. JSCs are most suitable for those companies who would like to go public.

The main difference between the two company types lies in liability perspective. Although, they are both capital companies (in terms of responsibility to shareholders limited with their capital payments), the LLC shareholders are also liable with their personal assets for State related debts such as taxes and social security premium payments for employees. Since LLC and Joint Stock companies are now bureaucratically closer to each other (subject to new TCC in effect since 2012); it may be advised to foreign investors to incorporate Joint Stock companies instead of LLC due to flexibilities of corporate transactions and minimum shareholder liability for corporate related debts.

That being said, if liability is not the primary concern of the founders, LLC remains the most flexible establishment type in terms of operational requirements.

Please click here to read detailed information about company types and their qualities.

Quick Comparison between Liaison Office Establishment, LLC and Branch.

LIAISON OFFICELLCBRANCH
Not allowed to engage in commercial activities. Allowed to engage in commercial activities. Allowed to engage in commercial activities.
Limited scope of activities. Unlimited scope of activities. Limited to the parent office's scope of activities.
Cannot issue invoices. Can issue invoices. Can issue invoices.
Cannot apply for grants. Can apply for grants. Can apply for a transfer of profits from abroad.
Cannot ask for transfer of profits from abroad. Can ask for a transfer of profits from abroad. Can apply for a transfer of profits from abroad.
Time restricted (the permit is initially issued for 3 years; after 3 years, it can be extended up to 5 years - in some cases up to 10 years). Does not have a time limit (in terms of permit). Does not have a time limit (in terms of permit).
Cannot finance its own activities – needs to be financed from abroad. Can finance its own activities. Can finance its own activities.
Exempt from:
  • Corporate Income Tax
  • Value Added Tax
  • Income tax on the salary of the employees
Not exempt from tax (except from special exemptions given to certain sectors and regions). Not exempt from tax (except from special exemptions given to certain sectors and regions).
Duration of application processing: 15-20 business days (provided that all documents are complete and in order). Duration of application processing: 15-25 business days (provided all documents are complete and in order).  
Liaison office closing and liquidation takes a brief time. There is a detailed process to conduct for liquidation. The law stipulates it as 6 months.