By Evren Özmen – CPA Istanbul
Specialized in cross-border taxation, compliance, and regulatory structuring for foreign investors in Turkey
Introduction
Establishing a branch office in Turkey remains one of the most efficient market-entry strategies for foreign companies that wish to operate locally without creating a separate legal entity.
However, from a taxation and compliance standpoint, the process is more than an administrative registration — it is a full legal extension of the foreign company under Turkish fiscal and regulatory oversight.
The Turkish Revenue Administration (GİB), Ministry of Trade, and Financial Crimes Investigation Board (MASAK) treat foreign branches as permanent establishments subject to corporate tax, audit, and reporting obligations similar to local entities.
1. Legal and Structural Overview
A branch office (şube) is not a distinct legal person. It operates under the legal identity of the parent company, which bears full liability for the branch’s debts and obligations.
Key legal features include:
Registration with both the Trade Registry Office and the local Tax Office
Appointment of a Branch Representative (authorized under notarized Power of Attorney)
Submission of parent company documents — including the Articles of Association, Board Resolution, and latest audited financials — all apostilled and translated into Turkish
Use of the same trade name as the parent company, with “Turkey Branch” suffix
2. Regulatory Filings and Compliance Documentation
Before registration, foreign entities must prepare a complete documentation package compliant with both the Turkish Commercial Code (TTK) and the Tax Procedure Law (VUK).
Mandatory filings include:
Apostilled Certificate of Incorporation
Board Resolution authorizing the Turkish branch
Financial statements covering the last fiscal year
Power of Attorney for the branch representative
Lease agreement for the registered address
⚖️ All translations must be certified by a sworn translator and notarized in Turkey.
Once approved, the Trade Registry forwards the information electronically to the tax authorities and Social Security Institution (SGK) for automatic integration — a process fully digitalized under the MERSIS system since 2025.
3. Taxation of Branch Offices
From a tax perspective, a branch is a permanent establishment of its foreign parent. The profits attributable to its Turkish operations are subject to corporate income tax.
| Tax Type | Description | Remarks |
| Corporate Income Tax | 25% on net profits derived from Turkish activities | Declared annually via e-Beyanname |
| VAT | 20% standard rate on taxable goods/services | Input VAT deductible if properly documented |
| Withholding Tax on Profit Transfer | Typically 15%, may be reduced under DTTs | Applies when profits are remitted to parent |
| Stamp Tax | Applicable to certain contracts | Based on fixed percentages or value |
| Social Security | For Turkish employees | Employer contribution ~22.5% |
Profits may be transferred to the parent company abroad only after tax liabilities are settled, and transfer records must comply with transfer pricing documentation standards under Communiqué No. 1 (OECD BEPS alignment).
4. Bookkeeping, Audit, and Reporting
Branches must maintain their books in Turkish Lira, using the Uniform Chart of Accounts as per VUK and TFRS (for reporting).
Key compliance requirements:
Monthly VAT returns and Withholding Tax filings
Quarterly provisional tax returns
Annual corporate tax return (April each year)
e-Defter (electronic ledger) and e-Invoice obligations
Transfer Pricing documentation (Master File + Local File)
MASAK reporting for transactions above ₺200,000 or involving cross-border fund flows
Since 2024, all foreign branches are required to obtain a digital e-signature for submission through the GİB e-Beyan portal.
Audit requirements under Turkish Commercial Code Article 397 apply if the branch exceeds thresholds in total assets, net sales, or employee count — in such cases, independent audit becomes mandatory.
5. Risk Management and Compliance Focus Areas
Foreign investors often underestimate the compliance exposure of Turkish branches.
From a risk-management perspective, attention should be given to:
MASAK (AML/KYC) compliance: Especially for service or consulting branches receiving international transfers
Transfer pricing between head office and branch (management fees, royalty allocations, cost-sharing arrangements)
Withholding tax on intercompany service payments to non-residents
Employment compliance, including SGK registration and payroll withholding
Permanent establishment risk where foreign personnel spend extended time in Turkey
Failure to comply with these obligations can trigger tax audits, administrative fines, and reputational exposure — particularly as GİB increasingly employs AI-based matching systems (MEVA) to identify undeclared foreign income.
6. Choosing Between a Branch, Liaison Office, or Subsidiary
| Model | Legal Personality | Taxable in Turkey | Eligible for Incentives | Ideal Use Case |
| Branch Office | No | Yes | No | Commercial presence without full incorporation |
| Liaison Office | No | No | No | Market research or coordination only |
| LLC / JSC (Subsidiary) | Yes | Yes | Yes | Long-term operations, Technopark & R&D activities |
Foreign companies targeting R&D, software export, or technology incentives should prefer a Limited Liability Company over a branch, as branches are not entitled to the 80% tax exemption or Technopark benefits.
7. 2025 Regulatory Outlook
The 2025 compliance landscape emphasizes digital traceability and AML transparency:
e-Defter and e-Invoice mandatory for all foreign branches
MASAK thresholds lowered, expanding reporting scope
Cross-border payments under heightened scrutiny by the Central Bank (CBRT)
Automatic exchange of information (AEOI) under OECD CRS includes branch data
Foreign entities must therefore ensure that fund inflows and outflows are properly documented, matching both Turkish and home-country accounting entries.
8. How OZM Consultancy Assists
At OZM Consultancy, we represent numerous multinational clients establishing branch operations in Turkey — ensuring tax efficiency, legal compliance, and operational readiness.
Our scope includes:
Branch establishment and registration with Trade Registry & GİB
Tax, payroll, and MASAK onboarding
Bank account opening, e-signature setup, and digital filing support
Ongoing tax advisory, transfer pricing, and statutory reporting
Annual compliance reviews and internal audit health checks
📞 Schedule a Consultation
If your company plans to open a branch in Turkey, we can provide a tailored compliance roadmap aligned with your group structure and jurisdiction.
📧 info@ozmconsultancy.com
🌐 ozmconsultancy.com
