How to Set Up a Liaison Office in Turkey (2025): A Comprehensive Guide
For foreign companies exploring the Turkish market, a liaison office (irtibat bürosu) offers a strategic way to establish a local presence without the complexities of a full subsidiary. This guide explains the liaison office formation process, legal requirements, and common pitfalls to help you navigate the setup smoothly.
What is a Liaison Office? Understanding Its Role
A liaison office is a non-commercial entity that allows foreign companies to conduct limited activities in Turkey, such as market research, technical support, or supplier coordination. Unlike a subsidiary, it cannot engage in revenue-generating operations (e.g., sales, invoicing).
Liaison Office vs. Permanent Establishment: Key Differences
A common confusion arises between a liaison office and a permanent establishment (PE). Here’s how they differ:
Liaison Office:
Restricted to non-commercial activities (e.g., market analysis, promotion).
No corporate tax, VAT, or income tax on salaries (if compliant).
No legal entity status; operates as an extension of the parent company.
Permanent Establishment:
Conducts commercial activities (e.g., sales, contracts).
Subject to corporate tax, VAT, and other local obligations.
Requires full legal registration as a branch or subsidiary.
Why choose a liaison office? It’s ideal for companies testing the market or providing regional support without financial risk.
Setting up a liaison office in Turkey involves strict compliance with the Ministry of Industry and Technology. Below are the steps to establish a liaison office:
Step 1 – Determine Eligibility and Permitted Activities
Liaison offices are permitted only for the following activities (as defined by Turkish law):
Representation and Promotion: Hosting clients, organizing trade fairs, or facilitating business introductions.
Quality Control and Supplier Audits: Monitoring local suppliers or coordinating logistics.
Technical Support: Assisting Turkish clients with product installation or troubleshooting.
Market Research: Analyzing market trends and reporting findings to the parent company.
Note: If your activities fall outside these categories, consider a subsidiary or branch office.
Step 2 – Prepare Required Documents
The application requires apostilled and translated documents, including:
Parent company’s certificate of incorporation and articles of association.
A board resolution approving the liaison office setup.
A detailed activity report explaining the office’s purpose in Turkey.
Power of attorney for your local representative (if applicable).
Costs: Translation and notarization fees range from $1,000–$2,000, depending on document volume.
Step 3 – Submit Application to the Ministry of Industry and Technology
Applications are submitted to the General Directorate of Incentive Implementation and Foreign Capital in Ankara. Key points:
Red Flags: Applications are rejected if the parent company already has a Turkish subsidiary or if activities resemble commercial operations.
Step 4 – Open a Foreign Currency Bank Account
After approval, open a foreign currency account for the liaison office. All transactions (e.g., salary payments, expenses) must flow through this account.
Step 5 – Register Employees with Social Security
Even though liaison office employees are exempt from income tax, you must:
Critical Rule: Salaries must be paid in foreign currency (e.g., USD, EUR) to retain tax exemptions.
Step 6 – Submit Annual Activity Reports
By May 31 each year, submit a report to the Ministry detailing:
Financial transactions (via bank statements).
Activities conducted (e.g., meetings, research projects).
Employee headcount and roles.
Requirements for a Liaison Office in Turkey
To maintain compliance, ensure your office meets these criteria:
Parent Company Eligibility
Permitted Activities
Strictly avoid:
Signing contracts with Turkish clients.
Issuing invoices or earning revenue.
Importing/exporting goods.
Financial and Tax Obligations
No Corporate Tax: Liaison offices are exempt.
VAT Exemptions: Except for local purchases (e.g., rent, utilities), where VAT is non-refundable.
Employee Taxes: Salaries are income tax-free if paid in foreign currency.
Common Mistakes to Avoid When Establishing a Liaison Office
Mistake 1 – Engaging in Commercial Activities
Example: A liaison office helping a Turkish client troubleshoot equipment cannot charge fees. Such actions risk reclassification as a permanent establishment, triggering back taxes and penalties.
Mistake 2 – Paying Salaries in Turkish Lira
Salaries must be disbursed in foreign currency (e.g., USD, EUR). Payments in TRY void income tax exemptions, requiring retroactive tax payments.
Mistake 3 – Ignoring Reporting Deadlines
Late submission of annual reports can lead to fines or permit revocation. Use calendar reminders to stay compliant.
Mistake 4 – Misinterpreting Tax Exemptions
While liaison offices avoid corporate tax, they still pay:
Frequently Asked Questions (FAQs)
Can a Liaison Office Hire Local Employees?
Yes, but only for activities aligned with its permit (e.g., market research). Employment contracts must specify roles and foreign currency payments.
How Long Does the Setup Process Take?
Typically 2–3 months, including document preparation and government approvals.
Can a Liaison Office Convert to a Subsidiary Later?
Yes. Many companies start with a liaison office and transition to a subsidiary after validating the market.
Conclusion
A liaison office is a low-risk entry strategy for foreign companies targeting Turkey. By adhering to permitted activities, maintaining financial compliance, and avoiding common errors, you can leverage this structure to build relationships and gather market insights.
For tailored assistance with your liaison office establishment, contact our team at info@ozmconsultancy.com. We handle document preparation, ministry applications, and ongoing compliance, so you can focus on growing your business.
By Evren Özmen, CPA | Last Updated: January 2025
