Turkish Labor Law
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One of the ways of entering into Turkey markets for foreign-based commercial enterprises is setting up liaison offices, which are specified in Foreign Direct Investment Law No. 4857, and in the framework of procedures and principles stated in “Application Regulation”.
A liaison office (also called representative office), can be defined as an office established in a foreign country to act as a channel between the parent company and the entities in the country it is established. These offices can only engage in liaison, and do not perform any commercial activities that generate revenue or profit, and the all expenses of a liaison office shall be covered by the foreign based company.
Activities of Liaison Offices
- Collecting information relating to market;
- Representation and Hosting
- Control, Inspection and Provision of Local Suppliers
- Technical Support
- Communication and Transfer of Information
- Regional Management Center
Application and Authority
- Ministry of Economy is the competent authority for granting and extending the permission of liaison offices.
- The applications for opening liaison offices in special fields such as capital market, money market and insurance business that have particular legislation shall be assessed by the institutions and organizations assigned as competent authority in line with their special legislation.
- In first application liaison offices may be given permission for at most three year in their scope of activity. Offices wishing to extend their operating period should apply to General Directorate of Incentive Implementation and Foreign Investment, one month before the expiration of the authorization.
- Duly made applications will be finalized within 15 days.
- Permission of liaison offices who engaged in market research or product promotion is not extended.
Required Documents
- Documents to be submitted to the Ministry for establishing a liaison office are as follows;
- The Application Form
- The original and notary certified translation of operating certificate of the parent company, (or it may be translated and approved by the relevant Turkish Consulate)
- Operational report or balance sheet and income statement of the parent company (notary certified translation or approved by the relevant Turkish Consulate)
- The Letter of Commitment indicating the scope of activity of the liaison office and including a statement that the office will not carry out commercial activities, and the authorization document of foreign company official who signed the letter,
- The notary certified translation certificate of authority issued to the name of the person who are appointed to carry out the operations of the liaison office,
- The power of attorney in case that another person will carry out the establishment transactions of the liaison office,
- If they are submitted to the General Directorate in their original forms, the General Directorate approves the copy and gives the original document back to the applicant.
- If the documents are complete and proper application will be finalized within 15 days.
Tax exemption
- As liaison offices are not in the commercial enterprise status and do not gain any revenue or profit they are not subject to VAT (Value added Tax) and corporate tax.
- Personnel of liaison offices that paid by foreign based company with foreign currency brought from abroad are exempt from income tax.
- And also no stamp tax deduction shall be made.
SSI Liability
Without prejudice to bilateral agreements Turkey is party to, personnel of liaison offices should be insured under the Social Security and General Health Insurance Law No. 5510.
SSI Declaration for starters: The declaration shall be submitted to the authorities at latest one day before the insured’s start date.
FAQ About Liaison Office
Nature of the payment?
All payments must be transferred to bank accounts by the foreign based parent company with foreign currency.
1- Must liaison offices make SSI e-declarations?
Yes. All personnel whether Turkish or foreigner must be notified to SSI with monthly premium and service document. (Provisions of bilateral agreements are reserved).
2- Do liaison offices calculate stamp tax?
No. Although some of them continue to make stamp tax deduction from their personnel’ salary that is not necessary, because these offices are exempt from stamp tax.
3- Are the e-declarations liable to stamp tax?
Yes. Stamp tax applied to the “monthly premium and service documents.” However that is not related with the salaries of personnel, this stamp tax charged for document itself.
4- Why minimum living allowance is not applicable in liaison offices?
Because the minimum living allowance is a deduction from the wages, as salary of the personnel is exempt from income tax there cannot be such an application.
5- Do their personnel benefit from the incentive 5510 and the others?
Yes. Personnel of liaison offices can benefit from every invective just as the employees of other companies.
6- Is there any exception as regard to SSI liability for liaison office personnel?
If there is an agreement between Turkey and the country parent company established in, the persons employed temporarily in the liaison office may be exempt from SSI, provided that certificate of exemption is obtained.
