Opening a Branch in Turkey for Foreign Companies in 2024

Foreign corporations often prefer to establish branches in Turkey due to several benefits. However, this advantageous step requires a solid legal foundation. Missteps or negligence during the establishment phase can lead to long-term legal issues. To navigate these processes effectively, it’s crucial to work with experienced lawyers and understand the general framework.

Key Points to Note When Opening a Branch in Turkey by Foreign Companies

1. Opening a Branch in Turkey

   Foreign companies opening branches in Turkey involves a process where companies headquartered outside Turkey establish operations within the country. The procedures differ for establishing a company, a branch, or a liaison office in Turkey. This article focuses on the branch opening procedure.

   A critical requirement for foreign firms to open a branch in Turkey is having their capital divided into shares.

   Turkish commercial company law largely aligns with Western standards. The types of companies are mostly similar. However, we can summarize the types of Turkish commercial companies in the following table:

   Type of Company	Legal Personality – Liability	Partners – Company Structure
   Joint Stock Company	Exists, Limited Liability	Real or legal person partners, minimum 1 shareholder, minimum capital 50,000 TL
   Limited Liability Company	Exists, Limited Liability	Real or legal person partners, minimum 1 shareholder, minimum capital 10,000 TL
   Commandite Company	Exists, Unlimited Liability	Real person partners, minimum 2 shareholders
   Collective Company	Exists, Unlimited Liability	Real person partners, minimum 2 shareholders
   Ordinary Partnership	None, Unlimited Liability	Real person partners, minimum 2 shareholders

2. How Can a Foreign Company Open a Branch in Turkey?

   According to Article 40 of the Turkish Commercial Code, branches of foreign companies in Turkey are registered like local commercial enterprises. A commercial representative residing in Turkey is appointed for these branches. If there are multiple branches, they are also registered like the branches of a local commercial enterprise.

   The process for foreign companies to open a branch in Turkey primarily begins with a series of bureaucratic application procedures. We can summarize these procedures in the following table:

   Opening a Branch in Turkey by Foreign Companies
   The first step is to obtain permission for branch establishment from the Ministry of Industry and Trade of the Republic of Turkey.
   Then, registration with the Chamber of Commerce and subsequently the Trade Registry is carried out.
   Upon completing the above two steps, the branch is established. Subsequent applications that foreign capital company branches need to make to the Ministry of Economy Incentive Implementation and Foreign Capital General Directorate include:
   1. Reporting payments made to the capital account using the forms in the regulation annex within 1 month following the payment.
   2. Share transfers made by the current partners should also be reported within 1 month following the share transfer using the forms in the regulation annex.
   3. The branches must annually report information related to their capital and activities, using the forms in the regulation annex, by the end of May each year.

3. Opening Additional Branches in Turkey Linked to the Established Branch

   Foreign companies can open additional branches, referred to as secondary branches linked to the main branch established initially. For opening these additional branches, applications must be made to the Ministry of Industry and Trade, Domestic Trade Directorate General, to obtain the necessary permissions.

   Before applying for the opening of other branches, the following documents should be gathered:

   • Two original and translated copies of the power of attorney prepared by the company headquarters or the Turkish representative (notarized).
   • If the representative is a foreign national, a residence permit (notarized copy).

    

4. Required Documents for Opening a Branch in Turkey by Foreign Companies

   The completeness of documents is crucial for foreign companies opening branches in Turkey. It should be noted that documents obtained from foreign state authorities must also undergo an apostille procedure. The necessary documents and their specifics are:

   Documents Required for Branch Establishment	Characteristics
   Application Letter	Must be signed by the company or its representative, including details such as company name, date of establishment, nationality, capital, name, surname, address, and nationality of the Turkish representative, a commitment by the representative to comply with legal regulations in Turkey, branch address, business scope of the branch, and branch capital.
   Decision of the Company’s Authoritative Body to Open a Branch	Original and translated copies required.
   Company’s Articles of Association	Original and translated copies required.
   Documentation of Company’s Registration and Current Operation Status	Original and translated copies required.
   Power of Attorney for the Turkish Representative	Original and translated copies covering essential aspects including executing transactions indicated in the company’s articles of association, representation of the company, representing the company in legal actions, ability to appoint a representative in case of temporary absence from Turkey, and authority to appoint representatives for subsidiary branches.

    

5. Tax Liability of Branches in Turkey by Foreign Companies with Headquarters Abroad

   Foreign-origin companies with branches in Turkey face several responsibilities, including tax obligations. Turkey has agreements with nearly 80 countries, including major investor countries like Germany, to prevent heavy taxation on foreign investors and companies, thus avoiding double taxation. The tax position of a company and its taxes paid in the country of origin are significant.

   Depending on the branch’s commercial activities, branches earning in Turkey become liable for taxes such as corporate tax, value-added tax (VAT), income tax depending on the situation, and provisional tax. The tax liability of a foreign company’s branch in Turkey is determined based on the specifics of each case, and legal consultation is highly recommended.

    

6. Changing the Turkish Representative

   Foreign companies operating branches in Turkey require a fully authorized representative based in Turkey. Circumstances like resignation, dismissal, or death may necessitate the appointment of a new representative. The number of representatives can also be increased. In these cases, an application along with the following documents should be submitted to the Ministry of Industry and Trade, Domestic Trade Directorate General:

   • Application Letter
   • Power of Attorney canceling the previous representative’s authorities (original and translated, two copies each)
   • If the Turkish representative is a foreign national, a notarized residence and work permit.

    

7. Address Change of the Foreign Company’s Branch

   Address changes for branches in Turkey involve a legal procedure that varies based on the location of the new address. We can explain this as follows:

   Foreign Company’s Branch Address Change in Turkey
   If the change is within the same trade registry office limits; direct registration of the change in the trade registry and notification to the Ministry of Industry and Trade, Domestic Trade Directorate General is required.
   If the change is to an address within different trade registry office limits; an application for relocation permission along with the company’s authoritative body’s decision (original and translated, two copies each) must be submitted to the Ministry of Industry and Trade, Domestic Trade Directorate General.

   For commercial enterprise branches in Turkey, address changes are also possible and common. In such cases, the address change should be reported through the MERSIS system, obtaining a request number, and applying to the Chamber of Commerce’s regional representation without an appointment. The application should include a letter signed by the branch’s authorized representative. If signed by proxy, the original or certified copy of the power of attorney should be attached.

    

8. Appointment of Directors to the Foreign Company’s Branch

   Appointing directors to a branch in Turkey for a commercial enterprise with its headquarters outside Turkey requires notification to the Chamber of Commerce. The required documents for this notification are:

   • Director appointment notification letter
   • Decision by the company’s authoritative bodies or branch officials authorized for director appointment (if the decision is made abroad, it should be notarized or confirmed by the Turkish Consulate, along with a notarized translation)
   • Signature declaration of the branch representative
   • If the branch official is a Turkish citizen, a Turkish Identity document copy; if a foreign national, a notarized passport copy and tax number document
   • Acceptance document of the branch official for the role, notarized and signed.

    

9. Capital Increase of the Foreign Company’s Branch

   For capital increases, permission is again sought from the Ministry. Notifications for the Chamber are made through the MERSIS system, and the following documents are collected:

   • Letter regarding the notification of capital increase
   • Decision by the company’s authoritative body related to capital increase, or branch officials’ decision if they have the authority for capital increase (3 copies of the original or certified translation, approved by notaries in the company’s home country and by the Turkish Consulate or as per international agreements on document verification)
   • If the capital increase is funded from internal resources, a report from a sworn financial consultant is required.

    

10. Advantages of Opening Branches in Turkey for Foreign Companies

    Turkey, as a developing nation, offers numerous opportunities to foreign investors. The option to establish various types of companies, including the removal of high upfront capital requirements, is particularly attractive.

    Turkey is appealing to foreign investors due to its workforce and investment potential. Moreover, the country protects foreign investors with several international tax agreements, providing equal, and sometimes more advantageous opportunities compared to local businesses.

     

11. Commercial Title of the Foreign Company’s Branch

    Foreign company branches in Turkey must use their headquarters’ name, adding the location of the headquarters and the branch. If the company’s headquarters’ title changes, the branch’s title must also change.

    For title changes, the following documents must be submitted to the Ministry:

    • Decision of the company’s authoritative body regarding the title change (original and translated, two copies each)
    • Document from the competent authority confirming the registration or approval of the company’s title change (original and translated, two copies each).

    The commercial title of a branch of a foreign business entity in Turkey is determined under Article 48 of the Turkish Commercial Code, indicating both the headquarters and branch locations and the branch nature.

     

12. Opening a Liaison Office in Turkey by Foreign Companies

    A liaison office, unlike a branch, does not engage in commercial activities and is established for market research, information transfer, promotion, and similar purposes. The regulations for opening a liaison office by foreign companies in Turkey differ significantly from those for opening a branch.

    We do not delve into the details of establishing a liaison office in this article. For more information, please refer to our article titled “Opening a Liaison Office in Turkey by Foreign Companies”.

     

13. Considerations for Foreign Firms Wishing to Open a Branch

    While we have discussed the legal procedures for foreign companies to open a branch in Turkey, it is important to note that the matter often requires more than just following these procedures. Companies must conduct preliminary research and ensure all legal gaps are filled.

    To prevent long-term legal issues, it’s vital to conduct legal transactions in accordance with the law from the start. Therefore, collaborating with law firms experienced in foreign law and proficient in foreign languages is crucial.

ਸਿੱਟਾ

Establishing a branch in Turkey for foreign companies involves meticulous legal procedures. Ensuring compliance with local laws from the outset is crucial to avoid legal complications in the long term. Therefore, it’s imperative to seek legal advice from experts experienced in foreign law and language proficiency.

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