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LIAISON OFFICES IN TURKEY

July 2014 - Corporate & Commercial. Legal Developments by Baspinar & Partners Law Firm.

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Liaison offices are regulated in the Foreign Direct Investment Law ("FDI") numbered 4875 and Regulation for Implementation of Foreign Direct Investment Law ("RIFDI") issued based on FDI. According to article 3(h) of the RIFDI, the Undersecreteriat of Treasury ("Undersecreteriat") is authorized to permit foreign companies established under the laws of foreign countries to open liaison offices, provided that they do not engage in commercial activities in Turkey. In other words, liaison offices cannot engage in income generating activities. Liaison offices do not have any aspects other than salary payments made to the employees working in these offices.

Applications for establishment and extension shall be finalized within 15 days following the application, provided that the necessary information / documents are complete and proper.

Liaison offices, in their first applications, are granted operation permits of 3 years at most. For extensions, the liaison offices are required to make an application before the expiration of their permissions.

 

The General Directorate evaluates the extension applications within the framework of the past year activities of the liaison office, the foreign company's prospective business plans and objectives for Turkey, the current and anticipated amount of expenditures and the number of personnel employed in the office and may conclude the application within the following durations that are determined in accordance with the nature of activity. The permits obtained for market research or promotion of products or services of the foreign company are not extended.

 

The Activities of Liaison Offices

 

Field Of Activity

 

Representation and Hosting

Representation of the foreign company at sectorial institutions and relevant organizations, coordination of business contacts of the company officers, meeting the office demands of those officers

 

Control, Inspection and Provision of Local Suppliers

Provision of local producers and products for the foreign company and inspection of those suppliers in terms of the quality standards of the foreign company

 

Technical Support

Provision of training and technical support services for distributors, supporting local suppliers for their enhancement of quality standards

 

Communication and Transfer of Information

Collection and transmission of information to the foreign company having business contacts in Turkey such as the market conditions, consumption trends, sales of competitors and distributors, performance of distributors.

 

Regional Management Headquarter

Particularly oriented to other units of the foreign company in foreign countries; coordination and management of some operations such as formulation of investment and management strategies, planning, promotion, sales, after sales services, brand management, financial management, technical support, R&D, external supply, testing of newly developed products, laboratory services, research and analysis, training of personnel.

 

Post Establishment

 

·       Liaison offices, having received their establishment permit, shall send a copy of the tax office registration document to the General Directorate latest within 1 month. Liaison offices shall notify the General Directorate of any change of address latest within 1 month.

 

·       Liaison offices shall send the "Data Form for Liaison Office Activities" (see attached) to the Undersecretariat every year latest until end of May, so as to inform the Undersecretariat about their activities of previous years. Documents certifying that the previous year's expenses of the office have been covered by foreign currency transferred from abroad, have to be enclosed as well.

 

·       Liaison offices are granted operation permits of 3 years at most. For extensions, successive extensions of maximum 3 years each may be granted by taking into consideration the activities of previous years and plans and objectives for the future.

 

·       In case the liaison office terminates its activities, the "termination and examination of business note" obtained from the related tax office has to be submitted to the General Directorate. Liaison offices cannot claim any money transfer except the residue arising due to termination and liquidation.

 

·       The Undersecretariat might cancel the permits of liaison offices ascertained to have violated the legislation and shall notify related authorities thereof.