Foreign companies entering Türkiye without forming a subsidiary have two options, and they are not interchangeable. A liaison office exists to represent and to gather information, and is prohibited from any commercial activity. A branch is a trading presence of the parent company, taxed in Türkiye on the income it generates here.
Choosing the wrong one is expensive to correct, because the liaison office permission is granted on the basis of what you said you would do, and it is reviewed against what you actually did.
| Liaison office | Branch | |
|---|---|---|
| Legal personality | None; a representation of the parent | None; part of the parent, which remains liable |
| Commercial activity | Prohibited | Permitted within the parent’s field of activity |
| Invoicing and income | Not permitted | Invoices and earns in its own right |
| Permission | Ministry of Industry and Technology | Ministry of Trade, then trade registry registration |
| Funding | Expenses met from abroad in foreign currency | Allocated capital, plus its own revenue |
| Corporate tax | None, as there is no income | Taxed on income generated in Türkiye |
| Duration | Granted for a limited period and extended on review | Indefinite |
| Representative | An appointed representative | A fully authorised representative resident in Türkiye |
Permission is given for a stated purpose, and the permitted activity follows that purpose. The usual categories are market research and promotion of the parent’s products or services, representation and hosting, technical support, communication and information transfer, and regional management. What is common to all of them is that the office produces no income and concludes no sales in Türkiye.
The line is crossed more easily than most parent companies expect. Negotiating and signing contracts, issuing invoices, taking payment, holding stock for sale, or providing services to Turkish customers for consideration are all commercial activity, whatever the office is called and however the payment is routed. Where an office is found to be trading, the permission can be cancelled and a tax exposure arises for the period concerned.
Salaries paid to employees of a liaison office are exempt from income tax where they are paid in foreign currency from funds brought in from abroad by the parent. This is a genuine advantage and it is frequently the reason a liaison office is chosen. It is also conditional: the exemption depends on the source and the currency of the payment, so the funding route has to be set up correctly from the start and evidenced afterwards.
Where a separate legal entity, limited liability and a clean future exit matter, the answer is usually neither of these but a Turkish subsidiary. A branch keeps the parent exposed to the liabilities of its Turkish operations, and a share sale is not available as an exit route because there are no shares to sell.
No. A liaison office is prohibited from commercial activity and may not generate income or invoice. Its expenses must be met from abroad in foreign currency. An office found to be trading risks cancellation of its permission and a tax exposure for the period concerned.
A liaison office represents the parent and cannot trade. A branch is a trading presence, invoices in its own right and is taxed in Türkiye on the income it generates here. The liaison office is permitted by the Ministry of Industry and Technology; a branch is permitted by the Ministry of Trade and registered with the trade registry.
Salaries are exempt from income tax where they are paid in foreign currency out of funds brought into Türkiye from abroad by the parent company. The exemption depends on the source and currency of payment, so the funding route must be structured and evidenced correctly.
A branch has no separate legal personality, so the parent remains liable for its Turkish operations, and there are no shares to sell on exit. Where limited liability, a separate balance sheet or a clean exit matter, a subsidiary is usually the better structure.
Not by a formal conversion. In practice the liaison office is closed and the branch or subsidiary is established separately, which is why the decision is worth taking correctly at entry if trading was always intended.
