A liaison office in Türkiye represents its foreign parent, gathers information, and is strictly prohibited from commercial activity, invoicing, or earning income; it is permitted by the Ministry of Industry and Technology. A branch is a trading presence that invoices and earns in its own right, is authorized by the Ministry of Trade, and is taxed in Türkiye on the income it generates here. Liaison office salaries are exempt from income tax only when paid in foreign currency from funds sent from abroad.
Foreign companies entering Türkiye without forming a subsidiary have two options, and they are not interchangeable. A liaison office, irtibat bürosu, exists to represent the parent and to gather information, operates under a permission from the Ministry of Industry and Technology, and is prohibited from any commercial activity. A branch, şube, is a trading presence of the parent company, registered in the Trade Registry, able to invoice and earn in Türkiye, and taxed here on the income it generates. The two structures share one feature, the absence of a legal personality separate from the parent, and differ in almost every other respect: in what they may do, in how they are authorised, in how they are funded and taxed, in how long they last, and in how they are closed. Choosing the wrong one is expensive to correct, because there is no procedure for converting one into the other, and because a liaison office's permission is granted on the basis of what the parent said it would do and is reviewed against what the office actually did. This guide sets the two structures side by side, explains what a liaison office may and may not do, describes the income tax exemption for liaison office staff and its conditions, identifies the situations in which a branch is the right answer and those in which neither is, and sets out the practical points, from documents to annual reporting, that apply to each.
Quick Answer: A liaison office is established under Article 3 of the Foreign Direct Investment Law, Law No. 4875, and Articles 6 to 9 of its Implementing Regulation, with a permission from the Ministry of Industry and Technology granted for up to three years and extendable on review of the office's annual activity reports. It may conduct market research, promotion, representation, technical support, communication, and regional management, but may not invoice, earn income, sign contracts generating income, or hold stock for sale, and its expenses must be met from abroad in foreign currency; salaries of its staff paid in foreign currency from funds brought in by the parent are exempt from income tax under Article 23 of the Income Tax Law, Law No. 193. A branch is registered in the Trade Registry under Article 40 of the Turkish Commercial Code, Law No. 6102, after permission from the Ministry of Trade, operates indefinitely within the parent's field of activity through a fully authorised representative resident in Türkiye, invoices and earns in its own right, and is subject to corporate tax on a limited liability basis on its Turkish source income under Article 3 of the Corporate Tax Law, Law No. 5520, with withholding tax on profits remitted to the parent. Neither has legal personality, so the parent remains liable for both and neither offers a share sale as an exit. Where limited liability, a separate balance sheet, or a clean exit matter, a Turkish subsidiary is usually the better structure. Conversion between the forms is not available; the old entity is closed and the new one established.
A foreign company that wishes to have a presence in Türkiye without incorporating a Turkish company can do so through a branch or a liaison office, and both are, in law, the foreign company itself acting in Türkiye rather than a separate person. The practical consequences of this shared feature are significant and often underestimated. The parent is directly liable for every obligation the branch or office incurs, including tax assessments, employment claims, and contractual debts, with its worldwide assets. There is no corporate shield between the Turkish operation and the parent's balance sheet. There are no shares, so the Turkish operation cannot be sold as such; a buyer can acquire its assets and take over its staff, but the structure itself is closed rather than transferred. And the decision making, signature authority, and corporate governance of the Turkish operation are those of the parent, exercised through a representative, rather than those of a Turkish board or managers. For many foreign companies these consequences are acceptable, particularly at the exploratory stage or where the Turkish activity is small; for others they are the reason a subsidiary is chosen instead.
| Element | Liaison Office | Branch |
|---|---|---|
| Legal personality | None; a representation of the parent | None; part of the parent, which remains liable |
| Legal basis | Article 3 of Law No. 4875 and Articles 6 to 9 of its Implementing Regulation | Article 40 of Law No. 6102 and Article 122 of the Trade Registry Regulation |
| 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, General Directorate of Incentive Implementation and Foreign Investment | Ministry of Trade, then registration in the Trade Registry |
| Funding | Expenses met from abroad in foreign currency brought in by the parent | Capital allocated by the parent, plus its own revenue |
| Corporate tax | None, as there is no income | Limited liability on income generated in Türkiye, plus withholding on remitted profit |
| VAT | Not a VAT taxpayer; pays VAT on its purchases without recovery | Registered for VAT; charges and recovers VAT |
| Staff salaries | Exempt from income tax where paid in foreign currency from funds brought from abroad | Taxed in the ordinary way through payroll withholding |
| Duration | Up to three years initially, extended on review of annual reports | Indefinite |
| Representative | An appointed representative, who need not be resident | A fully authorised representative resident in Türkiye |
| Bookkeeping | Expense records sufficient for the annual report and withholding | Full statutory books under the Commercial Code and the Tax Procedure Law |
| Exit | Closure notified to the Ministry within one month; only the closing balance repatriated | Closure by parent resolution, tax review, and deletion from the Trade Registry |
Permission for a liaison office is given for a stated purpose, and the permitted activity follows that purpose. Under the Implementing Regulation and the Ministry's practice, the usual categories are representation and hosting, meaning acting as the parent's point of contact in Türkiye and receiving its visitors; control and inspection of suppliers in Türkiye in terms of quality and standards; technical support to the parent's distributors or customers; communication and information transfer between the parent and the Turkish market; regional management, where the office coordinates the parent's activities in several countries from Türkiye; and market research and promotion of the parent's products or services. What is common to all of them is that the office produces no income, concludes no sales, and performs no service for consideration in Türkiye.
The line between representation and trading is crossed more easily than most parent companies expect, and it is crossed in substance rather than in form. Negotiating and concluding contracts on the parent's behalf, issuing invoices or pro forma invoices, taking payment from Turkish customers even for onward transmission to the parent, holding stock in Türkiye for sale or delivery, providing after sales services to Turkish customers for a fee, or employing staff whose work is in substance the performance of the parent's contracts in Türkiye are all commercial activity, whatever the office is called and however the payment is routed. The test applied by the Ministry and the tax office is functional: if the office does what a branch would do, it is treated as one.
Where an office is found to be trading, two consequences follow. The Ministry may cancel the permission under Article 8 of the Implementing Regulation, which ends the office's existence and complicates any later application by the same parent. More seriously, the tax office treats the office as a permanent establishment of the parent under Article 3 of the Corporate Tax Law and the applicable double tax treaty, assesses corporate tax and VAT on the income attributable to it for the open years, applies tax loss penalties and default interest, and withdraws the income tax exemption on staff salaries for the period concerned. This exposure typically surfaces at the moment of closure, when the tax office reviews what the office actually did against what its permission allowed, or on an extension application, when the Ministry reviews the annual reports.
Under Article 23, paragraph 14, of the Income Tax Law, Law No. 193, salaries paid to employees of a liaison office are exempt from income tax where the office is established by a foreign enterprise with legal and business headquarters outside Türkiye, and where the salaries are paid in foreign currency out of the enterprise's earnings abroad, brought into Türkiye for that purpose. This is a genuine and substantial advantage, since Turkish income tax on employment income is withheld at progressive rates that reach 40 percent, and it is frequently the reason a liaison office is chosen for a regional management or technical support function staffed by expatriates.
The exemption is conditional, and the conditions are examined. The salary must be paid in foreign currency, not in Turkish Lira converted at payment; it must be paid from funds the parent brought into Türkiye from abroad, evidenced by the bank's foreign currency inflow records, and not from any amount the office received in Türkiye; and the office must not be engaged in commercial activity, since an office that is in substance a permanent establishment loses the exemption for the whole period of the trading. The funding route must therefore be set up correctly from the start, with the parent's transfers documented as expense funding and the payroll run in foreign currency from the account into which they are received, and the evidence kept for the ten year retention period. Social security contributions are not covered by the exemption: the office is an employer under Law No. 5510 and registers a workplace file, declares its staff, and pays premiums in the ordinary way, unless a social security agreement between Türkiye and the employee's home country provides otherwise for seconded staff.
A branch is the correct structure where the parent intends to trade in Türkiye but does not need, or does not want, a separate legal person. The indicators are the following. The parent will invoice Turkish customers directly, or will hold and sell stock in Türkiye, which a liaison office cannot do. The activity requires a licensed presence in Türkiye, for example in construction, engineering, or regulated services, where the licence is issued to a registered trading entity. Tenders, public procurement, or private counterparties require a locally registered trading entity with a Turkish tax number and a Trade Registry record. And the parent is content to remain directly liable for the Turkish operation, is not concerned to ring fence the Turkish risk from its balance sheet, and does not foresee selling the Turkish business separately.
The parent's competent organ resolves to open a branch in Türkiye, allocates capital to it, which is not subject to a statutory minimum but should be adequate to its activity, and appoints a fully authorised representative resident in Türkiye. An application is made to the Ministry of Trade with the parent's apostilled and translated corporate documents, and on the Ministry's permission the branch is registered in the Trade Registry of its seat under Article 40 of the Commercial Code and Article 122 of the Trade Registry Regulation, announced in the Trade Registry Gazette, and registered with the tax office and the Social Security Institution. The branch keeps full statutory books, files monthly VAT and withholding returns, quarterly advance tax returns, and an annual corporate tax return, and is subject to the transfer pricing rules in Article 13 of the Corporate Tax Law in its dealings with the parent.
A branch is a limited taxpayer under Article 3 of the Corporate Tax Law, taxed on the income it generates in Türkiye at the standard corporate tax rate, and under Article 30 of the same law the after tax profit remitted to the parent is subject to a withholding tax, currently 15 percent, reduced to 5 or 10 percent under most of Türkiye's double tax treaties. Management fees, royalties, and interest charged by the parent to the branch are deductible only within the arm's length limits of Article 13 and may themselves attract withholding. The branch's effective tax burden is therefore comparable to that of a subsidiary distributing dividends, and the choice between the two is rarely driven by tax.
Where a separate legal entity, limited liability, and a clean future exit matter, the answer is usually neither a branch nor a liaison office but a Turkish subsidiary, typically a limited liability company or, for larger or regulated operations, a joint stock company. A subsidiary confines the parent's exposure to its capital contribution and any guarantees it chooses to give; it has its own balance sheet and its own governance; it can contract, borrow, and be licensed in its own name; it can be sold by a transfer of shares, which is the exit route most buyers prefer and the only one that preserves the entity's licences, contracts, and employees without novation; and it can be liquidated under the Commercial Code without the parent's tax affairs being examined. Against these advantages, a subsidiary requires a minimum capital, now 50,000 Turkish Lira for a limited liability company and 250,000 Turkish Lira for a joint stock company, carries the formalities of Turkish corporate governance, and cannot offer the income tax exemption for staff salaries that a liaison office provides. A branch keeps the parent exposed to the liabilities of its Turkish operations, and a share sale is not available as an exit because there are no shares to sell.
Both routes require the parent's corporate documents, apostilled under the Hague Convention of 5 October 1961 or legalised through the Turkish consulate, and translated into Turkish by a sworn translator in Türkiye: a certificate of activity or register extract showing the parent's existence and field of activity, its articles of association or equivalent, the resolution of its competent organ to establish the branch or office and appoint the representative, and the power of attorney to the representative. For a liaison office the Ministry additionally requires the parent's most recent audited financial statements or activity report, since the permission depends on the parent being an established enterprise. Collecting and authenticating these documents is the longest step in either procedure and should be started first.
Under Article 7 of the Implementing Regulation, a liaison office must submit to the Ministry, by the end of May each year, an activity report describing what it did in the preceding year and how its expenses were met, with the bank records of the foreign currency brought in. These reports are the basis on which extensions are granted and on which the Ministry assesses whether the office has stayed within its permission, so they are not a formality; an office whose reports show expenses out of proportion to its stated activity, or whose activity description drifts towards commerce, invites refusal of the extension or an inspection.
Both structures need a Turkish tax registration, a registered address evidenced by a lease, and, where they employ staff, a Social Security Institution workplace file. A branch additionally needs full bookkeeping by a certified public accountant, registration for VAT, and enrolment in the e-invoice and e-ledger systems where the thresholds are met. A liaison office needs expense records sufficient for its annual report and a withholding file for any staff whose salaries are not exempt.
Moving from a liaison office to a branch or a subsidiary, or from a branch to a subsidiary, is not a formal conversion under Turkish law. The existing structure is closed, with the tax review and Ministry notification that closure involves, and the new one is established, with employees transferred by agreement, the lease assigned, and contracts novated. The two procedures can run in parallel so that the business is not interrupted, but the cost of both is incurred, which is why an office set up to save cost at entry can cost more overall if trading was always the plan. The decision between the structures is therefore worth taking correctly at entry, on the basis of what the parent actually intends to do in Türkiye over the following three to five years rather than in the first six months.
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 corporate tax and VAT 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 in the Trade Registry.
Salaries are exempt from income tax under Article 23 of the Income Tax Law where they are paid in foreign currency out of funds brought into Türkiye from abroad by the parent and the office does not trade. Social security contributions are still due. The funding route must be structured and evidenced correctly.
Up to three years initially, extended on application by reference to the office's annual activity reports, its expenses, and the parent's continued need for the office. Extensions are not automatic.
It needs an appointed representative with a power of attorney from the parent, but the representative is not required to be resident in Türkiye, unlike a branch representative, who must be fully authorised and resident.
The overall burden is similar: corporate tax on Turkish income, then withholding on profit remitted to the parent, reduced by treaty. The choice between branch and subsidiary is rarely driven by tax.
No statutory minimum applies, but the parent allocates capital adequate to the branch's activity, and the Ministry of Trade and the Trade Registry expect the allocation to be stated and evidenced.
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. 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.
Yes, both Turkish and foreign staff, the latter with work permits. It registers as an employer with the Social Security Institution and may benefit from the income tax exemption on salaries paid in foreign currency from abroad.
The Ministry may refuse the extension or cancel the permission, and the tax office may treat the office as a permanent establishment and assess corporate tax and VAT on the income attributable to it, with penalties.
Yes. It may enter into contracts needed for its own existence, such as a lease, utilities, and a bank account for receiving expense funding, but not contracts generating income in Türkiye.
A certificate of activity or register extract, the articles of association, the resolution to establish the branch or office and appoint the representative, and the power of attorney to the representative, each apostilled and translated by a sworn translator in Türkiye. A liaison office additionally needs the parent's recent financial statements.
The parent, with its worldwide assets, because the branch is the parent acting in Türkiye. The branch's resident representative may also be pursued personally for public receivables of his or her period as a legal representative.
Generally yes, as a registered trading entity with a Turkish tax number and a Trade Registry record, subject to the specific requirements of the tender. A liaison office cannot.
A liaison office by ceasing activity, obtaining the tax office's cessation record, and notifying the Ministry within one month, after which only the closing balance is repatriated. A branch by the parent's resolution, the tax office's review of the open years, closure of the social security file, and deletion from the Trade Registry.
The choice between a branch and a liaison office is a choice about what the parent will actually do in Türkiye. A liaison office is the right structure for a presence that represents, researches, supports, and coordinates without earning, and it rewards that discipline with a simple regime, a light administrative burden, and an income tax exemption for its staff; it punishes any departure from that discipline with cancellation and a retrospective tax exposure. A branch is the right structure for a parent that will trade in Türkiye in its own name and is content to remain directly liable for the result. Neither offers a corporate shield or a share sale, and where those matter the answer is a subsidiary. Because the structures cannot be converted into one another, and because closing one and opening another costs both procedures, the decision should be made at entry on the basis of the parent's real intentions over the medium term rather than its first steps.
We advise foreign companies on the choice between a liaison office, a branch, and a subsidiary, prepare and authenticate the parent's documents, obtain the Ministry permission or the Trade Registry registration, structure the funding and payroll of liaison offices so that the income tax exemption is preserved, prepare the annual activity reports, and, where the structure must change, plan the closure of one and the establishment of the other in parallel. For a review of which structure fits your plans in Türkiye, our legal team can examine your intended activity and set out the steps required under the current law.
See also: Investment Lawyer in Türkiye for Foreign Investors.
