Closing a Branch or Liaison Office in Turkey

Foreign companies enter Turkey in one of three forms, and leave in three different ways. A subsidiary — a Turkish company owned by the parent — is liquidated under the Commercial Code; that is the subject of our liquidation service. A branch and a liaison office are not companies, and closing them is a shorter procedure with its own traps. We compared the two structures at entry in branch vs liaison office; this note covers the exit.

Closing a branch

A branch is registered in the Turkish trade registry as a place of business of the foreign parent. It has a registered representative, a tax number, books and — usually — employees, but no legal personality of its own. Because the parent is the legal person, the branch is not liquidated; it is closed by the parent and deleted from the registry. The steps are:

1. Parent resolution. The competent organ of the parent under its own law resolves to close the Turkish branch and authorises a representative to carry it out. The resolution is notarised, apostilled and translated by a sworn translator in Turkey, in the same way as at registration.
2. Winding up the branch's affairs. Contracts are ended, receivables collected, the lease terminated, and employees' contracts ended with notice and severance where due. The branch keeps filing monthly VAT and withholding returns until the end.
3. Tax closure. The branch files its final corporate tax return for the period to the closure date and notifies the tax office of cessation. The tax office reviews the branch's open years and any assessment is settled. A branch is taxed on its Turkish-source income, and the office will look at transfer pricing with the parent before it closes the file.
4. Social security. The SGK workplace file is closed after the last employee is deregistered and the final premium declaration filed.
5. Registry deletion. The closure is registered with the trade registry on the basis of the parent's resolution and announced in the Trade Registry Gazette. The branch's remaining funds are transferred to the parent as repatriated capital and profit.

The books and records of the branch must be kept for ten years, and the parent should designate who holds them, since the branch's representative will no longer be registered.

Closing a liaison office

A liaison office operates under a permission from the Ministry of Industry and Technology and is barred from commercial activity, so it has no income and no corporate tax file in the ordinary sense — but it does have a tax registration, a withholding file for its staff and, usually, an SGK file. Its closure is governed by the Regulation under the Foreign Direct Investment Law:

1. Cease activity and terminate staff. Employment contracts are ended; severance and notice pay are due in the ordinary way.
2. Tax office cessation record. The office notifies the tax office of cessation and obtains the cessation inspection record (işi bırakma-yoklama fişi).
3. Notify the Ministry within one month. The office informs the General Directorate of Incentive Implementation and Foreign Investment of the closure within one month, attaching the tax office's cessation record and the closing documents.
4. Repatriate only the closing balance. After the closure date the office may not transfer any funds abroad other than its closing balance. Funds brought in for expenses and unspent are returned; nothing else can be moved out under the office's name.

Two points cause most of the difficulty. First, the Ministry's file and the tax office's file are separate and each expects the other's paperwork; the sequence above is the one that satisfies both. Second, an office that has quietly begun to trade — invoicing, taking payment, signing contracts — has a tax exposure for the period concerned that surfaces precisely at closure, when the tax office reviews what the office actually did against what it was permitted to do.

Timing

A branch with clean books is typically closed in three to five months, most of which is the tax office's review. A liaison office can be closed within two to three months of ceasing activity, provided the Ministry notification is made within the one-month window. Both are considerably faster than the liquidation of a subsidiary, which is bound by the six-month creditor period.

Before you close: is it the right entity?

Parents sometimes close a branch to replace it with a subsidiary, or a liaison office to replace it with a branch. Neither is a conversion; the old entity is closed and the new one is formed, and the two procedures can run in parallel so that the business is not interrupted. We plan the overlap — particularly the transfer of employees and the lease — so that nothing is left uncovered on either side. For the new entity, see company establishment.

Frequently asked questions

Does a Turkish branch have to go through liquidation?

No. A branch has no legal personality, so it is closed by a resolution of the parent company and deleted from the trade registry after its tax and social security files are closed. There are no creditor notices or waiting period.

What is the deadline for notifying the Ministry when a liaison office closes?

One month from ceasing activity. The notification goes to the General Directorate of Incentive Implementation and Foreign Investment with the tax office's cessation record attached.

Can the liaison office transfer its remaining money abroad?

Only the closing balance. After the closure date no other transfer abroad may be made in the office's name.

Do employees of a branch or liaison office get severance when it closes?

Yes. Closure is a termination by the employer, so notice and severance pay are due under the Labour Law in the ordinary way, and the final premium declaration must be filed with SGK.

How long does it take to close a branch in Turkey?

Typically three to five months for a branch with clean books, most of it spent on the tax office's review of the open years. A liaison office is usually closed within two to three months.