Set up a Branch | News

2 ) Set up a Branch

Nature and Activities
Branch does not have a legal personality. Branch’s main advantage in comparison to liaison office is that it enables foreign investors to carry out commercial activities in Turkey. Although branch is registered with the relevant Trade Registry as though it is a separate legal entity, it is not totally independent from its parent company. Thus, the scope of activity of a branch is limited to that of its founder. A branch, which conducts business in Turkey, does so for and on behalf of its parent company. It may be argued that branch acts as a representative of the relevant foreign company within Turkey.

Establishment formalities, registration with tax authority and notification to the Treasury
Neither the Law nor the Regulation requires permission from the Treasury for the establishment, by foreign legal entities, of a branch in Turkey. Nevertheless, if a foreign legal entity intends to establish a branch in Turkey, an application has to be made to the General Directorate of Domestic Trade of the Ministry of Trade and Commerce together with the supporting documents. Upon approval of the Ministry, the necessary documents should be submitted to the relevant Trade Registry for registration and announcement on the Trade Registry Gazette. We note that registration with the Trade Registry triggers additional expenses compared to liaison offices.

Within one month from the registration with the relevant Trade Registry, an application to the relevant Tax Authority has to be made in order to obtain a tax registration number and finalize other tax-related formalities.

Finally, pursuant to the Regulation, an establishment notification has to be made to the Treasury via Foreign Direct Investments Operations Data Form until the end of May each year, at the latest, for statistical purposes. Information on payments made to the equity accounts of the branch has to be submitted as well to the Treasury in accordance with the Foreign Direct Investments Capital Data Form within one month following such payments.

Term
There is no restriction on the term of branches. In other words, a branch may be incorporated for an indefinite period of time.

Expenses and Transfer of Profit
As explained above, branches may conduct business in Turkey for and on behalf of their founder entity. Therefore, unlike liaison offices, branches will be subject to applicable tax schemes including corporate tax and withholding tax.