LEGAL ASPECTS OF FOREIGN COMPANIES OPENING A BRANCH IN TURKEY

LEGAL BASIS FOR THE ESTABLISHMENT OF A FOREIGN COMPANY BRANCH OFFICE IN TURKEY

The establishment of branches in Turkey by companies headquartered outside of Turkey is considered a form of foreign direct investment in Turkey under the Turkish legal system and is subject to various legal regulations.

In this context, the process and obligations of establishing a foreign company branch office in Turkey can be examined under the following headings:

1. Concept of Foreign Direct Investment in Turkey

According to Article 2 of the Foreign Direct Investment Law No. 4875, the establishment of a new company in Turkey or the opening of a branch by an existing foreign company is defined as foreign direct investment in Turkey.

Thus, branch establishment is considered not only a commercial activity but also part of investment law in Turkey.

2. Opening a Foreign Branch under the Turkish Commercial Code

Article 40(4) of the Turkish Commercial Code No. 6102 regulates the registration of branches in Turkey by commercial enterprises headquartered abroad.

According to this provision:

• Foreign branches are registered in the same manner as domestic commercial enterprises, although the provisions of the parent company’s home country regarding the trade name are preserved.
• If more than one branch is to be opened in Turkey, branches established after the first one are registered in accordance with local regulations.
• It is mandatory to appoint a fully authorized commercial representative residing in Turkey for the foreign branch.

3. Trade Name of the Branch in Turkey

Pursuant to Article 48(3) of the Turkish Commercial Code, the trade name of the branch must clearly indicate both the location of the head office and the branch. Indicating that the branch is foreign-based is crucial for commercial transparency and public disclosure.

For the first branch to be opened in Turkey, the trade name should follow this format:“[Parent Company Name] + [Country of Head Office] + İstanbul Merkez Şubesi”

Example: X Company GMBH Merkezi Hollanda İstanbul Merkez Şubesi

For subsequent branches, the term “Merkez” (head office) should not be included in the trade name.

4. Administrative Obligations under the Foreign Direct Investment Law in Turkey

According to the Regulation Amending the Implementation Regulation of the Foreign Direct Investment Law, published in Official Gazette No. 30438, foreign branches are required to apply for authorization through the E-TUYS system of the Ministry of Industry and Technology of the Republic of Turkey.

• A designated authorized user must be defined.
• The “Company and Branch Establishment Notification Form” must be completed accurately.
• All other notification obligations outlined in the Regulation must also be fulfilled.

5. Compliance with Legal Regulations in Turkey

The process of opening a branch in Turkey by a company headquartered abroad goes beyond registration with the trade registry. It requires multifaceted compliance with investment law, Turkish commercial law, and administrative regulations. Strict adherence to all procedures set forth by the legislation is essential to ensure legal security and the continuity of operations.

In conclusion, establishing a foreign branch office in Turkey entails a combination of regulatory steps that require legal, administrative, and operational compliance. Consulting with local legal experts throughout this process is highly recommended to ensure smooth and legally compliant business operations.

REQUIREMENTS FOR FOREIGN COMPANIES TO OPEN A BRANCH IN TURKEY

For foreign companies to engage in commercial activities by opening a branch in Turkey, certain administrative, representative, and registration requirements must be fulfilled in full. Although a branch does not constitute an independent legal entity, it serves as an organizational extension that represents the company’s activities in Turkey. Therefore, the establishment of a foreign branch is subject to specific procedures and conditions.

1. Operational Status of the Parent Company

In order for a foreign company to open a branch in Turkey, it must first be lawfully established and actively operating in its home country. For the first branch, the company must be authorized to establish a branch under the legislation of its country of origin. For subsequent branches, only compliance with Turkish law is considered.

2. Appointment of a Fully Authorized Representative

A fully authorized representative must be appointed to manage the company’s operations in Turkey. While there is no nationality requirement, the representative must reside in Turkey.

The representative’s identification details, residential address, and notarized signature declaration must be submitted to the trade registry. If the representative changes, the new appointment must be promptly registered with the trade registry.

3. Trade Registry Registration Requirement

A branch becomes legally operational only upon registration with the trade registry. The application for registration must include the following complete information and documents:

• Trade name, business name (if any), and registered address of the parent company,
• Capital of the parent company,
• Capital allocated to the branch (if applicable),
• Trade name and address of the branch,
• Scope of activity of the branch,
• Identity, residence, nationality, and authority resolution of the branch representative,
• Date of incorporation, registration number, and applicable legal system of the parent company.

All documents must be submitted together with notarized Turkish translations.

4. Registration with Relevant Authorities in Turkey

Since the branch will generate income in Turkey, it is mandatory to register with the tax office during the establishment process. Tax consultancy in Turkey is recommended for this purpose.

In addition, depending on the sector in which the branch will operate, required permits must be obtained, and registrations with other relevant institutions (such as chambers of commerce or professional associations) must be completed.

5. Capital Requirement

Foreign companies establishing a branch in Turkey are not required to allocate separate capital for the branch. Since the branch is a direct extension of the parent company, it operates using the financial resources of the headquarters. However, any resources allocated to the branch may be reported in the trade registry.

In summary, the opening of a branch by a foreign company in Turkey is contingent on satisfying various administrative and legal requirements. These include the operational status of the parent company, the appointment of a local representative, completion of registration procedures, fulfillment of tax obligations, and submission of all necessary contracts and documents without deficiency.

HOW TO ESTABLISH A FOREIGN COMPANY BRANCH IN TURKEY?

For foreign companies to establish a branch and carry out commercial activities in Turkey, a set of administrative and legal procedures must be followed carefully. This process involves multiple and technical stages, ranging from online applications and physical document submissions to tax obligations and appointment of a legal representative.

Below is a systematic overview of the steps foreign companies must follow to open a branch in Turkey:

1. Obtaining a Potential Tax Number

Before initiating any application, a potential tax number must be obtained in the name of the foreign company. This is done through an application to the relevant tax office, and the tax number must be included in all further documentation.

2. Online Application via MERSIS

The branch establishment process is initiated online through the Central Trade Registry System (MERSIS). The steps are:

• Logging into the MERSIS platform,
• Entering all required details regarding the branch,
• Obtaining a request number,

This request number serves as a tracking ID for subsequent physical applications and official correspondence.

3. Application to the Regional Directorate of the Chamber of Commerce

After receiving the MERSIS request number, the foreign company must apply to the relevant Regional Chamber of Commerce office, submitting the following documents:

• Certificate of Activity of the parent company (apostilled and officially translated),
• Board resolution approving the branch opening,
• Resolution appointing the legal representative,
• Notarized signature declaration of the representative,
• Proof of the representative’s Turkish residential address,
• Notarized Turkish translation of the parent company’s Articles of Association,
• Potential tax number and MERSIS request number.

4. Registration with the Trade Registry

The branch is officially registered at the Trade Registry Directorate following the application. Required information includes:

• Parent company’s trade name, business name (if any), and registered address,
• Share capital of the parent company and any capital allocated to the branch (if applicable),
• Branch’s trade name, address, and field of activity,
• Full name, nationality, residential address, and identity details of the branch representative,
• Board resolution on the representative’s authority.

These details establish the branch’s legal presence in Turkey, even though the branch itself does not acquire a separate legal personality.

5. Appointment of a Fully Authorized Representative

To operate in Turkey, the branch must have a fully authorized representative. While Turkish citizenship is not required, the representative must reside in Turkey. The board resolution for the appointment and the representative’s notarized signature declaration must be included in the application package.

6. Other Registration and Notification Procedures

Once the branch is registered, several follow-up actions are required:

• Final tax registration with the local tax office,
• Notifications to the Social Security Institution (SGK) and İŞKUR (if employing personnel),
• Obtaining special licenses or permits, depending on the branch’s field of activity (e.g., finance, energy, healthcare sectors).

7. Difference Between First and Subsequent Branches

For the first branch, the foreign company must comply with both the legal requirements of its home country and Turkish law.
For subsequent branches, only Turkish legal procedures must be followed.

The process of opening a foreign company branch office in Turkey requires strict administrative discipline and legal compliance. Each stage must be handled systematically, and particular attention must be given to the appointment of the representative, the registration procedures, and the completeness of documentation.

In practice, it is highly recommended to seek professional legal assistance, which helps ensure regulatory compliance and smooth execution of the entire process.

DOCUMENTS REQUIRED FOR THE ESTABLISHMENT OF A BRANCH IN TURKEY BY FOREIGN COMPANIES

The process of establishing a branch in Turkey by foreign companies is governed by compliance with both Turkish legislation and the laws of the home country of the foreign company. The procedure begins with obtaining a request number through the Central Trade Registry System (MERSIS), followed by submitting the required documents to the relevant regional directorate and completing the registration at the trade registry office.

Below is a detailed list of the mandatory documents required during the foreign company branch office establishment process in Turkey:

1. Petition: Must be signed by the authorized person(s) submitting the application. If signed by proxy, the original or notarized copy of the power of attorney must be attached. The petition must clearly state the branch’s affiliated tax office, trade name, capital, head office, opening date, and field of activity along with its NACE code. The signatories must declare responsibility for the accuracy of the information provided. (Regulation on Trade Registry, Article 24/1)
2. Establishment Notification Form: Must be fully completed and submitted as a single signed copy by the authorized person.
3. Chamber Registration Statement: Must be signed by the authorized persons and include their photographs.
4. Resolution of the Parent Company’s Authorized Body: A copy of the resolution authorizing the branch establishment and appointing a fully authorized representative resident in Turkey is required. (Regulation on Trade Registry, Article 122/1-ç)
5. Documents of Representative Authority: If full authority is not granted to the branch representative, the original of the power of attorney indicating the representative’s specific powers must be submitted. (Regulation on Trade Registry, Article 122/1-e)
6. Letter from the Competent Authority in the Home Country: An official letter certifying that the foreign parent company meets registration requirements and that necessary documents have been submitted. (Regulation on Trade Registry, Article 122/1-a)
7. Branch Registration Documents in the Home Country: Documents showing the registration of the foreign company in its country of origin. (Regulation on Trade Registry, Article 122/1-b)
8. Updated Commercial Registry Records and Articles of Association of the Parent Company: Certified copies of current registry records and a notarized copy of the company’s Articles of Association must be submitted. (Regulation on Trade Registry, Article 122/1-c)
9. Declaration: A declaration signed by the authorized representatives of the parent company that includes basic information about the parent company and the branch, and identity and address details of the person(s) who will represent the branch. If issued in a foreign language, a notarized Turkish translation is required. (Regulation on Trade Registry, Article 122/1-d)
10. Ministry or Official Authority Approvals: If the branch’s field of activity requires prior authorization (e.g., from a ministry or other public authority), those permits or opinion letters must be attached. (Regulation on Trade Registry, Article 122/1-g)
11. Copies of Representatives’ Passports: Passport copies of foreign representatives must be submitted along with notarized Turkish translations.
12. Signature Declarations: Signature declarations of the branch representatives must be issued in accordance with Article 40 of the Turkish Commercial Code. (Regulation on Trade Registry, Article 122/1-f)

Documents issued in countries subject to foreign jurisdiction must be submitted with an apostille or Turkish consular certification, together with their notarized Turkish translations.

The accurate and complete preparation of these documents is essential for the legal validity of the foreign branch establishment process in Turkey and for a swift commencement of the company’s commercial operations.

HOW LONG DOES IT TAKE FOR FOREIGN COMPANIES TO ESTABLISH A BRANCH IN TURKEY?

The duration for a foreign company to establish a branch in Turkey varies depending on several factors, including the speed and completeness of the application, the accuracy of the submitted documents, the workload of the relevant trade registry office and other authorities, and any additional review or approval requirements.

In general, the process consists of the following stages:

1. Online Application via MERSIS and Request Number Generation: Submitting the application and obtaining the request number through the Central Trade Registry System (MERSIS) typically takes a few business days.
2. Preparation of Required Documents and Application to the Regional Directorate: Collecting documents, obtaining notarizations and certified translations may take several weeks depending on the number and complexity of the documents.
3. Registration at the Trade Registry Office: Once the application is submitted, the trade registry office reviews the documentation and proceeds with the registration. Under normal conditions, this step is completed within 7 to 15 business days.
4. Regulatory Approvals (If Required): If the intended activity requires approval from a Ministry or public institution (e.g., in regulated sectors such as energy, finance, or healthcare), this may extend the timeline.

On average, the branch establishment process for a foreign company in Turkey can be completed in approximately 3 to 4 weeks. However, this duration may vary depending on document readiness, institutional workload, and regulatory requirements. These factors should be taken into account during planning.

CAN FOREIGNERS ESTABLISH A BRANCH IN TURKEY WITHOUT COMING TO THE COUNTRY?

It is possible for foreign natural and legal persons to carry out the process of opening a branch in Turkey without physically coming to the country. This can be achieved by appointing a fully authorized representative. The appointed representative must be authorized through a special power of attorney, which enables them to act as a representative in all necessary applications and legal procedures before the Ministry and the relevant trade registry offices.

Acting within the scope of authority specified in the power of attorney, the representative can complete all procedures related to the branch establishment, allowing the legal processes to be finalized without requiring the foreign company owners to be physically present in Turkey.

POST-ESTABLISHMENT OBLIGATIONS FOR FOREIGN COMPANIES OPENING A BRANCH IN TURKEY

Following the successful establishment of a branch, foreign companies must fulfill a series of administrative and legal obligations to legally and effectively operate in Turkey. These obligations include appointing a branch manager, notifying the relevant authorities, obtaining necessary work and residence permits, fulfilling social security registration, complying with tax regulations, and ensuring adherence to personal data protection laws.

Proper and timely execution of these procedures is critical for ensuring legal compliance, maintaining the branch’s operational continuity, and minimizing legal risks. Foreign companies must act in accordance with Turkish administrative and legal requirements to continue their branch operations without disruption.

1. Appointment of a Branch Manager in Turkey

One of the first mandatory steps after establishing a branch in Turkey is the official appointment of a branch manager. The appointment is made through an official application to the regional chamber of commerce, and prior to that, an online application must be submitted via the Central Registration System (MERSIS) to obtain a request number.

Required documents include:

• A petition regarding the manager appointment, signed by authorized representatives.
• A notarized copy of the board resolution from the head office approving the appointment.
• A signature declaration prepared in accordance with Article 40 of the Turkish Commercial Code.
• For foreign nationals: notarized copy of passport and Turkish tax number documentation.
• A written declaration from the manager stating their acceptance of the role.

If the petition is signed by proxy, the original or notarized copy of the power of attorney must be submitted. Foreign documents must be apostilled and accompanied by notarized Turkish translations to be valid in Turkey.

2. Compliance with Turkish Labor Law

If employees are to be hired, the branch must be registered with the Social Security Institution (SGK) and ensure that all employment practices are fully compliant with Turkish Labor Law.

As an employer, the branch is responsible for safeguarding employee rights, including:

• Severance pay,
• Overtime payments,
• Paid annual leave,
• Weekly working hours,
• Termination procedures of employments and worker’s compensations.

Full compliance with Turkish labor regulations is essential for the legal integrity of the branch and the protection of employee rights in accordance with Turkish standards.

3. Tax Planning and Obligations in Turkey

Foreign company branches operating in Turkey are subject to Turkish tax laws, including:

• Corporate Income Tax,
• Withholding Tax,
• Value-Added Tax (VAT).

To avoid double taxation, Turkey has signed treaties with many countries. As such, the tax liabilities of a foreign company branch in Turkey may vary depending on the tax status in the parent company’s country and the nature of the business conducted in Turkey.

4. Personal Data Protection and GDPR Compliance

With the establishment of a branch by a foreign company in Turkey, commercial communication and electronic messages must be brought into compliance with Turkish law, particularly with regulations concerning the protection of personal data in Turkey. Companies are required to undertake necessary compliance efforts under the Law on the Protection of Personal Data No. 6698 (KVKK) for the data they collect during their commercial activities.

In this context, ensuring that personal data processing activities comply with the relevant legislation is a critical requirement for protecting the rights of data subjects and minimizing potential legal risks. KVKK compliance is an indispensable element for foreign companies to enhance their credibility in the Turkish market and to avoid legal sanctions.

WHAT ARE THE ADVANTAGES OF ESTABLISHING A BRANCH IN TURKEY FOR FOREIGN COMPANIES?

One of the primary advantages of foreign companies that establish a branch office in Turkey is the flexibility of capital requirements. While Turkish legislation mandates the division of capital into shares for branch formation, it has eased the entry process by removing previously existing high capital thresholds. This enables foreign investors to enter the Turkish market quickly and at a lower cost.

The legal link maintained between the branch and the parent company allows the branch to operate in Turkey in alignment with the company’s global strategies. Acting on behalf of the parent company, the branch provides effective operational support in Turkey, enabling high efficiency in adapting to local market conditions, taking prompt actions, delivering customer support, and managing product supply processes.

From a financial perspective, the ability to easily transfer profits generated by the branch in Turkey abroad allows investors to manage their capital efficiently. Additionally, Turkey’s numerous double taxation avoidance treaties with other countries reduce the tax burden on foreign companies operating in Turkey and minimize the risk of double taxation. This enhances the attractiveness of the investment environment and promotes sustainable foreign investments.

Another significant advantage of establishing a branch office in Turkey is the more effective control and protection of intellectual property rights owned by the parent company. Since a branch does not have a separate legal personality, intellectual property rights such as trademarks, patents, and designs can be registered directly in the name of the parent company. This allows the parent to retain ownership and full control over such rights.

This structure accelerates trademark registration in Turkey and enables direct registration under the parent company’s name, enhancing efficiency in licensing, infringement monitoring, and legal protection processes. Operating locally, the branch also provides direct observation and oversight in the Turkish market, allowing for quicker responses to counterfeiting and infringement cases. As a result, through the branch, the parent company gains a stronger and more systematic capability to protect its intellectual property rights in Turkey.

WHAT ARE THE DIFFERENCES BETWEEN A FOREIGN COMPANY OPENING A BRANCH AND ESTABLISHING A LIAISON OFFICE IN TURKEY?

Foreign companies can operate in Turkey mainly through two methods: by opening a branch or establishing a liaison office in Turkey. There are significant differences between these two structures in terms of legal status, scope of activity, the right to generate income, and administrative obligations.

1. Legal Status in Turkey

• Branch: It does not have a legal personality and is considered an extension of the parent company in Turkey. It is registered with the trade registry pursuant to the Turkish Commercial Code and operates like local businesses.
• Liaison Office: It does not have a legal personality and is prohibited from engaging in commercial activities. It can be established with the permission of the Ministry of Industry and Technology under Law No. 4875 on Direct Foreign Investments.

2. Scope of Activity in Turkey

• Branch: It can engage in commercial activities; can sell products/services, issue invoices, employ workers, and sign contracts with public and private sector entities.
• Liaison Office: Its activities are limited to marketing, promotion, communication, information gathering, and sectoral analysis. It is strictly prohibited from engaging in any commercial activity; it cannot sell, issue invoices, or sign contracts.

3. Right to Generate Income in Turkey

• Branch: It can directly generate income in Turkey. It is subject to tax liability and all related financial obligations including corporate tax.
• Liaison Office: It is prohibited from generating commercial income and is therefore not considered a taxpayer in Turkey.

4. Tax and Administrative Obligations in Turkey

• Branch: Subject to all financial obligations such as corporate tax, VAT, withholding tax returns, social security premiums, and payroll declarations.
• Liaison Office: It must be registered with the tax office but is not subject to corporate tax or VAT. It is required to submit an annual activity report to the Ministry of Industry and Technology.

5. Establishment and Authorization Process in Turkey

• Branch: It is established through registration with the trade registry by submitting the required documents and completing notary procedures.
• Liaison Office: It is not registered with the trade registry. Permission must be obtained from the Ministry of Industry and Technology, typically granted for a period of 3 years (extendable if necessary).

6. Employment of Personnel

• Branch: May employ workers and is subject to all obligations under Turkish labor law, including social security registration.
• Liaison Office: May employ a limited number of personnel, who may only engage in promotion and communication activities. Personnel residing in Turkey and receiving their salaries from abroad may be exempt from income tax, and social security obligations may be limited.

For foreign investors, a branch is an ideal option for companies aiming to start direct commercial activities in Turkey; whereas a liaison office is more suitable for companies aiming to analyze the Turkish market, build business relationships, or conduct feasibility studies. A branch provides a broader scope of activity but entails more extensive financial and legal obligations, while a liaison office offers lighter administrative procedures with limited operations. Therefore, the advantages and limitations of both structures should be carefully evaluated in line with the investment purpose.

WHAT ARE THE DIFFERENCES BETWEEN A FOREIGN COMPANY OPENING A BRANCH AND ESTABLISHING A LIMITED LIABILITY COMPANY IN TURKEY?

There are important structural, legal, and financial differences between a foreign company opening a branch in Turkey and establishing a company in Turkey.

These differences can be examined under the following headings:

1. Legal Personality and Legal Status in Turkey

• Branch: It does not have a legal personality and is an extension of the parent company in Turkey. Legal responsibilities belong to the parent company.
• Limited Liability Company (LLC): It has a completely independent legal personality and can acquire rights and obligations in its own name.

2. Capital Requirements

• Branch: There is no specific minimum capital requirement in Turkey; however, the parent company may allocate capital to the branch.
• Limited Liability Company (LLC): Under the Turkish Commercial Code, a minimum capital commitment is mandatory.

3. Tax Obligations in Turkey

• Branch: Since it is part of the parent company, tax processes are managed through the headquarters. Income earned in Turkey is subject to taxation.
• Limited Liability Company (LLC): It has an independent tax identity and pays taxes in its own name.

4. Scope of Activity and Flexibility

• Branch: Its activities are generally limited to the scope of the parent company’s operations.
• Limited Liability Company (LLC): It has a broader and more independent field of activity and can determine its own business strategy.

5. Management and Representation Powers

• Branch: Operates under the management policies of the parent company. It is generally represented in Turkey by a manager appointed by the parent company.
• Limited Liability Company (LLC): Management and representation authority is determined by the partners in Turkey, and the company can make independent decisions.

6. Authority to Acquire Real Estate in Turkey

• Branch: As it does not have a legal personality, it cannot directly acquire real estate in Turkey under Turkish Property Law. Therefore, real estate to be registered with the land registry in Turkey cannot be recorded in the name of the branch. If acquisition is necessary, it must be done through the parent company or another local legal entity.
• Limited Liability Company (LLC): As a legal entity established under Turkish law, it has the right to acquire real estate in Turkey as a foreign-capital company, provided legal conditions are met. Title deeds can be registered in the company’s name, and the ownership right directly belongs to the company. These properties may be used as collateral through mortgage or pledge. This right may also be subject to reciprocity or special regulations in certain cases.

7. Liability and Risk

• Branch: The parent company is directly liable for the debts and obligations of the branch.
• Limited Liability Company (LLC): Liability is limited to the company itself, and shareholders are not personally liable.

This structure offers a comparative perspective for foreign investors when structuring their operations in Turkey and contributes to informed decision-making processes.

THE IMPORTANCE OF LEGAL SUPPORT FOR FOREIGN COMPANIES WHEN OPENING A BRANCH IN TURKEY

The process of opening a foreign company branch in Turkey is a technical procedure that involves numerous legal, administrative, and financial obligations. Proper and timely execution of this process is crucial for both the protection of the investor and the smooth start of operations in Turkey. Therefore, working with a commercial law attorney in Turkey from the outset provides significant advantages.

The procedures to be followed during branch establishment include apostille certification of the parent company’s documents, sworn translation into Turkish, trade registry registration, social security registration, tax office procedures, and appointment of a commercial representative—each of which contains several technical details. Ensuring that legal documents are accurately prepared, properly submitted, and that all obligations are fulfilled on time is only possible through professional legal consultancy.

In addition, following the establishment of the foreign company branch in Turkey, issues such as property acquisition, lease agreements, and work permit applications in Turkey may arise. At this point, if real estate is to be leased or purchased on behalf of the branch, obtaining support from a real estate law attorney becomes critical to prevent legal risks.

Incorrect or incomplete legal procedures can lead to serious commercial and financial issues that are difficult to remedy later. Therefore, it is not merely a preference but a fundamental requirement for foreign companies to work with experienced attorneys specialized in relevant legal fields during the foreign company branch in Turkey establishment process, in order to ensure a secure and sustainable investment. In this regard, obtaining support from an English-speaking lawyer in Turkey can provide significant advantages by ensuring clear communication and a better understanding of local legal requirements.