A liaison office is a permit-based representation of a foreign company that may not carry on any commercial activity in Turkey. It pays no corporate tax because it earns nothing, it is funded entirely from abroad, and its permit is granted for a maximum of three years — after which whether it can be extended, and for how long, depends entirely on which activity it was authorised to perform.
The structure is often presented as the easy way to test the Turkish market. It is genuinely useful, but it carries two constraints that decide whether it fits: the activity list is closed and exhaustive, and stepping outside it costs the permit and can expose the parent company to Turkish corporate tax.
Liaison Office, Branch or Company?
The three structures answer different questions. A liaison office cannot invoice, cannot sign a sales contract and cannot generate income. If any part of the plan involves revenue in Turkey, the choice is already made.
| Criterion | Liaison office | Branch | Company |
|---|---|---|---|
| Commercial activity | Prohibited | Permitted | Permitted |
| Separate legal personality | No | No | Yes |
| Establishment authority | Ministry of Industry and Technology | Trade registry | Trade registry |
| Duration | Time-limited permit | Indefinite | Indefinite |
| Minimum capital | None | None | TRY 50,000 or TRY 250,000 |
| Corporate tax | Not a taxpayer | 25% on Turkey-sourced income | 25% |
| Income tax on salaries | Exempt where the conditions are met | Normal payroll taxation | Normal payroll taxation |
| Social security premiums | Payable in full | Payable in full | Payable in full |
| Value added tax | Paid on purchases, not deductible | Registered and deductible | Registered and deductible |
| Funding | Only from abroad, in foreign currency | Own revenue and head office funds | Own revenue and capital |
| Annual reporting to the Ministry | Mandatory, by end of May | Foreign investment reporting | Foreign investment reporting where foreign-owned |
What a Liaison Office May and May Not Do
The permitted activities are set out exhaustively, and each one carries its own extension period. This table is the single most important thing to read before applying, because the activity declared at the application stage determines whether the office has a future beyond its first three years.
| Permitted activity | What it covers | Extension |
|---|---|---|
| Representation and hosting | Representing the foreign company before sector bodies and at relevant organisations, coordinating and organising the Turkish business contacts of the company’s executives, and meeting their office needs | 5 years |
| Control and supervision of suppliers | Auditing manufacturers producing on behalf of the foreign company against its quality standards, and sourcing products and manufacturers | 5 years |
| Technical support | Training or technical support for distributors, and support to supplier manufacturers in raising their quality standards | 5 years |
| Communication and information transfer | Collecting and transmitting information on market developments, consumer trends, competitors’ and distributors’ sales performance and similar matters | 5 years |
| Regional management centre | Coordination and management services for the company’s units in other countries: investment and management strategy, planning, promotion, sales, after-sales, brand and financial management, technical support, research and development, outsourcing, product testing, laboratory services, analysis and staff training | 10 years |
| Market research and promotion | Researching the market and promoting the foreign company’s goods or services | Not extendable |
An office authorised for market research or promotion cannot have its permit extended at all. When the three years end, it closes. An office authorised as a regional management centre can run for ten years at a time. Between those two extremes sit the operational categories at five years each.
Groups routinely apply under market research because it sounds broad and harmless, then discover at year three that there is no route forward and that the operation has to be rebuilt as a branch or a company. Where the real function is technical support to distributors, or supervision of suppliers, or regional coordination, declare that from the outset and document it. The declaration is not a formality; it is the office’s lifespan.
Permit Duration, Extension and Inspection
The initial permit is granted for a maximum of three years within the scope of the declared activity. An office wishing to continue must apply before its permit expires. The Ministry assesses extension requests on the office’s activities in the previous year, the foreign company’s business plan and objectives in Turkey, current and projected expenditure, and the number of staff employed, then grants the period corresponding to the nature of the activity.
Compliance with the permitted scope can be inspected by the Ministry on its own initiative or on the written notification of another institution. An office found to be operating outside the scope of its permit is given thirty days to apply for a permit covering the activity actually being carried on, extendable by up to a further thirty days on justified grounds. An office that does not apply within that period loses its permit. An office found to be carrying on commercial activity has its permit cancelled and the matter is reported to the relevant authorities.
Losing the permit is the administrative consequence. The tax consequence is larger. A liaison office is outside Turkish corporate tax only because its activities are preparatory and auxiliary. Where it negotiates prices, concludes or habitually plays the principal role in concluding contracts, holds stock for delivery, or otherwise performs the core commercial function of the parent, it may be treated as a permanent establishment or a dependent agent. The parent company then becomes a limited taxpayer in Turkey on the profits attributable to that activity, with the assessment running back over the open years and interest and penalties on top.
This is not a theoretical risk. It arises most often where a liaison office employs staff with sales titles, where its people appear on the parent’s commercial correspondence with customers, or where a “technical support” office is in practice managing the customer relationship. The double taxation agreement with the parent’s country defines the boundary, and the analysis should be done before the office is staffed, not after an inspection.
Requirements and Application Documents
The application is made to the Ministry of Industry and Technology, General Directorate of Incentive Implementation and Foreign Investment. Applications are concluded within fifteen working days provided the information and documents are complete.
| Document | Requirements and notes |
|---|---|
| Application form | The Ministry’s own form for liaison office establishment |
| Statement of works and undertaking | Setting out the scope of the work the office will carry out and undertaking that it will not engage in commercial activity, with evidence of the signatory’s authority |
| Certificate of activity of the parent | Issued in the parent’s country and certified by the Turkish consulate or apostilled under the Hague Convention |
| Financial statements of the parent | Activity report, or balance sheet and income statement |
| Certificate of authority for the representative | Issued to the person or persons appointed to carry out the office’s activities |
| Power of attorney | Where the establishment procedures are handled by another person |
Where originals are submitted, the Ministry certifies a copy and returns the original to the applicant.
On the parent company’s track record, the position is narrower than it is often described. The Ministry may require that at least one year has passed since the parent’s incorporation, assessed against the parent’s activity, capital and headcount. It is a discretionary condition applied to newly established companies, not an absolute bar. Applications in regulated financial fields — capital markets, insurance and similar — are assessed by the competent authority under the relevant special legislation, and the Ministry may seek the views of the licensing body in other regulated sectors.
Tax and Payroll Treatment
The salary exemption and its conditions
Wages paid to the staff of a liaison office are exempt from income tax, and the related documents are exempt from stamp duty, but only where every one of the following holds:
- The employer is a non-resident with neither its legal seat nor its business centre in Turkey
- The wage is paid in foreign currency
- It is paid out of earnings the employer derived outside Turkey, in other words funded by transfers from abroad
- It is not recorded as an expense against income taxable in Turkey
Break any one of these and the exemption fails for that employee. Paying a salary in Turkish lira from a local account, or funding it from a source other than the parent, is enough to lose it. The exemption is also personal to the employee: it is not a status the office holds, and it must be assessed for each person on the payroll.
The income tax exemption is often described as making liaison office payroll cheap. It does not. Social security premiums and unemployment insurance are payable in full on the same wages, and they are the larger part of the employer’s payroll cost in Turkey. The office registers a workplace file and files the withholding and premium service return like any other employer. Where the employee is seconded from a country with which Turkey has a social security agreement and holds a valid certificate of coverage, an exemption may apply — but that follows from the agreement, not from the office’s status.
Value added tax and other obligations
A liaison office makes no taxable supplies and therefore does not register as a value added tax payer. The practical consequence is that value added tax charged on its rent, professional fees and purchases is a cost rather than a recoverable input. The office is nevertheless registered with the tax office and remains within the scope of withholding obligations in respect of its payroll. Where the office makes rent or similar payments, the withholding position should be confirmed with the tax office, as practice is not uniform.
Compliance Calendar
- Tax registration and lease agreement to the Ministry within one month of the permit
- Annual activity information form by the end of May
- Notification of any change of representative or of the parent’s name within one month
- New lease agreement filed on any change of address
- Withholding and premium service return each period
- All expenses funded by foreign currency transfers from abroad
- All payments made through local bank accounts
- Extension application before the permit expires
Liaison offices must send the Ministry the activity information form and its annexes for the previous year by the end of May each year. An office that does not file it has its extension request refused without assessment, and its permit may be cancelled by the Ministry on its own initiative. This single deadline ends more liaison offices than any inspection does, because it is easy to miss in a structure with no accounting deadlines of its own.
Funding, Banking and Changes
A liaison office has no assets of its own. Every cost — salaries, social security premiums, rent, professional fees, translation, cleaning — is funded by foreign currency transferred from abroad by the parent, and payments are made through local bank accounts. The office cannot transfer funds out of Turkey, except for the residual balance arising on closure and liquidation.
Changes of address, of the appointed representative, or of the foreign company’s name must be notified to the Ministry within one month, with the new lease agreement or the new certificate of authority as applicable.
Closing a Liaison Office
Where the office ceases operations, a cessation and inspection form is obtained from the relevant tax office and sent to the Ministry. All liabilities — taxes, social security premiums and employee entitlements — must be settled before closure. No transfer of funds abroad may be requested other than the residual balance arising from closure and liquidation.
How Long Does It Take?
Six to nine weeks from first instruction is realistic, with legalisation of the parent’s documents accounting for most of it. The Ministry stage itself is the predictable part.
Common Mistakes Made by Investors
- Applying under market research. That category cannot be extended. At the end of three years the office closes and the operation has to be rebuilt.
- Letting the office act commercially in practice. Negotiating prices or concluding contracts risks both cancellation of the permit and treatment of the parent as having a permanent establishment in Turkey.
- Missing the end-of-May filing. The extension request is then refused without assessment and the permit may be cancelled.
- Assuming payroll is cheap. Only income tax and stamp duty are exempt. Social security premiums apply in full and are the larger cost.
- Paying salaries in local currency or from a local source. Each of these breaks a condition of the income tax exemption on its own.
- Treating value added tax as recoverable. The office makes no taxable supplies, so the tax on its purchases is a cost.
- Missing the one-month notifications. Changes of address, representative or parent company name each carry a one-month deadline.
- Assuming a one-year trading history is always required of the parent. It is a discretionary condition for newly established companies, not an absolute bar.
Frequently Asked Questions
How long is a liaison office permit valid in Turkey?
Can a liaison office in Turkey issue invoices or sign contracts?
Are liaison office salaries really tax free in Turkey?
Does a liaison office pay corporate tax or value added tax in Turkey?
Can a liaison office create a permanent establishment for the parent company?
What must a liaison office file each year?
Must the parent company have been trading for at least a year?
How is a liaison office funded?
As the Ozbek CPA team, we advise on the choice between a liaison office, a branch and a company, and we handle liaison office work end to end — selecting and documenting the activity category with the extension in mind, the Ministry application, tax and social security registration, payroll under the salary exemption conditions, the annual activity filing, permit extensions, and assessing permanent establishment exposure before it becomes an assessment. Contact us.
