A liaison office in Turkey may carry out non-revenue-generating activities such as market research, promotion, supplier follow-up, quality control, coordination and reporting. It cannot sell goods or services, issue invoices, take orders, collect payments from customers or earn commission income. What matters in the assessment is not the name of the office, but the work the employees actually do.
The basic rule: does the activity generate revenue?
Foreign companies may open a liaison office in Turkey only on condition that the office does not engage in commercial activity. The activities must also be consistent with the scope stated in the establishment permit. In practice the line is not always clear: an employee meeting a potential customer may count as market research, while the same employee quoting a price, taking an order or settling contract terms creates a commercial activity risk.
- Does the activity result in income being earned in Turkey?
- Are goods or services being supplied to a customer in Turkey?
- Does the employee conclude the sales or order process?
- Are customer payments coming into the liaison office’s bank account?
- Is the office supporting the parent company, or is it in fact running the commercial operation itself?
The activity spectrum
Activities a liaison office may carry out
Market research
Market size, competitors, import data, price levels and distribution channels may be researched and reported to the parent company.
Supplier research
Manufacturers may be identified, capacity information collected and factories visited. The purchase contract and payment must remain with the parent company.
Quality control
The production process may be followed, samples examined, pre-shipment checks carried out and a quality report sent.
Trade fairs and events
Fairs, conferences and chamber events may be attended. Selling at a fair, accepting orders or collecting payment crosses the line.
Coordination and reporting
The flow of information between the parent company and suppliers, distributors, advisers and public authorities may be maintained, and regular reports submitted.
Office, staff and bank
An office may be rented, staff employed and a bank account opened. The account is used only to fund the activity.
Grey area: three critical activities
1. Customer meetings
Meetings may be held to introduce the company and learn about needs.
Appropriate: “These are our parent company’s product groups.” · Risky: “We can sell you this product for EUR 100,000 and deliver next month.”
2. Price work
Information about price levels may be collected as part of market research. Conducting binding negotiations, setting the discount rate or approving the final offer may indicate that the sales process is being run from Turkey.
A safer method: the employee collects the requirement, and the parent company prepares the formal offer and sends it to the customer. This method does not on its own remove the risk; the employee’s actual role is assessed separately.
3. Technical support
General technical information may be given, and user feedback collected and passed to the parent company.
Risky: providing the customer with regular maintenance, repair, assembly, training or paid service. Engineers working on site for extended periods and accepting delivery also raise the risk of a permanent establishment.
Activities a liaison office may not carry out
Issuing invoices
A sales invoice cannot be issued to a customer. Receiving supplier invoices for office, rent and personnel expenses is possible.
Collecting payments
Sales amounts, service fees or commissions cannot be collected from customers in Turkey. The account is only for funding expenses.
Selling goods or services
Product sales, paid consultancy, subscriptions, maintenance fees or commission income are not possible.
Signing a sales contract
Lease and employment contracts may be concluded; signature of a customer sales contract by the office may be treated as commercial activity.
Taking orders
Passing an enquiry to the parent company differs from taking a binding order. Order confirmation and a delivery undertaking cross the line.
Holding stock and distributing
Limited samples may be held. Commercial stock, a warehouse and a dispatch operation point to commercial activity.
Twenty-activity quick table
Assessment of liaison office activities
| Activity | Assessment | Point to watch |
|---|---|---|
| Market research | Permitted | Must not turn into a sales process |
| Competitor analysis | Permitted | Must serve the purpose of reporting to the parent company |
| Meeting a potential customer | Limited | Price and order must not be finalised |
| Product presentation | Permitted | No selling or collection of payment |
| Attending a trade fair | Permitted | No orders may be accepted |
| Supplier research | Permitted | Purchasing must be done by the parent company |
| Quality control | Permitted | Production activity must not be assumed |
| Regional coordination | Subject to the permit | Must not become a revenue-generating operation |
| Sharing technical information | Permitted | Must not turn into a paid service |
| Reporting to the parent company | Permitted | The most natural function of the office |
| Employing staff | Permitted | Payroll and social security formalities must be carried out |
| Renting an office | Permitted | Contract and signature authority must be set up correctly |
| Opening a bank account | Permitted | No commercial collections |
| Setting prices | Risky | The final commercial decision must rest with the parent company |
| Invoicing a customer | Not permitted | A branch or a company is required |
| Collecting from customers | Not permitted | The account is only for funding the activity |
| Taking orders | Not permitted | Collecting enquiries must be kept separate from orders |
| Signing a sales contract | Not appropriate | Creates a commercial activity risk |
| Stock and distribution | Not appropriate | A local commercial structure is required |
| Commission and paid service | Not permitted | The office cannot earn income |
Job descriptions and correspondence
Keeping within the activity limit does not depend on the permit document alone. Employment contracts, job descriptions, business cards, e-mail signatures, target and bonus schemes, signature authorities and positions on the organisation chart all matter in the assessment of the actual activity. An employee whose job description reads “market research and coordination” but who is subject to a sales quota or receives a sales bonus presents a contradictory picture.
Wording that creates risk
“I confirm your order.” · “Our final price is as follows.” · “We can give you a 10 per cent discount.” · “You may make payment to our account in Turkey.” · “I approve the contract terms on behalf of our company.”
Wording that reflects the role correctly
“We will pass your request to our parent company.” · “The formal offer will be sent from our head office abroad.” · “We are collecting information about the market in Turkey.” · “We are passing your technical request to the specialists at our parent company.”
What matters here is not only the wording used, but how the transaction is actually carried out.
Consequences of crossing the line
Where it is established that the liaison office has engaged in commercial activity or has operated outside the permitted field, the following may arise: cancellation of the operating permit, rejection of an extension request, examination of tax obligations for past periods, corporate tax and VAT exposure, tax penalties and late payment interest, effects on work permit processes, and scrutiny of banking and contractual transactions. Setting the operating model up correctly from the outset is safer than preparing a defence after a problem has emerged.
Practical check
- Employees in Turkey have a sales target.
- Employees negotiate prices with customers.
- Orders are approved by the team in Turkey.
- Customer payments come into the account in Turkey.
- Stock or a warehouse is held in Turkey.
- Employees provide paid technical services to customers.
- Contracts are signed at head office, but the terms are set by the team in Turkey.
- The office’s expenses are met out of customer revenue.
Where any of these applies, a move to a branch or local company structure should be assessed. A liaison office does not convert directly into a commercial enterprise; the new structure must be established separately and the transition planned.
Frequently asked questions
Can a liaison office meet customers?
Yes. It may hold meetings for market research, promotion and coordination purposes. However, it should not finalise a price, take an order or conclude a contract.
Can a liaison office submit an offer?
Submitting a binding commercial offer is risky. It is more appropriate for the formal price and sales offer to be prepared by the foreign parent company.
Can a liaison office provide technical support?
It may provide general technical information and coordination support. Paid maintenance, repair, assembly or servicing creates a commercial activity risk.
Can a sales bonus be paid to a liaison office employee?
A bonus scheme tied to sales creates the impression that the employee is in fact carrying out sales activity. The duties and the remuneration structure should be assessed together with the operating model.
Can a liaison office rent a warehouse?
Limited storage may be considered according to the needs of the activity. Holding commercial stock and distributing to customers is not appropriate.
Can a liaison office receive customer payments into its bank account?
No. The account should be used to manage the operating funds sent by the parent company and the office expenses.
Legislation: Foreign Direct Investment Law No. 4875 and its Implementing Regulation (prohibition of commercial activity, scope of the permit) · Corporate Tax Law No. 5520 (place of business and permanent representative) · the place of business provisions of the applicable double taxation agreements.
Are your liaison office’s activities consistent with the scope of its permit?
Send us the list of your office’s activities and the duties of its employees, and our team will assess the existing structure for commercial activity, tax, payroll and permit risks, and identify which transactions can be carried out through the office and what adjustments are needed in the job descriptions. Contact the Ozbek CPA team.
