Pathway: Consultancy Liaison Office

Liaison Office

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Companies based that are based outside of Turkey choose to establish liaison offices in  Turkey for various reasons. The primary differentiate between liaison is that they cannot partake in commercial and invoicing activities. The amendment published in the official gazette on July 3rd 2012 entitled FOREIGN DIRECT INVESTMENT REGULATION LAW has been completely revamped and has put in place new procedures and regulations regarding the establishment and operations of liaison offices.

 According to the new regulation, liaison offices can be established based on the following activity types for certain periods of time:

Activity

Period (Years)

Representation and hospitality businesses

(Businesses related with sectoral organizations to be representative of the foreign company, coordination and organization of business contacts in Turkey.)

5

Supplier control

(Maintaining the status of suppliers in Turkey in terms of quality and standards control in line with the foreign standards set by the foreign company)

5

Technical Support

(Training or providing technical support for distributors, suppliers, manufacturers provide support services to enhance quality standards)

5

Communication and information transfer

(To be delivered to foreign companies located in a business relationship with Turkey on the market developments, consumer trends, competitors and distributors selling situations, distributor firms' performance, and so on. Issues relating to the collection and transfer of informatoin.)

 

5

Regional management center

(Foreign company, units in other countries will be developed for investment and management strategies, planning, promotion, sales, after sales services, brand management, financial management, technical support, R & D, foreign procurement, testing of newly developed products, laboratory services, research and analysis, employee training and management services, such as ensuring the coordination of activities.)

 

10

The first period of operating liaison office is limited  to three years.  Companies that wish to extend their license shall apply to the General Directorate before the expiration of the period. Companies have liaison office for market research or to promote the products or services are not allowed to extend their operating licenses.

The first period of operating liaison office is limited  to three years.  Companies that wish to extend their license shall apply to the General Directorate before the expiration of the period. Companies
have liaison office for market research or to promote the products or services are not allowed to extend their operating licenses.The first period of operating liaison office is limited  to three years.  Companies that wish to extend their license shall apply to the General Directorate before the expiration of the period. Companies 

Following the obtaining of the permit, the Liaison Office must register with the local tax office. Within one month from the date of establishment, the office must submit a copy of the Tax Office Registration Document to the Directorate General. Forms and documents must be supplied to the Directorate General each year about their activities (Data Form for Liaison Office Activities) and all expenditures have been paid with the transferred foreign currency. Additionally, any changes in the address of the company or title of the foreign company, or changes in the authorized personnel must be submitted to the Directorate General by submitting the respective documents related to those changes.

The liaison office must also submit a report of the previous year operations using the form EK-4 along with supporting documents. Should the office fail to submit these items, the operation permit for the liaison office may be terminated.

 Liaison offices must perform their activities according to regulations and as the subject of activity specified in permits, written notices on its own initiative or on the relevant organization and institution inspected by the Ministry. As a result of the audit, in case where it is identified that the offices in which they operate outside the scope of permission, may apply for permission within thirty days in order to operate effectively. This period may be extended for thirty days at most if there are justifiable reasons. Operating permit shall be cancelled if relevant liaison office does not apply within the given period.

 In the case of winding up of the Liaison Office, "Termination and Examination of Business Note" issued by the tax office must be submitted to the Directorate. At this point, the liaison office cannot transfer funds except for those related to remaining balances and liquidation.

 In addition to the regulations mentioned above, there are also rules that apply to the transfer of funds, tax administration, and foreign currency.

 There are several items that must be taken into consideration for a liaison office to be successfully established in Turkey and maintained from a legislative view. Liaison offices must be registered at the treasury and file several periodic declarations at the proper authorities.

As per the new regulations, due to the fact that employees of liaison offices are not subject to income tax and the funds brought into the organization must be in foreign currency, the tracking and record keeping of these funds is extremely important. The funds that are sent to the organization must be exchanged into local currency and matched with the expenses that the company incurs. Also, the exchange statements from the bank must be kept on file so that they can be submitted annually by the month of May to the Treasury. These filings are not only important during the operating period, they are also a crucial part of the permit extension process. If the reporting procedures and requirements put forth by the Bank and Tax Authorities, the entity is not only at risk of having their permit revoked but can also be forced to retroactively calculate and pay income tax accruals for employees and face further penalties.

 Just like other kinds of entities, liaison offices have need for accounting and payroll services as well, are happy to be one of the premier providers of such services in the Istanbul area with our team of spirited CPA's and our partnership with the respected payroll organization within our group, Boss Governance Inc.

Through our consultancy and BPO services, our clients do not need to concern themselves with the arduous tasks and can focus on their primary operations instead. Our years of experience in this field and countless Fortune 500 customers served with great success have established our credibility as one of the leading liaison office consultants and BPO providers.