Liaison Office Creation

Companies having their headquarters outside of Turkey, might choose to establish a liaison office (representative office) in Turkey for various reasons, in case no commercial activity is to be conducted in Turkey The primary differentiate between liaison office compared to a capital company is that they due to the nature of these offices, income tax is not a subject as the liaisons cannot take part 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
What is a Professional Employer Organisation

just as all legal entities, liaison offices are required
to conduct accounting and payroll services

The initial license period of operating a liaison office is limited to three years. Offices that wish to extend their license shall apply to the Ministry of Technology and Industry, prior to the expiration date.

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 relevant authority. 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 outlined in the FDI Law.

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 Administration. 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, which can be provided by CottGroup® as a one stop shop service provider.

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.

Where are we?

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Kempinski Residences
Büyükdere Caddesi No: 127
B Kule Kat: 8 34394
Şişli / İstanbul / Türkiye

Telephone: +90 212 244 92 22
Fax: +90 212 244 92 21
Web: www.workinturkey.net

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