Today, one of the methods used by the developing countries with the purpose of addressing the financial needs is foreign investors. Foreign investments play a significant role in the economic development of countries. One of the foreign investment methods is establishing liaison offices at the country where the investment is planned. “Foreign Direct Investment Law” No. 4875 enacted on 17 June 2003 has established important regulations on this matter.
Liaison offices can be defined as “Foundations which were established by the companies in abroad and -on condition that commercial activities are not covered- which were founded in order to communicate, host, contact, do market research and follow the business opportunities and so on”. Companies registered abroad generally prefer establishing liaison offices in Turkey in order to introduce their commercial activities or carry out market research. The difference between the liaison offices and the limited liability companies, joint stock companies and branches founded as per Turkish Commercial Code is that it is strictly forbidden for liaison offices to engage in income generating commercial activities.
Main and most important restriction imposed on the liaison offices is the prohibition of engaging in income generating commercial activities. Thus, liaison offices founded in Turkey are not obliged to pay corporate and value added tax. Although there is no direct regulation in Turkish Commercial Code regarding liaison offices, provisions on these offices are set forth in the Law on Foreign Direct Investments and the Regulation for Implementation of Foreign Direct Investment Law.
According to Article 6 of the Regulation for Implementation of Foreign Direct Investment Law No. 4875, following conditions should be satisfied in order to open a liaison office in Turkey:
-Companies should be established in accordance with the laws of foreign countries and the established legal entity should have articles of incorporation;
- They should not engage in any commercial activities in Turkey.
Article 7 of the Regulation sets forth the required documents for opening a liaison office in Turkey. These documents shall be submitted to the Ministry of Economy:
-The original “Certificate of Activity” of the parent company approved by the relevant Turkish Consulate or approved in accordance with the provisions of the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, prepared on the basis of the Hague Conference on Private International Law,
-Operational Report or balance sheet and income statement of the parent company,
-The original certificate of authority issued to the name of the person who is appointed to carry out the operations of the liaison office,
-The original power of attorney in case that another person will carry out the establishment transactions of the liaison office.
As per Article 6 of the relevant regulation, applications for establishment and extension shall be finalized within five days following the application, provided that the necessary information / documents are complete and proper.
Article 8 of the Governing Regulation states that liaison offices, in their first application are granted operation permits by the Ministry of Economy for a period of three years at most. For extensions, the liaison offices are required to make an application to the General Directorate of Incentives Implementation and Foreign Investment before the expiration of their permissions.
Information regarding the establishment and operation procedures of liaison offices is provided in brief. Liaison offices play significant role in encouraging the foreign investments in Turkey, increasing the foreign investments and introducing our country to the world.
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