1. Legal Nature of a Branch Office in Turkey
1.1. Branch vs. Company: Not a Separate Legal Entity
Under Turkish law, a branch is an extension of a foreign company operating in Turkey, but not a separate legal entity. It has:
- Its own commercial name (usually the foreign company’s name plus “Turkey Branch”)
- A separate trade registry record and tax number
- A branch manager who is authorised to represent the foreign company in Turkey
However, the foreign company remains fully liable for the branch’s obligations. The branch does not have its own independent capital structure like a limited liability or joint stock company.
This distinction is crucial for:
- Risk allocation – creditors can pursue the foreign company
- Corporate governance – main decisions are taken at the foreign company level
- Accounting and tax – the branch is taxed on its Turkish-source income, but profits legally belong to the head office
1.2. Branch as a “Commercial Enterprise”
In practice, the Turkish branch is treated as a commercial enterprise operated by a foreign legal entity. It is entered into the relevant Turkish trade registry and is subject to the Turkish Commercial Code rules applicable to commercial enterprises, including:
- Trade name and signage rules
- Book-keeping obligations
- Commercial correspondence and invoice rules
- Rules on unfair competition and commercial representation
2. Legal Framework for Foreign Branches in Turkey
Although this article does not quote legislation, the main pillars of the legal regime can be summarised as follows:
- Turkish Commercial Code (TCC) – regulates branches of foreign companies, commercial enterprises, trade register rules and corporate governance aspects for branch management.
- Foreign Direct Investment rules – guarantee national treatment and regulate the registration of foreign investors and their Turkish establishments.
- Trade Registry Regulation – details the documentation and formalities for branch registration.
- Tax legislation – income tax, corporate tax, withholding tax and VAT rules applicable to branch operations.
- Sector-specific regulations – for regulated industries (banking, insurance, energy, telecom, pharmaceuticals, etc.) additional licensing and approvals may be needed.
In most non-regulated sectors, foreign and domestic investors receive equal treatment, meaning a foreign company’s branch enjoys essentially the same legal environment as a Turkish commercial enterprise in similar conditions.
3. Why Foreign Companies Choose a Branch in Turkey
3.1. Main Advantages of a Branch
Foreign investors often compare three alternatives:
- A branch office
- A wholly-owned subsidiary (e.g. a joint stock or limited liability company)
- A liaison office (non-commercial representative office)
The branch model offers a number of advantages:
- Direct control by the foreign company – no separate shareholding structure
- Simpler corporate governance – no general assembly meetings, board structures, share transfers etc.
- Quick market entry – once documentation is prepared, registration can usually be completed relatively fast
- Possibility to carry out full commercial activities – unlike liaison offices, branches can generate revenue, sign contracts and issue invoices
- Perception of continuity – business partners see the Turkish branch as part of the global corporate network of the foreign company
3.2. When a Branch May Be Preferable to a Subsidiary
A branch may be preferable where:
- The foreign company wants to retain direct liability and direct control over Turkish operations
- The group prefers not to incorporate an additional legal entity in its global structure
- Activities are limited in scope or duration (e.g. specific projects, construction contracts, time-limited contracts)
- The group wants to test the Turkish market before deciding on a full-fledged subsidiary
3.3. Main Disadvantages and Considerations
On the other hand, a branch is not always the best solution:
- Unlimited liability of the head office for branch debts and obligations
- Reputational and risk contagion – branch-level disputes or enforcement may affect the foreign company’s assets
- In some cases, financing, investment and joint venture structures may be easier with a subsidiary
- Certain incentives or sector rules may be tailored for companies incorporated in Turkey, not branches
Therefore, before choosing the branch model, foreign investors usually conduct a comparative assessment between branch, subsidiary and liaison office.
4. Pre-Registration Considerations for Opening a Branch in Turkey
Before starting the formal registration process, foreign companies should carefully prepare.
4.1. Board Resolution and Corporate Approvals
The foreign company must adopt a corporate resolution approving:
- Opening a branch in Turkey
- Determining the branch address
- Appointing at least one branch manager/representative
- Allocating branch capital (even though branch is not a separate legal entity, a certain amount is usually declared)
- Defining the scope of activities to be conducted by the branch
The exact form of this resolution depends on the foreign jurisdiction and company type, but in practice Turkish trade registries expect certain standard elements.
4.2. Appointment of a Branch Manager
The branch manager (or authorized representative):
- Acts as the legal representative of the foreign company in Turkey
- Signs documents, contracts and commercial correspondence on behalf of the branch
- Is registered with the trade registry
- Often must provide a specimen signature declaration before a Turkish notary
If the branch manager is a foreign national, residence and work permit issues may arise. In many cases, the branch may first be registered and then the work permit process is initiated based on that registration.
4.3. Determining the Branch Address and Lease
Trade registries require the exact address of the branch office. A lease agreement or title deed indicating the business premises is commonly requested as supporting documentation.
Virtual offices may be acceptable in some cases, but foreign companies should consider:
- Whether the selected address is suitable for inspections
- Whether sector-specific regulations require specific types of premises (e.g. warehouses, laboratories, production areas)
4.4. Sector-Specific Approvals
For certain activities (financial services, banking, insurance, energy, pharmaceuticals, etc.), additional licenses or permits are required. In such sectors, the branch registration is usually part of a broader regulatory approval process and the foreign company must coordinate with both:
- The trade registry and
- The competent regulatory authority
5. Step-by-Step Procedure for Branch Registration in Turkey
While there may be minor local variations, the procedure usually follows these main steps.
5.1. Obtaining a Tax Number for the Foreign Company
In many cases, the foreign company must first obtain a Turkish tax number in order to proceed with subsequent steps such as lease registration or signing before notaries.
This is usually done by:
- Applying to the competent tax office (or electronically where available)
- Submitting the foreign company’s certificate of incorporation and translated documents
- Designating a local contact person
5.2. Preparation and Legalisation of Corporate Documents
Foreign company documents must generally be:
- Duly issued in the home jurisdiction (e.g. certificate of good standing, articles of association)
- Legalised (apostilled or consular legalisation, depending on the country)
- Translated into Turkish by sworn translators
- Notarised in Turkey where required
Commonly requested documents include:
- Articles of association / charter of the foreign company
- Certificate of incorporation and current status
- Board resolution approving the branch
- Power of attorney for individuals who will follow the registration process
- Identity documents of the branch manager
5.3. Drafting the Branch Articles / Statute
Although the branch is not a separate company, a brief branch statute is typically prepared, including:
- Name of the foreign company
- Name of the Turkish branch
- Registered office address of the branch
- Scope of activity
- Capital allocated to the branch (if any)
- Details of the branch manager and signatory powers
This document will be registered and announced by the trade registry.
5.4. Application to the Trade Registry
The branch registration application is filed with the relevant trade registry directorate where the branch will be located. The application usually includes:
- Trade registry forms
- Legalised and translated corporate documents
- Branch statute
- Signature declarations
- Lease agreement or proof of address
- Proof of payment of registration fees
Once the trade registry reviews and accepts the documents, it:
- Registers the branch
- Issues a trade registry gazette announcement
- Assigns a trade registry number
5.5. Post-Registration Formalities
After the trade registry step, the branch must complete several formalities:
- Tax registration – with the competent tax office; obtain tax certificate.
- Social security registration – if the branch will employ personnel in Turkey.
- Opening of bank accounts – often required for operational purposes, salary payments and tax obligations.
- Registration with professional chambers – in certain sectors, membership to specific chambers may be mandatory.
- Accounting setup – appointment of a certified public accountant and implementation of local book-keeping in Turkish Lira, where required.
6. Capital, Accounting and Profit Repatriation
6.1. Branch Capital
Although a branch is not a separate capital company, the foreign company typically declares a branch capital amount to show commitment and financial structure. This capital is:
- Not divided into shares
- Can be increased or decreased by decisions of the foreign company
- Often transferred from the head office to the branch via bank transfers
In some sectors or incentive schemes, minimum capital or specific financial criteria may be prescribed.
6.2. Accounting and Financial Reporting
Branch offices must:
- Keep statutory books in accordance with Turkish accounting rules
- Prepare yearly financial statements
- File tax returns and other periodic declarations
Although the branch’s accounts are integrated into the foreign company’s global consolidation, local compliance in Turkey remains indispensable.
6.3. Profit Repatriation
Profits generated by the branch:
- Are subject to corporate income tax in Turkey on their Turkish-source income
- Can be repatriated to the foreign head office after tax obligations are fulfilled
Profit transfers may involve:
- Banking procedures and documentation
- Withholding tax considerations on profit remittances (depending on the relevant rules and any applicable double tax treaties)
Well-designed tax planning should consider:
- Whether a branch or subsidiary structure is more efficient
- Availability of double taxation agreements
- Treatment of branch profits in the home jurisdiction of the foreign company
7. Employment and Immigration Issues in Branch Offices
7.1. Hiring Local Employees
Branches may employ Turkish nationals under standard labour law rules. Key points include:
- Written employment agreements
- Registration with the social security institution
- Compliance with minimum wage, working hours, overtime, and termination rules
- Implementation of workplace policies and, where necessary, occupational safety obligations
7.2. Foreign Personnel and Work Permits
If the branch wants to employ foreign nationals, work permits are required. For senior roles like branch managers, the work permit process may be linked to:
- The company’s investment level in Turkey
- The number of Turkish employees relative to foreign employees
- Sector-specific conditions
The branch structure itself does not remove the need for work permits; it simply acts as the Turkish employer.
8. Regulatory and Compliance Obligations
8.1. Commercial and Consumer Law Compliance
Branches must comply with Turkish:
- Commercial law (e.g. unfair competition, advertising, trade name use)
- Consumer protection rules (if dealing with consumers in Turkey)
- E-commerce, distance sales and electronic communication obligations, where applicable
8.2. Data Protection and Privacy
If the branch processes personal data of employees, customers or suppliers in Turkey, it must comply with:
- Local data protection rules (including registration and notice obligations where applicable)
- Principles on lawful processing, data minimisation and data security
- Cross-border data transfer requirements if data is shared with the foreign head office or other group entities
8.3. Sector-Specific Rules
For branches in regulated industries (banking, insurance, capital markets, energy, telecoms, pharma, etc.) the branch must secure and maintain:
- Operating licenses
- Ongoing reporting obligations
- Fit-and-proper requirements for managers or key personnel
Non-compliance may lead to heavy administrative fines or licence revocation.
9. Typical Risks and Pitfalls for Foreign Branches in Turkey
9.1. Underestimating Corporate and Tax Compliance
Some foreign companies treat the branch as a simple representative office. In reality, a branch:
- Issues invoices
- Concludes contracts
- Pays taxes
- Enters into employment relationships
Neglecting compliance can result in tax assessments, administrative fines or even criminal investigations in severe cases.
9.2. Insufficient Documentation and Localisation
A common problem is failure to properly translate and legalise documents or not tailoring corporate documents to Turkish practice. This may cause:
- Registration delays
- Rejections by the trade registry
- Additional costs for re-preparing or legalising documents
9.3. Inadequate Allocation of Authority to the Branch Manager
If the branch manager’s authority is restricted or unclear, daily operations become difficult. In practice, Turkish counterparties and authorities expect:
- A clearly authorised representative
- A transparent signature authority pattern
- Timely decision-making without constant overseas approvals
Mis-structuring the authority matrix can slow down business and create legal uncertainty.
9.4. Misalignment with Group Structure and Transfer Pricing
Branches are part of larger corporate groups. Issues may arise where:
- Services and goods are transferred between the head office and branch without clear contracts or transfer pricing policies
- Intercompany charges are not consistent with arm’s length standards
- The branch’s functions, assets and risks are not properly analysed
Tax authorities may challenge transfer pricing, leading to adjustments and penalties.
10. Comparison with Liaison Offices and Subsidiaries
10.1. Branch vs. Liaison Office
A liaison office (or representative office) in Turkey:
- Cannot carry out commercial activities
- Cannot issue invoices or generate revenue
- Is limited to non-commercial activities (market research, representation, communication, etc.)
Compared to a liaison office, a branch:
- Can engage in full commercial operations
- Is subject to corporate taxation
- Has more onerous compliance but also more business flexibility
Foreign companies sometimes start with a liaison office and later convert to a branch or subsidiary once they decide to actively trade in Turkey.
10.2. Branch vs. Subsidiary
A subsidiary (e.g. joint stock or limited liability company) is a separate legal entity incorporated under Turkish law. Compared with a branch:
- The subsidiary has limited liability – shareholders are generally not liable beyond their capital contributions
- Corporate governance may be more complex (board, general assembly, capital maintenance)
- Certain incentives or sector rules may specifically target companies incorporated in Turkey
In some scenarios, a branch is preferred for simplicity and integration with the head office, while in others a subsidiary is better for ring-fencing liability and structuring investments.
11. Practical Checklist for Opening a Branch in Turkey
For ease of reference, here is a consolidated checklist for foreign companies.
11.1. Strategic and Legal Planning
- Decide whether a branch is more suitable than a subsidiary or liaison office
- Analyse tax implications in both Turkey and the home jurisdiction
- Identify any sector-specific licence requirements
11.2. Corporate Documentation
- Prepare a board or shareholder resolution approving the branch
- Obtain updated certificate of incorporation / good standing
- Obtain and translate the articles of association of the foreign company
- Appoint the branch manager and define signatory powers
- Execute powers of attorney for local counsel or consultants
11.3. Local Formalities
- Obtain a tax number for the foreign company, if needed
- Secure a branch office address and sign the lease
- Translate and notarise documents in Turkey
- Prepare and file the trade registry application
11.4. Post-Registration Actions
- Register with the tax office and social security institution
- Open bank accounts in Turkey
- Implement accounting, payroll and compliance systems
- If applicable, complete licensing steps with relevant regulatory authorities
12. Ongoing Compliance and Corporate Governance
Once the branch is operational, foreign companies should treat it as a fully-fledged part of their global operations, with:
- Regular monitoring of tax and regulatory deadlines
- Internal audits of contracts, employment practices and data protection compliance
- Ongoing training for local staff on corporate policies and ethics
- Clear communication channels between the branch and head office
Documenting internal procedures and keeping minutes of significant decisions—even though a branch has no separate general assembly—helps demonstrate good governance in case of disputes or inspections.
13. Conclusion: When a Turkish Branch Is the Right Choice
Opening a branch in Turkey is a powerful way for foreign companies to:
- Enter a dynamic and growing market
- Maintain direct control over operations
- Integrate Turkish activities tightly with global business lines
However, the decision must be made with full awareness of:
- The unlimited liability of the foreign company
- The tax and regulatory obligations the branch will face
- Sector-specific requirements and compliance burdens
With careful planning, proper documentation and ongoing legal support, a branch in Turkey can become a highly effective platform for regional and global growth.
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