Foreign companies planning to enter the Turkish market usually face an important structural question at the very beginning:

Should the foreign company establish a branch office in Türkiye, or should it incorporate a separate Turkish subsidiary?

Both structures allow a foreign investor to conduct commercial activities in Türkiye. However, they are fundamentally different in terms of legal personality, liability, taxation, corporate governance, operational flexibility, investment strategy and exit procedures.

There is no universally correct choice. A branch may be efficient for a foreign company seeking a relatively direct extension of its overseas business into Türkiye. A subsidiary, on the other hand, is generally more suitable when the investor intends to build a long-term, locally operating business with employees, contracts, assets, financing arrangements and independent commercial risk.

For most substantial and long-term foreign investments, a Turkish subsidiary—particularly a joint stock company (Anonim Şirket or “A.Ş.”)—will usually provide stronger legal separation and greater corporate flexibility. Nevertheless, a branch can remain an attractive structure in certain circumstances.

This article explains the main differences.

1. Can a Foreign Company Freely Establish a Business in Türkiye?

As a general rule, yes.

Türkiye’s foreign investment regime is based on the principle of equal treatment. Foreign investors may establish companies in Türkiye under essentially the same rules applicable to domestic investors, subject to sector-specific restrictions and licensing requirements.

Foreign investors may therefore:

• establish a Turkish company,
• become shareholders in an existing Turkish company,
• establish a branch of a foreign company,
• enter into joint ventures, or
• use other investment structures permitted under Turkish law.

The Republic of Türkiye Investment Office expressly confirms that international investors may establish the company forms regulated under the Turkish Commercial Code and that, subject to certain regulated sectors, there are generally no nationality restrictions applicable to shareholders or persons holding management rights.

The principal legislation includes:

• Turkish Commercial Code No. 6102 (“TCC”),
• Foreign Direct Investment Law No. 4875,
• Corporate Tax Law No. 5520,
• Trade Registry Regulation,
• tax legislation,
• employment and social security legislation, and
• sector-specific regulatory legislation where applicable.

2. What Is a Branch Office in Türkiye?

A branch is an operational unit of the foreign parent company established in Türkiye.

The most important legal characteristic of a branch is that:

A branch is not a separate legal entity from the foreign parent company.

Accordingly, the Turkish branch and the foreign headquarters do not constitute two separate companies.

The Republic of Türkiye Investment Office similarly describes a branch as having no shareholders, no independent legal personality and a duration linked to that of the parent company.

Under Article 40/4 of the Turkish Commercial Code, branches of commercial enterprises headquartered outside Türkiye must be registered in Türkiye in a manner similar to domestic commercial enterprises. The foreign company must also appoint a fully authorised commercial representative whose residence is in Türkiye.

Therefore, a branch should conceptually be regarded as:

“The foreign company itself carrying out business through a registered place of business in Türkiye.”

It is not an independent Turkish subsidiary.

3. What Is a Subsidiary?

A subsidiary is fundamentally different.

Instead of registering an extension of the foreign company, the foreign investor establishes a new Turkish legal entity.

The foreign parent company generally becomes the shareholder of that Turkish company.

The most common structures are:

Joint Stock Company — Anonim Şirket (A.Ş.)

and

Limited Liability Company — Limited Şirket (Ltd. Şti.)

Both have separate legal personality.

For example, Article 329 of the Turkish Commercial Code provides that a joint stock company is responsible for its debts only with its own assets, while shareholders are generally responsible to the company only for the capital they have undertaken to contribute.

Similarly, limited companies are separate legal entities and their shareholders are generally not liable for ordinary company debts merely because they are shareholders.

This separation is one of the most important reasons multinational companies frequently prefer subsidiaries.

4. The Most Important Difference: Liability

The liability distinction is often the decisive factor.

Branch

Because a branch does not have an independent legal personality, the foreign parent company remains directly connected to the obligations generated through its Turkish branch.

For example, if the Turkish branch:

• enters into a commercial contract,
• leases an office or warehouse,
• employs personnel,
• purchases goods,
• incurs compensation liability, or
• becomes involved in commercial litigation,

the parent company may ultimately be exposed to those liabilities.

There is therefore no true corporate liability shield between the Turkish operation and the foreign headquarters.

Subsidiary

A subsidiary provides a substantially stronger separation.

Suppose a German company establishes:

ABC Türkiye Anonim Şirketi

The German parent company and ABC Türkiye A.Ş. are two legally separate entities.

Commercial agreements executed by ABC Türkiye A.Ş. generally create obligations of the Turkish company rather than automatically creating liabilities of the German shareholder.

This can significantly reduce the international group’s direct exposure.

However, this protection should not be treated as absolute.

Liability may still arise in exceptional circumstances involving, for example:

• guarantees issued by the parent company,
• fraudulent transactions,
• directors’ or managers’ liability,
• tax liabilities,
• public debts,
• capital obligations,
• related-party transactions, or
• specific contractual undertakings.

5. Special Warning: A.Ş. and Ltd. Şti. Are Not Identical

Foreign investors frequently assume that every Turkish subsidiary provides exactly the same liability structure.

That is incorrect.

A particularly important distinction concerns public debts.

Under Article 35 of Law No. 6183, shareholders of a Turkish limited company may, under the statutory conditions, be pursued proportionally for public receivables that cannot be collected or are understood to be uncollectible from the company. The Turkish Revenue Administration expressly confirms this principle.

This makes the limited company different from the classic shareholder liability structure of an A.Ş.

Accordingly, for significant international investments, an A.Ş. can often provide a cleaner shareholder-liability structure, although directors, legal representatives and other responsible persons may separately incur liability under tax and public receivables legislation.

This is one reason why the A.Ş. is frequently preferred for larger foreign investments.

6. Capital Requirements

The capital rules also differ significantly.

Branch

There is currently no statutory minimum capital requirement for establishing a branch of a foreign company.

However, sufficient funds should naturally be allocated to the branch for its Turkish activities. The Türkiye Investment Office expressly notes that although there is no formal capital requirement, allocating an operating budget is advisable.

Turkish Subsidiary

A subsidiary must comply with statutory minimum capital requirements.

As of 2026:

Joint Stock Company — A.Ş.

Minimum share capital:

TRY 250,000

For non-public joint stock companies adopting the registered capital system, the minimum initial capital is:

TRY 500,000

Limited Company — Ltd. Şti.

Minimum share capital:

TRY 50,000

These minimum amounts became effective from 1 January 2024.

Accordingly, a branch may initially appear financially simpler.

Nevertheless, the relatively modest capital requirement of a Turkish subsidiary is rarely the principal consideration for a multinational investor. Liability protection and operational flexibility are generally more important.

7. Scope of Activities

Another important limitation concerns the business activities of a branch.

A Turkish branch must operate within the business purposes of its foreign parent company.

The Türkiye Investment Office expressly states that a branch may be incorporated only for purposes corresponding to those of its parent company.

This can become important where the Turkish business eventually develops into activities outside the parent’s existing corporate objects.

A subsidiary offers considerably greater structural flexibility.

Provided that the activity is lawful and relevant regulatory approvals are obtained, a Turkish company can be incorporated with an appropriately broad corporate purpose.

This may make future expansion easier.

8. Corporate Governance

Branch Governance

A branch has:

• no shareholders,
• no separate general assembly,
• no board of directors in the corporate-law sense applicable to an A.Ş.

Instead, the parent company appoints a representative to manage the Turkish branch.

Turkish Commercial Code Article 40 requires a foreign company’s Turkish branch to have a fully authorised commercial representative resident in Türkiye.

Strategic decisions ultimately remain connected to the foreign headquarters.

This can make internal governance relatively straightforward.

Subsidiary Governance

A Turkish subsidiary has its own corporate organs.

An A.Ş. generally operates through:

• General Assembly of Shareholders, and
• Board of Directors.

A limited company generally operates through:

• General Assembly, and
• Manager or Board of Managers.

This requires more corporate administration.

However, it also creates a more autonomous Turkish business platform.

For foreign investors expecting:

• local management,
• additional investors,
• equity financing,
• employee participation,
• joint ventures,
• acquisitions, or
• eventual sale of the Turkish business,

this autonomy can be commercially valuable.

9. Which Structure Is Better for Future Investors or an Exit?

This is an area where the subsidiary usually has a significant advantage.

Assume a foreign technology company enters Türkiye and three years later wishes to sell 40% of its Turkish operations to an investment fund.

If it operates through a branch, there are no Turkish company shares to sell.

The transaction may instead require transferring:

• business assets,
• agreements,
• employees,
• intellectual property rights,
• customer relationships,
• permits, and
• other operational elements.

This may be considerably more complicated.

If the investor has established a Turkish subsidiary, the transaction can potentially be structured as a share sale.

The buyer acquires shares in the Turkish company while the underlying company continues to own its agreements, employees and assets.

This makes subsidiaries particularly attractive for businesses contemplating:

• venture capital investment,
• private equity investment,
• strategic partnerships,
• mergers and acquisitions,
• joint ventures, or
• an eventual exit.

10. A.Ş. May Be More Flexible Than Ltd. Şti. for Share Transfers

Where future investment or exit is anticipated, the choice between A.Ş. and Ltd. Şti. becomes relevant.

Limited-company share transfers generally require a written share transfer agreement with notarised signatures and, unless otherwise provided by the articles of association, approval of the general assembly.

Share transfer mechanics of an A.Ş. can generally be structured more flexibly, depending on whether the shares are registered or bearer shares and any restrictions contained in the articles of association.

Therefore, for:

• investment rounds,
• multiple investors,
• private equity,
• holding-company structures, or
• anticipated M&A transactions,

an A.Ş. is generally the more sophisticated corporate vehicle.

11. Taxation of a Branch and a Subsidiary

Tax considerations should always be examined together with the applicable Double Taxation Treaty.

Nevertheless, the basic Turkish tax structure can be summarised as follows.

Corporate Income Tax

For the 2025 and 2026 accounting periods, the standard Turkish corporate income tax rate for ordinary corporate taxpayers is generally:

25%

Different rates may apply to specified institutions and activities. The Turkish Revenue Administration’s 2026 corporate tax guidance confirms the general 25% rate.

Subsidiary

A Turkish subsidiary is ordinarily considered a resident Turkish corporate taxpayer and pays Turkish corporate income tax on its taxable corporate income under the applicable rules.

When profits are distributed to a foreign corporate shareholder, Turkish withholding tax may also apply.

Under current domestic rules, dividends paid by a Turkish resident corporation to a non-resident corporate shareholder are generally subject to 15% withholding tax, although an applicable Double Taxation Treaty may provide a reduced rate.

Branch

The Turkish-source profits attributable to the branch are taxed in Türkiye under the rules applicable to non-resident corporate taxpayers.

If the after-tax branch profits are transferred to the foreign headquarters, an additional branch-profit remittance withholding may arise.

Under current domestic rules, the withholding rate applicable to amounts transferred from branch profits to the foreign head office is 15%, subject again to possible reductions under an applicable Double Taxation Treaty.

12. Is a Branch Therefore More Tax-Efficient?

Not necessarily.

It is a common mistake to choose the legal structure solely on the basis of headline withholding percentages.

The actual tax position may depend on:

• the applicable Double Taxation Treaty,
• tax residence of the parent company,
• permanent establishment rules,
• transfer pricing,
• financing model,
• royalties,
• management fees,
• intra-group services,
• interest payments,
• thin capitalisation rules,
• deductible expenses,
• investment incentives, and
• the method by which profits are repatriated.

Therefore, the structure should ideally be modelled from both a corporate-law and tax-law perspective before incorporation.

13. Funding the Turkish Operation

A branch can generally receive operational funding directly from its foreign headquarters.

Because the branch and headquarters belong to the same legal entity, there is no shareholder relationship between them.

A subsidiary, however, may be funded through several mechanisms, including:

• capital contributions,
• capital increases,
• shareholder loans,
• intra-group financing,
• bank financing, or
• other legally permissible instruments.

This makes a subsidiary particularly useful where Türkiye is intended to operate as an independent investment centre within a multinational group.

However, related-party financing must be carefully structured because Turkish:

• transfer-pricing rules,
• thin-capitalisation rules,
• withholding taxes, and
• foreign-exchange regulations

may affect intra-group transactions.

14. Banking, Contracts and Commercial Presence

Both branches and subsidiaries can generally conduct commercial operations and open bank accounts, subject to bank compliance procedures.

In practice, however, a Turkish subsidiary may sometimes offer a stronger local commercial identity.

Customers, suppliers, landlords and financial institutions may prefer contracting with a Turkish incorporated company, particularly for long-term operations.

A subsidiary may also facilitate:

• local borrowing,
• commercial leases,
• distribution agreements,
• procurement contracts,
• employment arrangements,
• local investment partnerships, and
• possible acquisition transactions.

A branch may nevertheless work perfectly well for businesses with a smaller or more centrally controlled Turkish presence.

15. Employees and Work Permits

Both branches and Turkish subsidiaries may employ personnel in Türkiye.

They must comply with Turkish:

• employment law,
• social security regulations,
• payroll requirements,
• occupational health and safety regulations, and
• immigration and work-permit rules applicable to foreign personnel.

Special rules may apply to foreign employees and key personnel working in foreign direct investment enterprises. Türkiye’s foreign investment framework expressly contemplates both Turkish companies and branches with foreign investment.

Establishing a Turkish company does not automatically give foreign managers a right to work in Türkiye. Work authorisation must be assessed separately.

16. Regulatory Licences

Neither a branch nor a subsidiary should be viewed as a way of avoiding sector-specific regulations.

Foreign investors operating in regulated industries may require separate licences or approvals.

Examples include:

• banking,
• payment services,
• insurance,
• capital markets,
• energy,
• healthcare,
• pharmaceuticals,
• telecommunications,
• aviation,
• maritime activities, and
• broadcasting.

Foreign ownership restrictions may also exist in certain sectors.

Accordingly, the first legal question should not always be:

“Branch or subsidiary?”

It may first be:

“Is this activity regulated, and what type of entity is permitted to obtain the necessary licence?”

17. Foreign Direct Investment Reporting — E-TUYS

Foreign-invested companies and branches may also have reporting obligations under Türkiye’s foreign direct investment legislation.

Certain foreign investment information is submitted electronically through E-TUYS — Electronic Incentive Application and Foreign Investment Information System.

The Ministry of Industry and Technology confirms that foreign-capital companies and branches submit foreign-investment notifications through the E-TUYS system.

Consequently, incorporation or branch registration is not necessarily the end of the foreign-investment compliance process.

Ongoing reporting should also be monitored.

18. Establishment Documents for a Foreign Company Branch

Although requirements should always be checked with the competent Trade Registry Directorate, establishing a branch generally involves documents concerning:

• the parent company’s resolution to open the Turkish branch,
• the parent company’s articles of association,
• certificate of activity or equivalent corporate-status document,
• appointment and authority of the Turkish branch representative,
• branch registration forms,
• signature documentation, and
• information concerning the branch address and activity.

Foreign-issued corporate documents generally need to be appropriately legalised—commonly through apostille where the Hague Apostille Convention applies or through consular procedures—and translated into Turkish and notarised where required.

This should be planned in advance because collecting corporate documents from the parent company’s jurisdiction can sometimes be the most time-consuming part of the registration process.

19. Which Structure Is Easier to Close?

This depends heavily on the facts.

A branch may appear structurally simpler because it is not a separate company.

However, closure still requires settlement of:

• Turkish tax liabilities,
• employee claims,
• contractual obligations,
• trade registry matters,
• accounting obligations, and
• other regulatory requirements.

A subsidiary normally requires formal dissolution and liquidation unless another restructuring method is used.

Consequently, a subsidiary generally involves a more formal exit procedure.

Nevertheless, ease of liquidation should rarely be the primary criterion where the investment itself is intended to be substantial and long term.

20. Practical Comparison

21. When Is a Branch Usually the Better Choice?

A branch may be appropriate where:

• the Turkish operation will remain relatively small,
• the parent company wants direct control,
• there is no intention to bring Turkish shareholders or investors into the structure,
• the parent company is comfortable assuming liability for Turkish activities,
• the activity will remain within the foreign company’s existing corporate purpose,
• the investment is project-specific, or
• establishing an additional corporate entity provides little commercial benefit.

For example, a foreign engineering company carrying out a defined long-term infrastructure contract in Türkiye may sometimes prefer a branch.

22. When Is a Subsidiary Usually the Better Choice?

A Turkish subsidiary will generally be preferable where:

• Türkiye will become an important market,
• the business will employ significant personnel,
• the company will enter numerous local agreements,
• substantial assets will be acquired,
• liability risk is material,
• financing will be raised,
• Turkish or international investors may participate,
• a joint venture may be created,
• the Turkish operation may later be sold,
• an independent Turkish brand or corporate identity is desirable, or
• long-term expansion is expected.

For a foreign technology, manufacturing, healthcare, e-commerce or professional-services group establishing a permanent Turkish operation, a subsidiary will therefore often be the more sustainable solution.

23. A.Ş. or Ltd. Şti. for the Subsidiary?

For relatively simple, closely held operations, a limited company may be sufficient.

However, an A.Ş. often becomes preferable where the Turkish business will:

• receive outside investment,
• issue different groups of shares,
• have several investors,
• implement sophisticated shareholder arrangements,
• attract venture capital or private equity,
• undergo future M&A transactions, or
• become a significant part of an international corporate group.

The higher statutory minimum capital of an A.Ş.—TRY 250,000 compared with TRY 50,000 for an Ltd. Şti.—is often a relatively small consideration compared with these corporate advantages.

24. Practical Example

Consider a UK software company entering the Turkish market.

Scenario A

The UK company wishes to employ two people in Istanbul and provide services to a limited number of Turkish clients while strategic decisions remain entirely in London.

A branch could potentially be sufficient.

Scenario B

The same company intends to:

• employ 50 people,
• lease a major Istanbul office,
• obtain local financing,
• acquire Turkish software companies,
• bring a Turkish investor into the business, and
• eventually sell part of its Turkish operations to a private equity fund.

In that case, establishing a Turkish subsidiary, most likely an A.Ş., would generally be much more appropriate.

The legal structure should therefore reflect not only what the investor intends to do today, but what it expects the Turkish business to become in the next several years.

25. Conclusion: Branch or Subsidiary?

There is no automatic legal answer applicable to every foreign company.

A branch provides a relatively direct method of operating in Türkiye without creating a separate Turkish legal entity and without a statutory minimum capital requirement.

Its principal disadvantage is precisely that absence of legal separation.

The branch remains part of the foreign parent company, meaning that Turkish operational liabilities can create more direct exposure for the parent.

A subsidiary requires additional corporate organisation, capital and governance but creates an independent Turkish legal entity.

For companies intending to make a significant, permanent or expandable investment in Türkiye, this separation normally provides substantial advantages.

In practical terms:

Branch:
Best suited to limited, centrally managed or project-specific Turkish operations where direct parent-company exposure is acceptable.

Limited Company (Ltd. Şti.):
Suitable for smaller or closely held Turkish subsidiaries, although foreign investors should carefully assess shareholder exposure to Turkish public debts and the more formal share-transfer process.

Joint Stock Company (A.Ş.):
Usually the strongest structure for substantial foreign investment, corporate groups, future investors, M&A transactions and long-term Turkish operations.

The final decision should nevertheless be made after reviewing:

• the parent company’s country of residence,
• applicable Double Taxation Treaty,
• intended Turkish business activities,
• expected revenue,
• number of employees,
• regulatory requirements,
• liability exposure,
• investment and financing structure,
• profit repatriation strategy, and
• future exit plans.