A Limited Company in Turkey can be set with at least 1 founder. Minimum capital requirement is 10.000 TL. The liability of the shareholders is limited with the share capital. The founders can be real persons or legal entities. Similar to Joint Stock Companies in other respects, Limited Companies cannot issue stock certificates. The features of the limited companies in Turkey are shown below.

Companies based abroad can open liaison offices in Turkey provided if commercial activities are not carried out through these offices.

Companies based abroad can promote their business by opening Liaison Offices in Turkey. The main difference between a Branch and a Liaison Office is that the Liaison Offices cannot carry out any activity through their offices in Turkey to generate revenue. Another difference is that the expenditures of a liaison office must be met entirely from foreign currency brought in from abroad. Liaison Office permits are granted for a period up to three years, and extension applications must be made at the end of each period or permit.

The permit issuing authority for opening a Liaison Office in Turkey is the Directorate General of Foreign Investments, Turkish Treasury.

Documents needed at the application process are as below;

– Original copy of ” Certificate of Activity ” showing the number of employees and the annual expenditure estimate
– Operational report or balance sheet and income statement of the main company
– The original copy of Power of Authority issued to the representative authorised to manage the office
– The original copy of Power of Attorney issued to the person authorised to carry out the establishment transactions of the liaison office.

Liasion Office Status Against Investment Legislation

• The Treasury Report and Ek-4 (Form 4) form has to be submitted in every year in May to the Treasury for the activites performed within a year. The activities which is reported is simply regarding to the Money brought from abroad, changing Money, Office expenditures, gross salaries and other expenditures.
• Liaison offices at the establishment has a right to get a permission for three years. After three years, it has to be applied for the extention for more three years.

Liasion Office Status Against Turkish Tax Legislation

• In terms of Corporate Tax:

Liaison offices are related to Directorate General of Foreign Investments and are not allowed to make any trade activity and trade activities are subject to corporate tax law 5520. Article 1 of 5520 law states that the income for corporate bodies are subject to corporate tax which does not include liaison offices. We can summarize that liaison office can not have any trade activities and only income from trade activities are subject to corporate tax.

Since a liaison office cannot perform any commercial activity, it is not expected to have taxable income. Therefore, as long as it operates within the terms of its permit, a liaison office does not pay corporate or corporate withholding taxes.

• In terms of Value Added Tax:

Article 1 of 3065 VAT Law states that the deliveries and services made in Turkey as a part of commercial, industrial, agricultural and self-employment activities are subject to the VAT. Since a liaison office cannot perform any commercial activity, they do not have a liability for VAT. Liaison offices receive the invoices with VAT but VAT will be a cost for Liaison Office.

• In terms of Income Tax:

Article 23 of Income Tax Law states that the salaries paid in foreign currency to the employees working under foreign-based taxpayers are  exempted from income tax. Within the context of Article 94 of Income Tax Law:

1. Salary payment will be made of the earnings which the foreign-based taxpayers generate abroad. The payments will be made by the company abroad by transferring the money on the Liaison Office’s bank account in Turkey.

According to the “Employment Staff About Foreign Direct Investment Regulations” article 6 at most one person who has operating authority certificate can take work permit at Liaison offices.

2. The salary payments will be made in foreign currency or fx indexed TRL.

• In terms of Stamp Tax:

There is no stamp tax deduction from the salary payments.

A Collective Company is similar to a Commandite Company, except only real persons can be shareholders of a Collective Company and the liability of the shareholders is limited to the capital subscribed and paid by the shareholder. Like a Commandite Company, a Collective Company is set op carry out a business under a trade name without a requirement of minimum capital, where the rights and obligations of the shareholders are also set out in the Articles of Association.