Establish a liaison office in Turkey

As stated in 7. number of Foreign Direct Investment Law Implementation Regulation, the following documents will be filed with the Treasury to establish a liaison office in Turkey:

a) The original copy of the Activity Document of the parent company, certified by the relevant Turkish Consulate or within the framework of the Hague States Private Law Conference, in accordance with the provisions of the Contract for the Abolition of Certification of Foreign Official Documents,

b) Annual Report or balance sheet and income statement prepared about the parent company,

c) The original of the authorization certificate to be given to the person who will be appointed to carry out the activities of the liaison office,

d) In case the establishment of the liaison office is carried out through another person, the power of attorney.

Again, as stated in article 6 of the related regulation; Applications regarding the establishment and extension of the period are concluded within 5 working days from the date of application, provided that the requested information / documents are complete and complete.

Provisions on the Operation of Liaison Offices

It is determined as follows by the regulation of the relevant law.

a) The liaison offices, which have obtained a license, send a copy of the registration certificate to the tax office to the General Directorate within 1 month at the latest. Offices shall report their new addresses to the General Directorate within 1 month at the latest in case of change of address.

b) By the liaison offices, until the end of May every year, the “Information Form Regarding the Activities of the Liaison Offices” is filled in and sent to the Undersecretariat. Documents that the expenses of the bureau last year are covered by foreign currency sent from abroad are attached to these applications.

c) Liaison offices are granted an operating license for a maximum of 3 years. In the extension of liaison offices, a maximum extension of 3 years can be granted each time, taking into account the past year's activities and plans and targets for the future.

d) In the event that the liaison offices terminate their activities, the quit-probe receipt to be received from the relevant tax office is sent to the General Directorate. Offices cannot request a transfer, except for the balance resulting from closing and liquidation.

e) The Undersecretariat may revoke the establishment permissions of the liaison offices that are found to be in violation of the legislation and notify the decision to cancel.

Status of Liaison Offices Against Turkish Tax Laws

Evaluation in terms of Corporate Tax;

Liaison offices in Turkey, except for the purpose of making an income-generating activities (liaison offices in commercial activity in Turkey) receive permission. Therefore, since there is no commercial activity, it will not be possible to tax this, as there will be no commercial gain. There are various decisions and features of the Council of State regarding this issue at various times. Liaison offices will make and pay tax withholdings for payments other than the payments made to the servant (article 23/14 of GVK) listed in article 94 of GVK. Apart from the scope of Article 94 of the said GVA, liaison offices established and operating in accordance with the above conditions have no tax liability. Based on this explanation, liaison offices are not obliged to keep weaselly books in accordance with the VUK provisions according to the balance sheet procedure.

Evaluation in terms of Value Added Tax;

Value Added Tax Law No. 3065 No. 1 according to the provisions of Article 1 commercial, industrial, agricultural activities and delivery made in Turkey in the framework of self-employed activities and services constitute the subject of the value added tax. Supportive commercial, industrial, agricultural or self-employment must be carried out in order to be able to talk about VAT liability activities. Since the liaison offices are established on the condition that they do not engage in any way, they do not need to establish a VAT obligation. There are many features on the subject.

Evaluation in terms of Income Tax Withholding;

Income Tax Law of the 23/14 subparagraph, “legal or business center in Turkey without non-resident taxable employer to employee service connoisseur Besides, the wages paid in foreign currency through earnings it generates outside the employer's Turkey is exempt from income tax.” Payments to be made to the personnel to be employed in the liaison office are based on income tax, ie Art. Within the scope of 94, it is the exception of the withholding that the employer should make as responsible. These conditions are listed as follows;

1- Wage payment will be paid over the income earned by the narrow taxpayer employer abroad. So staff wages will be paid by the parent company abroad and will be sent to Turkey. It would be better to prove that the transfers are sent to the liaison office bank account.

2- Wage payments are made in foreign currency, not in Turkish Lira….

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Establishing a liaison office in Turkey

As stated in Article 7 of the Implementing Regulation of the Foreign Direct Investors Law, an application is made to the Undersecretariat of Treasury with the following documents in order to establish a liaison office in Turkey:

a) The original of the Certificate of Activity of the parent company, which has been approved in accordance with the provisions of the Agreement on the Abolition of the Obligation of Certification of Foreign Official Documents, prepared by the relevant Turkish Consulate or within the framework of the Hague Conference on Private International Law,

b) Annual Report or balance sheet and income statement prepared about the parent company,

c) The original of the authorization document to be given to the person who will be assigned to carry out the activities of the liaison office,

d) In case the establishment of the liaison office is carried out by another person, the original of the power of attorney.

Again, as stated in the 6th article of the relevant regulation; Applications for establishment and extension of time are concluded within 5 working days from the date of application, provided that the requested information / documents are complete and complete.

Provisions on the Operation of Liaison Offices

It has been determined by the regulation of the relevant law as follows.

a) The liaison offices that have obtained the establishment permit send a copy of the tax office registration document to the General Directorate within 1 month at the latest. In case of a change of address, the offices notify the General Directorate of their new addresses within 1 month at the latest.

b) Liaison offices fill out the "Information Form on the Activities of Liaison Offices" and send it to the Undersecretariat, every year until the end of May at the latest, about the activities of the bureau for the past year. Documents indicating that the previous year's expenses of the bureau were met with foreign currency sent abroad are attached to these applications.

c) Liaison offices are granted an operating permit for a maximum of 3 years. Time extensions of liaison offices may be extended for a maximum of 3 years each time, taking into account the activities of the past year and their plans and targets for the future.

d) In the event that the liaison offices terminate their activities, the dismissal-examination slip to be obtained from the relevant tax office is sent to the General Directorate for the closing process. Offices cannot request a transfer, except for the balance resulting from closing and liquidation.

e) The Undersecretariat may revoke the establishment permits of liaison offices that are found to act in violation of the legislation and notify the relevant authorities of the cancellation decision.

The Situation of Liaison Offices in the Face of Turkish Tax Laws

Evaluation in Terms of Corporate Tax;

Liaison offices take permission except for the purpose of carrying out an income generating activity in Turkey (Liaison offices cannot carry out commercial activities in Turkey). Therefore, due to the absence of commercial activity, there will be no commercial gain, so it will not be taxed. There are decisions and rulings of the Council of State on this subject at various times in this direction. Liaison offices will withhold and pay taxes for payments other than the wages they make to the service personnel (the wages within the scope of Article 23/14 of the Income Tax Law), which are listed in Article 94 of the Income Tax Law. Liaison offices established and operating in accordance with the above conditions, outside the scope of Article 94 of the said Income Tax Law, are not liable to tax. Based on this statement, liaison offices are not obliged to keep compulsory books in accordance with the balance sheet procedure within the framework of the provisions of the TPL.

Evaluation in Terms of Value Added Tax;

According to clause 1 of article 1 of the Value Added Tax Law No. 3065, deliveries and services made in Turkey within the framework of commercial, industrial, agricultural and self-employed activities constitute the subject of value added tax. Accordingly, in order for VAT liability to be mentioned, commercial, industrial, agricultural or self-employed activities must be carried out. Since the liaison offices are established on the condition that they do not engage in any commercial activity, there is no need for them to establish VAT liability. There are many specialties on the subject.

Evaluation in Terms of Income Tax Withholding;

In subparagraph 23/14 of the Income Tax Law, “The wages paid by the employer in foreign currency to the service professionals who work for the employers subject to limited liability whose legal and business center is not located in Turkey, are exempt from income tax.” Salary payments to be made to the personnel to be employed in the liaison office pursuant to the statement of income tax within certain conditions, that is, GVK art. Within the scope of 94, it is an exception from the withholding that the employer has to do as responsible. These conditions are listed as follows;

1- Wage payment will be paid on the basis of the income earned by the non-resident employer abroad. In other words, personnel wages will be covered by the parent company abroad and will be sent to Turkey. Here, sending the transfers to the liaison office bank account would be more accurate in terms of proof.

2- Fee payments will not be made in Turkish Lira, but in foreign currency or in Turkish Lira indexed to foreign currency.

3- Of course, it is obligatory to obtain and keep the necessary documents (bank receipts, foreign currency purchase documents, foreign transfer receipts, etc.) within the control of these conditions.

Except for the fee payments listed above, liaison offices are obliged to withhold payments in case they make the payments listed in clauses in Article 94 of the GVK. For example, it is obligatory to withhold income tax on rent payments to be made by persons working in liaison offices, and self-employment payments made to accountants or translation offices.

Evaluation in Terms of Stamp Duty;

Since there is no provision in the Stamp Duty Law that exempts wage payments from tax, until the Law No. 5535 dated July 8, 2006, in the payment of wages to the personnel working in the liaison offices (wage payments within the scope of article 23/14 of the Income Tax Law), the stamp tax is not included in the wage payments to be made. cut was made. However, after this date, according to Article 8 of the Law No. 5535 and Article 23 of the Income Tax Law, the fees that were exempt from Income Tax were also exempted from the stamp tax. No stamp tax deduction will be made for fee payments at the liaison offices after the relevant date.

Evaluation in Terms of Social Insurance Legislation;

If the personnel working in the liaison office is Turkish, income tax will not be deducted from their wages, but SSK employee and employer premiums will be deducted and deposited in the insurance directorates. In the subparagraph (G) of Article 3 of the Social Security Law No. 506, titled “Those Not Considered Insured”; There is the provision of “Foreign persons who are sent to Turkey for a job by and on behalf of and on behalf of any establishment established in a foreign country and who declare that they are insured in a foreign country”. Foreign personnel working in liaison offices are persons whose headquarters are located abroad and who act on behalf of and on behalf of that institution. In order for these personnel not to be considered insured in Turkey, the foreign personnel must have a social insurance agreement with the country of residence, secondly, there must be a document obtained from the authorities of the relevant country stating that he is insured in a foreign country, and this document must be approved by the SSK directorate to which it is affiliated. If the person proves that he is subject to the social security institution in his own country, he will not pay SSK premium in our country, and if he is not subject to the social security institution in his country, he will pay SSK premium in Turkey.

CONCLUSION

The purpose of allowing the establishment of liaison offices is to encourage foreign capital in Turkey, to increase investments from abroad, and to promote our country, as mentioned briefly above.