How to incorporate a branch in Turkey in 2020 – step by step instructions
If you are keen to sustain your business as a going concern and furthermore, to expand its reputation beyond only one jurisdiction, incorporating a branch in Turkey is recommended as a viable solution. The process can take 20-30 days in 2020. The scope of services of the parent organization can be anything from the sale of goods to the provision of services. Having a representative office or branch of your foreign company in a European state, you will receive an impressive list of benefits, in particular:
- you get a new status of the organization as an international company;
- you can expect a larger customer and contractor flow;
- you are going to benefit from direct access to the countries of Europe, Asia and the Middle East, whose trade routes conveniently intersect on the territory of the Republic of Turkey.
Let us consider which is the best option here: a branch or subsidiary? How to register a branch in Turkey without a personal visit to the country? What documents should be prepared and where to submit so that registration of the branch takes a minimum of time?
The consultants on our portal will provide you answers to these and many other questions of interest (you may find our contacts and e-mail address and by contact phone number on the website,). Many answers are provided in the article below, so we encourage you to read it through up to the end.
Incorporating a branch in Turkey in 2020 – legal framework
Registration of companies on behalf of a foreign national or legal entity in Turkey is regulated by the Turkish Trade Code (TTK) and the Law on Companies. Having a business in another country, an entrepreneur has the opportunity to reach a new level at an international scale, by incorporating a branch, subsidiary or representative office in Turkey, with a head office located in another country.
- Representation of a foreign company in Turkey is one of the types of divisions of a legal entity with limited rights. A representation is not eligible to conduct commercial activities. It can engage in business development only at the legal level: concluding contracts, finding clients, advertising, protecting the interests of a legal entity, etc.
- A branch of a foreign entity in Turkey has the right to engage in the same areas of business as the head office. The actions of a branch are regulated by the Charter of the legal entity which has incorporated a branch in another state. Foreign companies registering branch offices in Turkey can also set up sub-branches which fall under the responsibility of the main branch office.
- The subsidiary is an independent entity which can carry out other activities than the parent company, compare to the branch office which must undertake the same activities as the foreign company. From a taxation perspective, the subsidiary is considered a Turkish tax resident and will be taxed on the global income, while the branch will be taxed only on the profits earned in Turkey. It is more affordable to incorporate a branch office than a subsidiary in Turkey, as the subsidiary also requires depositing a share capital;
When having to choose between opening a branch or a subsidiary in Turkey, the foreign company will need to consider the activities it wants to complete and whether it has further perspectives to expand these activities. From this point of view, it is useful to know that branches are usually employed by financial companies and banks, while subsidiaries are used for trading and other commercial purposes.
Also, the start-up and annual maintenance costs should be considered when choosing between a branch and a subsidiary in Turkey.
All legal issues regarding the formation of a legal entity by foreign nationals in Turkey are regulated by the TTK; in particular, paragraph 4 of Art. 40 of this law and paragraph 5 of Art. 9 of the Law “On the Union of Chambers of Commerce and the Turkish Commodity Exchange”.
Registration of a branch of a foreign company in Turkey in 2020 – advantages and disadvantages
As is clear from the above, a branch has the same rights as its parent company, located in another state. This expands the range of commercial opportunities and provides a number of advantages:
- The business and commercial activities of a branch in Turkey are controlled by a head office in another state.
- Allowed activities within the powers specified in the power of attorney from the legal entity (main company).
- Financial activity is determined by the head office of the unit, which involves the use of a separate bank account in Turkey, opened for the branch of the foreign company, or a ban on separated financial transactions. In the latter case, all funds are credited to one account owned by the parent company.
- The branch has the right to act on the basis of a license issued by the founder for a separate type of activity, which excludes re-licensing of the business, as in the case of registration of an independent company or subsidiary in Turkey.
- Registration of a branch and termination of its activities may be carried out by the same authority.
- Registration of a branch in Turkey is cheaper and faster than the formation of a new legal entity.
The disadvantages of opening a branch in Turkey is based on some conventions:
- If the parent company ceases to operate, the branch is automatically liquidated.
- A branch and the parent company in another country should have the same name with an additional indication of the type of unit – a branch in a particular city.
The requirements for the name of a branch of a foreign company are reflected in Art. 48, paragraph 3 of the Turkish Labor Code No. 6102. In short, the name should repeat the name of the parent company, as well as include signs of the territorial location of the branch. For example, a branch of the organization «ZAO Polyana» in Izmir will be registered as: «Polyana» A .Ş. İzmir Şubesi (CJSC Polyana, Izmir Branch).
How to incorporate a branch in Turkey in 2020: Key requirements
Before incorporating a branch of your company in the Republic of Turkey in 2020, you should study all peculiarities this procedure, as any violation of the norms and rules established by law will lead to the liquidation of the enterprise and disputes with regulatory authorities.
Requirements for branches registered by a foreign entity in Turkey in 2020:
- The parent company and branch cannot have different owners. According to the law of the Turkish state, the founder of the head office and unit should be the same individual/legal entity.
- The branch has the same authorized capital with the main company and cannot form its own rules for doing business.
- The same applies to the activities of a foreign company and its branch in Turkey, which should not have differences.
- The actual address of the parent company and the branch should not coincide. It can be different jurisdictions, cities, buildings or office premises in one administrative complex.
- The branch should be registered in accordance with all the rules and a relevant record made in the Commercial Register.
- In Turkey, a branch of a foreign company undergoes the registration stage at the Chamber of Commerce.
- The branch does not have personal assets other than the main company, and all losses, profits and liabilities belong to the head office.
- The branch cannot be qualified as an independent legal entity, and all financial transactions proceed strictly through the main founder.
- The activities of the branch in Turkey are limited by the Charter of the parent company, both in the field of activity and the period of existence.
- In Turkey, it is allowed to account for the branch profit, which is transferred to the account of the parent office and is taxed on dividends (15%). In the event that states have signed a double taxation avoidance agreement, the rate may be reduced.
- The decision on the movement of personnel in the branch can be made by the management of the head office or directly by the management at the location of the branch in Turkey, which depends on the scope of powers assigned to the director of the branch.
Important! any individual with a work visa or Turkish citizenship can act as a branch director in Turkey – (Clause 4, Article 40 of the TKT).
How to incorporate a branch in Turkey in 2020 – a step-by-step guide
If you are absolutely certain that business in Turkey will help you reach a new level of income, then you should proceed to the incorporation of a branch in Turkey. This can be accomplished in two ways – independently or through a proxy. As practice shows, the second option is the most practical and economically feasible. You save time and are in trustful hands with the registration of a branch in Turkey, as experienced professionals, in addition to all relevant documentation/paperwork, will assist you in the following areas:
- You will receive assistance in renting an office for the subdivision;
- You will be recommended candidacies for an experienced and competent director who has a work visa;
- You will be assisted in opening a commercial bank account in Turkey.
For those who plan to enter the Turkish FEZ with subsequent plants to engage in export/import of goods/services, we also offer the best services in offshore, including opening an account in one of the offshore zones .
How to incorporate a branch in Turkey in 2020 – 10 steps to success
- Prepare documents for registering a branch in Turkey, translate them into Turkish, attest to a notary public and, if necessary, validate by apostil.
- The representative of the branch (individual) must receive a tax number (TIN).
- If registration is carried out through a proxy, prepare an appropriate document indicating the list of powers of the representative.
- Find and rent an office, having a lease agreement available.
- Submit documents to the Ministry of Trade and the Chamber of Industry of Turkey.
- Obtain a license (permit) to form a branch on behalf of a foreign company.
- Go through the registration procedure of the branch in the Turkish Commercial Register by submitting the following documents:
- An application with the seal of the company and the signature of the authorized person;
- the resolution of a foreign company to open a branch in Turkey, as well as documents for registration of the company and a copy of the charter;
- documents on the establishment of a branch in the territory of Turkish jurisdiction with a signature – 5 copies;
- power of attorney – 2 copies;
- documents of the authorized representative of the branch – for citizens of Turkey a copy of an identity card certified by a notary, for other persons a copy of a passport, residence permit or work visa with a translation into Turkish and with the stamp “Apostil”;
- an application according to the established format, to which photographs of representatives of the branch should be attached.
- While your application is under consideration, a document will be issued on temporary registration of the future subdivision of a foreign company (branch), which should be submitted to the tax service.
- Open a bank account in Turkey.
- Find an accountant and conclude a service agreement with the latter.
For branches whose activities are related to foreign economic activity (foreign economy), you will need to submit documents for registration in the Union of Exporters/Importers.
Requirements regarding the Power of Attorney
In order to adequately empower your authorized person/proxy to freely act on your behalf in incorporating a branch of a foreign company in Turkey, you need to provide the proxy with the following mandate:
- execution of all items specified in the Charter of the company;
- representation of the interests of a foreign company in the territory of the Turkish state in registration authorities and courts;
- selection of officials for the branch in Turkey, including the appointment of an accountant, hiring a lawyer, etc.
- transfer of the rights of the director of the branch to another authorized person for a certain period;
- transfer of rights to represent the interests of the branch to other representative offices of the parent company in Turkey.
Note! The number of company founders in Turkey can be no more than 50 people, including foreign nationals.
Change of documentation of a branch of a foreign company in Turkey
As in the case of permission to register a branch in Turkey, a change in the scope or structure of the enterprise is approved by the Ministry of Trade and Industry of the state. What adjustments can adopt in this facility in 2020 year:
- Registration of an additional branch in Turkey by a foreign company.
- Change of management of the branch.
- Changes to the following items: address, type of activity or company name.
- An increase in the authorized capital of the company (parent), which will directly affect the documentation of the branch.
Important! Full independence of the branch from the parent company is not possible. Only subsidiaries indirectly associated with the parent company in a foreign state have such a privilege.
How to incorporate a branch in Turkey in 2020 – registration time
While the procedure for registering a regular company in Turkey in 2020 takes no more than 10 working days, in the case of opening a branch by a foreign entity, the period depends on several factors.
- Preparation of documents, signature of a notary public, translation, apostille – from 3 to 5 days.
- Permit from the Ministry of Industry – 10 to 20 days.
- Consideration of documents by the Turkish Chamber of Commerce -from 2 to 7 business days.
- Opening a bank account – up to 10 days.
If the registration/accreditation of a branch of a foreign company in Turkey in 2020 is carried out through our Turkish partners, then the average period (from the beginning of a client’s appeal to the receipt of a package of documents with a ready-made office and bank account) is 20 days.
Liquidation of a branch of a foreign company in Turkey in 2020 – reasons, stages and outcome
How and for what reason can the activities of a branch of a foreign company in the Republic of Turkey be terminated in 2020? Among the well-reasoned arguments for the liquidation of a foreign representative office in Turkey may be:
- Resolution of the parent company;
- violation of the laws of the country of registration of the branch, which leads to litigation and forced liquidation of the business;
- failure to fulfill tax obligations;
- the use of the branch for money laundering by their further transfer to offshore and other.
Upon termination of activity in Turkey, it is required to submit an application to the register of the country’s Chamber of Commerce at the place of registration of the branch, providing documents upon request, a list of which can be clarified at the institution.
Conclusion
In 2020, incorporating n a branch, representative office or a subsidiary in Turkey is . This will open the doors of your business to global markets, substantially contribute to the reputation of your company, become a source of a stable income and contribute to the development of your business on much more favorable terms than the country of origin offers.
If you are ready to take a decisive step towards the future, then we are waiting for your questions and requests to the email address: [email protected].
How can a foreign company open a branch in Turkey in 2020?
You will need to arrange preparation of documents and apply to several institutions – the Ministry of Trade and the Turkish Commercial Register. Be sure to buy or rent an office, as well as register with the tax office. For settlements, you need to open a bank account.
How long does it take to incorporate a branch in Turkey?
The general time period for the formation of a branch from a parent foreign company includes: preparation of documents, renting an office, opening a corporate account with a Turkish bank. The duration of obtaining all permits and authorizations will take a period in between 20- 40 days.