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December 21, 2023

Procedure of Branch Establishment of Foreign Companies in Turkey

1.      INTRODUCTION

Similar to the company establishment process of foreign investors, branch establishment is also accepted as “foreign direct investment” within the scope of 4875 numbered Foreign Direct Investment Law (“Law No. 4875”) Therefore, foreign companies headquartered abroad can continue their activities with the “branch establishment” procedure without establishing a separate company in Turkey.

Within this context, as per the relevant provisions of 6102 numbered Turkish Commercial Code (“TCC”), companies with their registered headquarter in a foreign country that wants to establish a branch in Turkey will be registered as domestic commercial enterprises.  Although the procedures and requirements regarding branch opening transactions and the information and documents that can be requested may vary within the scope of each trade registry directorate in practice, the general legal principles regarding the branch establishment procedure in Turkey of foreign companies are explained within the scope of this article.

2.      REGARDING THE ESTABLISHMENT OF THE TURKISH BRANCH OF THE FOREIGN COMPANIES

4th paragraph of TCC article 40 is as ““The branches in Turkey of commercial enterprises whose headquarters are located outside of Turkey are registered as domestic commercial enterprises, provided that the provisions of the laws of their own countries regarding the trade name are reserved. For these branches, a fully authorized commercial representative whose place of residence is in Turkey is appointed. If the commercial enterprise has more than one branch, the branches to be opened after the registration of the first branch are registered as the branches of domestic commercial enterprises.”.

As per the provision of the article, the Turkish branch establishment process of foreign countries are conducted in accordance with the company establishment procedure.

Additionally, as per the 3rd paragraph of TCC article 48 “The trade name of the branch in Turkey of a company headquartered in a foreign country must reflect the location of the headquarters and the branch and that it is a branch.” Within the scope of the provision of the article, it is necessary to indicate that the commercial enterprise is a branch; in the title of the branch in Turkey, and the addresses of the headquarters and branches must be shown.

For these branches, a fully authorized commercial representative whose place of residence is in Turkey is appointed. If the commercial enterprise has more than one branch in Turkey, the branches to be established after the registration of the first branch are registered with the same method as the branches of domestic commercial enterprises.

In this context, the trade name of the first Turkish branch of foreign companies should be determined as; ‘Name of the Headquarter- Country of the Headquarter- Respective City Center Branch’ (e.g: X Company GMBH Headquartered in Germany İstanbul Center Branch). The word ‘Center’ shall not be included in the titles of other branches opened after the opening of the central branch.

In this context, the procedure and necessary documents are specified for each trade registry office. In essence, after the completion of the first stage procedures of establishment of branches, the following documents and requirements will have to be fulfilled before the applications of the trade registry directorate, where the branch will be located, with the potential tax number they will receive and the registration of branch on the Central Registry System (MERSIS).

  1. Petition
  2. Establishment Notification Form
  3. Chamber Registration Statement
  4. Current Records of the Head Office (The title of the company, type, business scope, type and amount of its capital, date of establishment, registration number, the law to which it is subject, whether it is a member of the European Union, website; the original of the signature declaration signed by the officials of the foreign company containing the title of the branch and the amount of capital allocated to the branch, name, surname, identity number, place of residence, aof the persons to be authorized to represent the branch, and the address of the branch. (Notarized copy of the translation if it is issued in a foreign language)
  5. A certified copy of the document containing the current registry records of the foreign company and the articles of association of the foreign company.
  6. Appointment of the Manager
  7. Decision to Appoint a Fully Authorized Commercial Representative to Represent the Branch
  8. Information on the Manager that is a Foreign National, if any
  9. Power of Attorney, if any
  10. Notarized Declaration of Signature (Original and Turkish Translation of the Declaration to be Issued)
  11. Required Documents Regarding Representation Authorization
  12. Permission or letter of approval for branches whose opening is subject to the permission or approval of the Ministry or other official institutions.

It should be noted that, except for the requirements within the framework of the relevant legislation, certain conditions must be met for the opening of a branch in Turkey, in the country where each company has its headquarters, for the foreign companies. Since this issue may vary for each country, foreign-based organizations that want to open branches in Turkey will have to complete the transactions by fulfilling local requirements in order not to be subject to any sanction.

In addition to legal requirements; it should be noted that branches of foreign-based companies with a branch in Turkey are also subject to tax liabilities for their earnings within the borders of the Republic of Turkey. In this framework, in accordance with the bilateral tax treaties to which the Republic of Turkey is a party, the issues related to taxation should be evaluated separately in each concrete case, taking into account the characteristics of the concrete case, the taxes paid at the headquarter location, and the country in which the company’s headquarters is located.

In addition to all these issues, due to the fact that branches located abroad are defined as “foreign investors” in the Law No. 4875, within the scope of the Regulation Amending the Regulation on the Implementation of the Foreign Direct Investment Law published in the Official Gazette No. 30438 by applying for authorization via the Electronic Incentive Application System (E-TUYS) of the Ministry of Industry and Technology of the Republic of Turkey, these branches will be required to define an authorized user, fill in the “Company and Branch Establishment Notification Form” and fulfill their notification obligations within the relevant scope.

3.      IN CONCLUSION

Branch establishment process of foreign companies appear as a foreign direct investment option. Branch establishment is extremely important both from a legal and tax point of view, and it is extremely important that the procedures are carried out according to the current applicable legislation.

 

Best Regards,

Kılınç Law & Consulting

Authors

Gülenay Kavcar

Gülenay Kavcar