FOREIGN COMPANY OPENING A BRANCH IN TURKEY

 

The foreign investor company may consider evaluating its investment by opening a branch in Turkey. Branches are established under the parent company and limited to its field of activity and duration. In order for a foreign company to open a branch in Turkey, the capital of the company must be divided into shares.

Branches do not have an independent personality from the center. It is also not necessary to put a minimum capital to establish a branch. 

In this bulletin, we will discuss the details of the procedure that a foreign company must complete in order to open a branch in Turkey. You can use our newsletter to get information about the registration of branches in the trade registry in Turkey, determination of the branch title, required permits, application documents, and appointment of an authorized representative.

Keywords: Branch, foreign company, foreign investment, trade register, registration, branch official.

  1. FEATURES OF BRANCHES

Companies may wish to carry out their commercial activities in places other than where their company headquarters are located. Companies in the process of growing and expanding their field of activity need this. For this, the company must open branches affiliated to it. 

For a place to be considered a branch, there must be elements of being within the body of the main company and being affiliated to the center, independency in foreign relations, separation of commercial activity, location and management.

The branch is an extension of the main company and is affiliated to the headquarters. The ownership of the branch and the main company belongs to the same natural or legal entity. The branch is affiliated to the head office, but it can do the work of the main company with third parties and carry out commercial activities. But the profit and loss of the branch from these transactions will still belong to the main company. The acts arising from the contracts made by the branches must also be performed at the location of the branch. 

The branch is an autonomous structure, as it can conduct its commercial activities on its own. It has a separate management, a separate accounting. Again, the branch must keep its own commercial books. It is also possible to register branch records by the main company.

It is mandatory to register and declare branches in the commercial register where they are located, just like companies. In addition, branches must again use a trade title, like companies.

In cases arising from the transactions made by the branch, a lawsuit can be filed at the location of the branch, and the branches have the authority to represent themselves in this case as plaintiff and defendant. But in terms of bankruptcy cases, branches do not have a capacity to sue. The bankruptcy case must be filed against the main office and at the place where the head office is located.

  1. ADVANTAGES OF OPENING BRANCHES IN TURKEY

Turkey has been a good alternative for investors in recent years with its geographical, economic, and demographic structure. Current economic policies are shaped around the promotion and support of foreign investment. Thanks to the economic and legal revision, the foreign investor can complete almost all their business remotely by appointing a proxy in Turkey without having to come to Turkey personally. It can do some processing steps online over the internet. It is possible to establish a company, branch, and liaison office in Turkey in a shorter time and with less expense, without having to travel many times and deal with bureaucratic procedures. 

It is possible for a foreign company to invest in its commercial activities by opening a Turkish branch instead of establishing a new company in Turkey. In fact, it is often easier and cost-free. The minimum capital requirement required for the establishment of joint stock and limited liability companies is not stipulated for branches. By establishing a branch, the investor gets the opportunity to start his/her business activities in Turkey in a much shorter time. Another advantage is that branches are dependent on the main company and are easy to control.

  1. APPLICATION FOR BRANCH ORGANIZATION VIA CENTRAL REGISTRATION SYSTEM (MERSIS)

The first step of the branch establishment process is carried out on the internet via MERSIS. Branches must be registered in the trade register, just like companies. For this, an application should be made to the Trade Registry Office with the request number obtained from MERSIS and the necessary documents.

  1. GETTING PERMISSION FROM THE MINISTRY OF INDUSTRY AND TECHNOLOGY

A foreign company that wants to open a branch in Turkey must obtain permission from the Ministry of Industry and Technology.

  1. DOCUMENTS REQUIRED FOR BRANCH ESTABLISHMENT
  2. Application form
  3. Screen print showing potential tax number from internet tax office
  4. Organization Notification Form
  5. Chamber registration declaration
  6. Certified copy and official Turkish translation of the parent company agreement
  7. Certified copy of the document containing the registration information of the parent company
  8. Decision of the authorized body of the parent company on opening a branch and appointing a fully authorized representative based in Turkey
  9. Commitment that the branch officer will comply with the provisions of the law and legislation in the works to be carried out within the borders of Turkey
  10. The incorporation document containing the records of where, when, and according to the laws of which state the company was established, and the activity certificate (original and translated copy)
  11. Detailed description of the branch’s field of activity
  12. The original of the power of attorney given to the person authorized for branch opening operations and its Turkish translation if it was issued in a foreign country
  13. Power of attorney stating that the representative in Turkey has been given full responsibility and authority
  14. Signature declarations of the person or persons who will represent the branch, prepared according to Article 40 of the TCC
  15. Certified passport copy of the director of foreign nationals and approved residence permit if he/she is residing in Turkey
  16. A letter and apostille approved translation obtained from the competent authority showing that, the conditions sought by the law of the source country where the company headquarters is located for registration for the establishment to open a branch and the documents required for the registration of the branch are fulfilled
  17. All documents required for the registration of the branch in the country of origin
  18. Permission or a letter of approval for branches which are subject to the permission or approval of the Ministry or other official institutions to open

Approved Turkish translations of documents prepared in foreign languages should also be added. Some of the documents will be used in the application to the Ministry of Industry and Technology and some of them will be used at the registration of the chamber of commerce.

  1. FULL AUTHORIZED REPRESENTATIVE TO BE APPOINTED TO THE BRANCH AND POWERS TO BE GRANTED TO THE REPRESENTATIVE

If a foreign company wants to open a branch in Turkey, it must appoint a fully authorized representative in Turkey for branch operations. The authorized representative of the branch must be granted some powers and the recognition of these powers must be separately documented in the power of attorney. The authority of the branch representative to represent the company, to carry out the transactions in the company’s articles of association, to represent the company as plaintiff and defendant before the courts in cases arising from branch transactions, to appoint a proxy for the secondary branches to be opened, to appoint a proxy with the powers he/she has in case of temporary departure from Turkey must be present and documented at the time of application.

The following documents must be submitted to appoint a representative:

  • Petition for notification of delegation
  • If the branch official is a Turkish citizen, ID, if he/she is a foreigner, notarized passport copies and tax number printout
  • Declaration of signature of the branch representative 
  • A notarized and signed declaration of acceptance that the branch official has accepted the position
  • The decision of the authorized bodies of the center or of the branch officials, if they have the authority to appoint a representative, on the appointment of a representative
  1. REGISTRATION OF THE BRANCH IN THE COMMERCIAL REGISTER

Registration of branches in the Commercial Register is mandatory in Turkish law. Registration must be done within 15 days. Just like trading companies, branches must choose and use a trade name, stating that they are branches. For registration procedures, it is necessary to apply to the commercial registry office with the necessary documents.

Unless otherwise specified in the law, records passed to the register to which the center is affiliated are also registered to the register to which the branch is affiliated. 

The first branch to be opened must be registered as a main branch, branches that will be opened after the registration of the first branch are registered as branches of domestic commercial enterprises. If the registration is not done, you may have to pay an administrative fine. Additionally, for tax offices to carry out branch opening procedures, the branch must be registered in the trade registry.

  1. DETERMINATION OF TRADE NAME OF BRANCH

The title of the first branches of the foreign company to be opened in Turkey should be determined as:

“The title of the center + the country in which the center is located + Istanbul Main Branch”.

The word “Center” is not included in the titles of other branches opened after the opening of the main branch.

  1. REGISTRATION OF BRANCH TRANSACTIONS

As with companies, some transactions of branches must be registered in the trade register. All applications for decisions subject to registration of branches of companies headquartered abroad in Turkey must be submitted to the Turkish Trade Registry Office with a notarized copy of the commerce registration containing the current registration records showing that the people who signed the decision to be registered are authorized at the center.

This document must be certified by the official authorities (notaries, consulates, etc.) in the country to which the company is subject, or in accordance with the provisions of the Convention on the cancellation of the obligation to certify foreign official documents and provided to the Directorate with a notarized Turkish translation. 

  1. E-TUYS OPERATIONS

Branches must define an authorized user to the E-TUYS system. They apply for user authorization procedures and carry out their transactions within the framework of the specified procedures and principles. Users must have a qualified electronic certificate to be obtained from electronic certificate service providers and a registered electronic mail account to be obtained from an electronic mail service provider registered in branches. Qualified electronic certificates and registered e-mail accounts previously obtained for other purposes and having a validity period can be used for E-TUYS. 

By means of a qualified electronic certificate holder they have authorized, within 1 month at the latest following the authorization, they can log in to E-TUYS, which is accessed on the website of the Ministry of Industry and Technology and provide information in the fields of “Investor”, “Partner List” and “Affiliates”, if any, in electronic form.

  1. TAX OBLIGATIONS OF BRANCHES

Companies that generate income by doing business in Turkey are taxpayers in Turkey. According to the activity, the branch is responsible for the following taxes.

  • Corporate tax
  • Income tax
  • Value Added Tax

We provide professional support to our clients in the field of legal and tax consultancy with our lawyers and business partners who are experts in the field of tax law regarding the tax transactions of the branches.

CONCLUSION

If foreign companies want to continue their commercial activities in Turkey, they can do so by opening a Turkish branch. Branches are preferred because they are easier than company establishment and can start operations as soon as possible. The establishment of a branch requires permission from the Ministry of Industry and Technology and the necessary registration procedures must be completed in the trade registry. Completing the applications in a short time and easily depends on the preparation of the necessary application documents in accordance with the conditions and the duly filing of the registration application without missing the deadline. Failure to comply with the prescribed rules may cause both the application process to be disrupted and some administrative fines to be imposed on the company. At the next stage, after the branch becomes operational, the registration of the transactions subject to registration to the trade registry must be followed.

As Solmaz Law and Consultancy team, we carry out the branch establishment transactions of our foreign company clients in Turkey in accordance with the law and conclude them in a short time. Thanks to the power of attorney to be issued by our clients from the country where they are located, we ensure that they can start their commercial activities without any problems by completing the branch establishment transactions without the need to come to the country. You can contact our team for the legal services you need during this process.

REFERENCES

<https://www.tobb.org.tr/Documents/ttk/ttk_tescil_ilan_maddeler.pdf>

<https://www.ito.org.tr/tr/hizmetler/ticaret-sicili-islemleri/tescil-islemleri/merkezi-yurtdisi-turkiye-subesi>

Turkish Commercial Code

Law of the Union of Chambers and Commodity Exchanges of Turkey

Regulation for Implementation of Foreign Direct Investment Law

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