Once you have decided to enter the Turkish market place, determining the type of company formation you want to create is critical. The wrong company type for the kind of business you are doing can saddle you with significant tax burdens, for instance.
There are three excellent reasons for establishing a Liaison Office as your initial entry into the Turkish market.
- Liaison Offices are easy to establish. There is no Trade Registry required. The permit is obtainable from the Ministry of Economy. You can maintain a Liaison Office status for 3-13 years depending on your business activities: Market Research firms can be Liaison Offices for up to 3 years; companies involved in Supplier Auditing, Quality Controlling, Technical Support (to distributors or producers) and Representation can remain Liaison Offices for up to 8 years; companies maintaining in Regional Management Headquarters can remain Liaison Offices for up to 13 years.
- There are significant tax advantages to having Liaison Office status. There is no corporation tax (which is significant in Turkey) and no VAT registration. The Liaison Office is only liable for income tax withholding, stam tax, and social security contributions.
- Salaries of employees are exempt from income tax.
A foreign company entering the Turkish market may be eligible for Liaison Office status if the following conditions are met:
- They do not engage in commercial activity.
- All of their expenditures must be financed by their non-Turkey-based income.