Business Law

BRANCH OPENING PROCESS OF FOREIGN COMPANIES IN TURKEY

Today, many companies want to open branches in Turkey due to the globalizing world and the developing trade life and growth, and the increase in the aim of opening up to the Turkish market of foreign companies that want to expand their field of activity. For companies that do not have any legal and company structure in Turkey, the process of opening a branch remains more attractive than starting a company from scratch. In the branch opening process, it is not necessary to create a minimum capital amount compared to establishing a company, and thanks to the economic and legal revision of our country, which offers many advantages in the fields of financing and tax within the scope of promoting and supporting foreign investment, foreign investors do not have to come to the country in person, and they are not exposed to the power of attorney procedure and intense bureaucratic procedures.

In the Turkish Commercial Code No. 6102 (“TTK”), a clear definition of the branch is not made. However, according to the definition of the concept of branch in Article 118.1 of the Trade Registry Regulation, branches are;
– subject to a centre,
– being independent and
-It must operate in a separate location from the center.

For branches with these features, T.T.K. m.40. Pursuant to this, (including if the parent company is located abroad) the branch must be registered with the Trade Registry where it is located. Branches are structured as an extension of the parent company and are autonomous structures attached to the center. Although they have a separate management style and accounting, they belong to the real or legal person who owns the property of the main company and they have the obligation to determine a trade name. In the lawsuits filed due to the transactions made by the branches, the branches have the authority to represent themselves as the defendant or the plaintiff in these lawsuits. It should be added that the branches do not have the capacity to sue in terms of bankruptcy cases and the bankruptcy case must be filed against the parent company at the location of the parent company. Mandatory Legal Procedure for Foreign Companies to Open a Branch in Turkey First of all, for branch establishment transactions, it is necessary to apply to the Trade Registry Directorate with the request number and necessary documents obtained through the Mersis system, which is the on-line application system of the Trade Registry. Then, foreign companies wishing to open branches in Turkey must obtain permission from the Ministry of Industry and Technology. Approved Turkish translations of documents prepared in foreign languages in terms of documents required for the establishment should be available at the time of application. Some of the documents will be used in the registration process of the Chamber of Commerce, and the other part will be used in the application to the Ministry of Industry and Technology.

What are the Qualifications Required for Assignment of a Fully Authorized Representative to the Branch?

In order for foreign companies to open branches in Turkey, they must appoint a fully and unlimitedly authorized representative residing in Turkey. The branch representative shall have powers such as fulfilling the legal procedures in the company's articles of association, representing the company in lawsuits filed due to branch transactions, and appointing a proxy for the secondary branches to be opened.

Registration of Branch and Branch Transactions to the Trade Registry

According to the T.T.K., it is obligatory to register branches in the trade registry, and this registration must be done within 15 days. Branches are required to determine their trade names and use this title in their transactions. The title of the first branches of the foreign company to be opened in Turkey should be determined as “Headquarters title + the country where the head office is located + Istanbul Central Branch”. The word “Center” is not included in the titles of other branches opened after the opening of this branch. Accordingly, the first branch opened must be registered under the name of the central branch, but the branches to be opened after the registration of the first branch are registered as the branches of domestic commercial enterprises. In order to be able to open branches in tax offices, the registration procedure must be completed before the registry.

Tax Obligations of Branches of Foreign Companies to be Established in Turkey

Every company operating commercially and generating income in Turkey is a taxpayer and is responsible for certain tax liabilities according to its field of activity. In Turkish law, these taxes are regulated as corporate tax, income tax and value added tax. Registration with the SGK (Social Security Agency) is done automatically by the trade registry during the registration to the trade registry.
As a result, foreign companies wishing to operate in Turkey; By opening branches, they can be structured in a less costly, faster and more advantageous way in terms of control mechanism, as they are dependent on the parent company. While creating this structure, it is very important to fulfill the obligations arising from the legislation, and it will be inevitable to face administrative fines if the necessary obligations are not fulfilled.

Yağız Öztim

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