Introduction

Rather than forming a joint stock company or a limited liability company, another option for forming a business entity in Turkey is to establish a branch office of a company that already exists in another state. It has benefits as well as drawbacks, which we will examine in this article from time to time.

Legal Personality

Even if a branch established in Turkey is regarded a legal entity because it can carry out its operations independently within its sphere of activity, it lacks a legal personality separate from its parent firm. A branch, of course, does not have its own articles of incorporation. It only needs to act within the scope of its parent company’s operations as Branch Office Turkey

Due to the lack of a separate legal personality, the branch’s rights and liabilities are directly transferred to the parent business.

Similarly, the parent company’s name must be included in the branch’s trade name. Furthermore, the parent company’s home country is also indicated in the trade name of the branch, according to current trade registry procedure. So, for example, a Turkish branch of a British firm called “ABC Manufacturing Ltd.” might be called “ABC Manufacturing Ltd. Merkezi ngiltere stanbul Merkez subesi.” (1)

A branch, on the other hand, is treated as if it were a separate entity from its parent firm for tax purposes. In this case, the branches must keep their own accounting records and are subject to corporate tax on their profits on their own.

Capital

Despite the fact that there are no legal minimum capital requirements for branches, they are required to have their own capital.

The monetary contributions for the branch’s capital must be placed into a separate bank account that will be opened in the name of the new branch. The relevant trade registry office will get a bank letter proving that the branch capital has been placed into an account. The sum deposited can be withdrawn by the branch upon presentation of the necessary establishing documents demonstrating that it has legal personality. (2)

It is acceptable to make a contribution in kind.

Decision-making

The branch has its own management team, which has the authority and responsibility for running the branch’s day-to-day activities.
Important decisions must be made at the parent company level because the branch does not have its own general assembly. This could result in a lot of red tape and costs, such as translation, notarization, apostille, attestation, and so on.

Manager of a branch

The branch manager is a real person who oversees the branch’s operations and acts as its representative to third parties. A foreigner with a residence permit in Turkey might be appointed to the position of branch manager.

The branch manager is in charge of the branch’s day-to-day operations as well as any additional tasks assigned by the main organization.

The parent business has the authority to fire the branch manager at any moment.

Liability

Due to the lack of an independent legal personality, the branch’s rights and liabilities are vested in the parent business. As a result, regardless of the capital assigned to the branch, the parent company is completely liable for the debts and liabilities of the branch in Turkey.

It is impossible to limit the parent company’s obligation for its Turkish branch, either through cash given to the branch or other procedures.

Permission to Open a Branch Office Turkey

A foreign firm wishing to open a branch in Turkey is no longer required to get a preliminary permit, as was the case until 2012. Since the introduction of the new commercial code, international corporations establishing branches have been subjected to the same bureaucratic procedures as domestic enterprises. Local and foreign investors are treated similarly in this manner.

Nonetheless, many economic activities, such as banking and insurance, require sector-specific permissions. In such situation, local businesses must also obtain similar permits.

Obtaining a Trade Registry Office registration for the Branch Office

The application to open a foreign company branch must be filed with the relevant trade registry office, which is the trade register office where the branch will be located.

In Turkey, trade registration transactions for all types of businesses, including international subsidiaries, are handled through the MERSS Central Registration Recording System.

A potential tax identification number for the branch must be obtained either through MERSS or the online tax office.

This possible tax identification number is also required in order to create a bank account and deposit the branch’s capital.

A letter from the bank where the branch’s capital is deposited must be obtained. The name of the branch and the parent firm, as well as the amount placed as the branch’s capital, should be included in this letter.

Documents Required

The following documents(3) must be included in the file to be submitted to the trade registry office:

1. Letter of application for the establishment of a branch (It must be signed by the branch representative or a proxy holder).

2. Notification of Incorporation Form

3. Declaration of the Chamber Registry,

4. Turkish translation of the articles of association of the parent business that has been notarized. It must also be apostilled or attested by the Turkish embassy in the parent company’s home country if the nation where the parent company is domiciled is not a party to the Apostille Convention.

5. Turkish translation of the parent company’s resolution to open a branch in Turkey that has been notarized. It must also be apostilled or attested by the Turkish embassy in the parent company’s home country if the nation where the parent company is domiciled is not a party to the Apostille Convention. The information (approved branch representative, term, capital, and so on) about the branch must be expressed specifically in that resolution.

6. A statement including basic information about the parent firm (It must be signed by the authorized signatories of the parent company),

7. The parent firm has given the branch representative in Turkey a power of attorney. If the power of attorney is given outside of the United States, it must be apostilled or, if the parent company’s domicile country is not a signatory to the Apostille Convention, attested by the Turkish embassy in the parent company’s home country.

8. Signature specimens notarized in the branch’s trade name

9. Turkish translation of the branch representative’s passport and residence permit that has been notarized. (At least one of the managers must live in Turkey.)

10. Turkish translation of the parent company’s Certificate of Incorporation and Certificate of Good Standing that has been notarized. These documents must also be apostilled or attested by the Turkish embassy in the parent company’s home country if the nation where the parent company is domiciled is not a party to the Apostille Convention.

11. All documentation necessary to open a branch in the parent company’s home country.

Completion

The branch’s registration is announced in the Turkish Commercial Registry Gazette once the registration process is completed.
The branch registration process usually takes a few weeks to complete.

Once the registration process is complete, the branch must be registered with the appropriate tax and social security departments.