A foreign company that wants a presence in Türkiye before committing to trade there has an option that costs very little and carries an unusual tax position: the liaison office. It may research, represent and coordinate. It may not sell, invoice or earn. Within that boundary it is exempt from corporate tax, and its employees can be paid without income tax withholding under defined conditions. Cross the boundary and the structure collapses. This article explains where the line runs.
What a liaison office is
A liaison office (irtibat bürosu) is a representative office of a foreign company, permitted under the Foreign Direct Investment Law No. 4875 and its implementing regulation, and authorised by the Ministry of Industry and Technology.
Its defining characteristic is negative: it may not carry on commercial activity in Türkiye. It exists to represent the parent, gather market information, coordinate with suppliers or customers, oversee quality, and support the parent's business — but not to conduct that business itself.
What it may and may not do
Permitted:
- market research and feasibility work;
- representation and hosting, including attending trade fairs and meetings;
- technical support to the parent's customers or distributors;
- quality control and supplier liaison;
- procurement and sourcing support for the parent;
- regional coordination between group entities.
Not permitted:
- selling goods or services;
- issuing invoices;
- concluding contracts on the parent's behalf that generate income in Türkiye;
- earning any revenue whatsoever;
- acting as a profit centre in substance while presenting as a representative office.
The distinction that matters in practice is between supporting a transaction and concluding one. An office that identifies customers, passes them to the parent, and lets the parent contract and invoice is within the boundary. An office that negotiates and closes deals is not, whatever the paperwork says — and the tax authority looks at substance.
How it is funded
All expenses must be met by transfers of foreign currency from the parent. The office has no income of its own and generates none. Expenditure is funded, recorded and reported.
This is not merely an accounting convention. It is the mechanism by which the office's non-commercial character is evidenced, and irregular funding — payments received from third parties in Türkiye, for instance — is precisely what triggers scrutiny.
The permission process
Application is made to the Ministry of Industry and Technology, with:
- the parent's certificate of incorporation or registry extract, apostilled and translated;
- an activity report or balance sheet and income statement of the parent;
- a certificate of authority for the person who will represent the office;
- a power of attorney where the application is made by a representative;
- a statement of the intended scope of activity.
Permission is granted initially for a defined period — commonly up to three years — and may be extended on application, with extensions assessed against the activity actually carried out and the parent's plans. Offices engaged in market research or feasibility work may find extensions assessed more strictly than those providing technical support to an established customer base.
After permission, the office registers with the tax office, obtains a tax number for withholding purposes, and registers with the social security institution for its employees.
The tax position
This is the structure's principal attraction, and its conditions should be understood precisely.
Because the office earns no income in Türkiye, it is outside the scope of corporate tax. It files no corporate tax return on profits it does not have.
Employees of a liaison office may be paid salaries exempt from income tax withholding where the salary is paid in foreign currency, transferred from abroad, out of the parent's earnings generated outside Türkiye. Each element of that condition matters: foreign currency, from abroad, from foreign earnings.
Social security contributions are payable in the ordinary way — the exemption relates to income tax, not to social security.
Where the conditions are not met, the exemption is not available, and the arrangement should be reviewed before it is relied upon rather than after an assessment.
Employment
A liaison office may employ staff for its representative activity, including foreign nationals, who require work permits. Applications are made by the office, and the assessment reflects its representative character.
Employees are entitled to the full protection of Turkish employment law — notice, severance, annual leave, social security registration. A liaison office is not a lighter employment regime, and the fact that it earns nothing does not reduce its obligations to its staff.
What happens when the boundary is crossed
Where an office carries on commercial activity, the consequences follow from substance rather than from its label:
- the office may be treated as a permanent establishment, with corporate tax assessed on attributed profits, plus interest and penalties;
- the income tax exemption on salaries falls away, with retrospective liability;
- VAT may be assessed on supplies made;
- the permission may be cancelled and the office closed;
- the parent's position on any future application is prejudiced.
These are not theoretical. Liaison offices that in substance operate as sales offices are a recognised pattern and are examined as such.
When a liaison office is the right structure
Suitable for: testing a market before committing; supporting an existing distributor or customer base; sourcing and quality control; regional coordination; maintaining a presence during a lengthy regulatory or tender process.
Not suitable for: any activity that will generate revenue in Türkiye; a business that intends to contract with Turkish customers; a structure adopted to avoid tax on activity that is in substance commercial.
A common and sensible sequence is to open a liaison office, use it to assess the market for two or three years, and then form a subsidiary when the business case is proved. Where that transition happens, it should be planned — the office is closed and the company formed, with employment continuity and tax consequences addressed rather than improvised.
Frequently asked questions
How long does permission last? An initial period, commonly up to three years, extendable on application.
Can a liaison office open a bank account? Yes, for its expenses, funded from abroad.
Can it rent premises? Yes, in its own name as the office of the parent.
Can it import goods? Importing for sale is commercial activity and is outside its scope. Samples and equipment for its own use are a different matter — take advice.
Are employees' salaries really tax-free? Income tax withholding exemption applies where salaries are paid in foreign currency transferred from abroad out of the parent's foreign earnings. Social security contributions remain payable.
Can the office sign contracts? Not contracts generating income in Türkiye. Signing on the parent's behalf risks creating a permanent establishment.
Can it be converted into a company? Not by conversion — the office is closed and a company formed.
A structure with a hard edge
The liaison office is inexpensive, quick and genuinely useful for a company assessing Türkiye. Its boundary is not a formality: the moment it earns, the structure fails, and it fails retrospectively.
Dural Hukuk prepares liaison office applications to the Ministry of Industry and Technology, advises on the boundary between representative and commercial activity, and manages the transition to a subsidiary when a business is ready to trade. Call +90 535 260 74 54 or use the contact form on this site.
This article is general information on Turkish law as at August 2026 and is not legal or tax advice. Permission conditions and tax treatment turn on the specific activity; take advice before establishing or relying on the structure.