A Berlin SaaS company has signed three enterprise customers in İstanbul, wants to hire a local sales team and is being asked by a Turkish bank for a “Turkish entity” before it can open an account. A Dubai holding wants to own a Turkish software studio. A US fund wants a small team on the ground to source deals but will not sell anything in Türkiye. Each faces the same first question: subsidiary, branch or liaison office? The answer sets who is liable for what, which registry and tax office the business reports to, and how profits leave the country. This article compares the three routes under the Foreign Direct Investment Law No. 4875, the Turkish Commercial Code No. 6102 (TCC) and the Corporate Tax Law No. 5520 (KVK) and ends with a decision table. The mechanics of incorporating with foreign founders are covered separately in the company formation guide for foreign founders.
The starting point: Law 4875 and national treatment
Law 4875 turned the old permit system into a notification system; Article 1 names the conversion of the permit and approval system into an information system as one of its purposes. Article 2(a) defines a foreign investor broadly: foreign nationals, Turkish citizens resident abroad, and legal persons established under foreign law together with international organisations. Article 2(b) lists what counts as direct foreign investment, and the list is the menu of this article: establishing a new company or opening a branch (yeni şirket kurmak veya şube açmak), and acquiring shares in an existing company outside a stock exchange, or at least ten per cent of the shares or votes through an exchange.
Article 3(a) contains the two principles that make the rest of the analysis possible. Unless international agreements or special laws provide otherwise, direct foreign investment by foreign investors in Türkiye is free, and foreign investors are subject to equal treatment with domestic investors (millî muamele). A foreign-owned Turkish company is therefore an ordinary Turkish company, and the special regimes that do exist (banking, payments, media) apply to it as they apply to anyone. Article 3(b) protects the investment against expropriation except for a public interest and against compensation, and Article 3(c) guarantees the free transfer abroad, through banks, of net profits, dividends, sale and liquidation proceeds, compensation, payments under licence and management agreements, and principal and interest on foreign loans. Article 3(f) sends the valuation of in-kind capital to the TCC, and Article 3(g) provides that foreign personnel of companies, branches and establishments set up under the Law receive work permits from the labour ministry.
Route one: a Turkish subsidiary (A.Ş. or Ltd. Şti.)
The subsidiary is a Turkish capital company whose shares are held by the foreign parent. Under TCC Article 125(1) commercial companies have legal personality, which a joint-stock company (anonim şirket, A.Ş.) acquires on registration under Article 355(1). The liability picture is the familiar one: Article 329(1) defines the A.Ş. as a company liable for its debts only with its own assets, and Article 329(2) provides that shareholders are liable only for the capital they subscribed, and only towards the company. For the limited company (limited şirket, Ltd. Şti.) Article 573(2) provides that partners are not liable for company debts and owe only payment of their subscribed capital and any additional payment or ancillary obligations in the articles, and Article 602(1) repeats that the company is liable only with its assets. One statutory exception matters to a parent choosing between the two forms: under Article 35 of the Law No. 6183 on the Collection of Public Receivables, limited company partners are directly liable, in proportion to their capital shares, for public receivables (taxes, social security premiums) that cannot be collected from the company, and transferor and transferee are jointly liable for pre-transfer public debts. A.Ş. shareholders carry no such liability, which is one reason groups prefer the joint-stock company over the limited company once the business is more than a shell.
Since 1 January 2024 the minimum capital is 250,000 Turkish lira for an A.Ş. (500,000 lira for a non-public A.Ş. in the registered capital system) and 50,000 lira for a Ltd. Şti.; under TCC Article 344 at least a quarter of the cash capital of an A.Ş. is paid before registration and the rest within 24 months, while under Article 585 a Ltd. Şti. pays nothing before registration and everything within 24 months. Four per ten thousand of the capital goes to the Competition Authority at incorporation and on each capital increase.
For tax, the subsidiary is a full taxpayer (tam mükellef): under KVK Article 3(1), corporations whose legal centre (the seat in the articles, Article 3(5)) or business centre (where transactions are actually managed, Article 3(6)) is in Türkiye are taxed on worldwide income. Corporate tax under Article 32(1) is 25 per cent (30 per cent for banks, finance, payment and insurance companies). When the subsidiary distributes a dividend to its foreign parent, Article 30(3) imposes a withholding on dividends paid by full taxpayers to non-resident corporations; the rate written in the Law is 15 per cent, Article 30(8) authorises the President to set it between zero and double that figure, and Presidential Decision No. 9286 (Official Gazette 22 December 2024, No. 32760) sets the rate at 15 per cent for dividends distributed from 22 December 2024, subject to any lower treaty rate; the rate should still be checked at the time of distribution. Article 30(3) also states that adding profits to capital is not a distribution, so a bonus issue to the parent is not withheld on.
Route two: a branch (şube) of the foreign company
A branch is not a separate legal person; it is the foreign company itself, doing business in Türkiye through a registered place. TCC Article 40(4) is the governing rule: branches in Türkiye of commercial enterprises whose head offices are abroad are registered like domestic commercial enterprises, subject to the trade-name rules of their home law, and a fully authorised commercial representative (tam yetkili ticari mümessil) resident in Türkiye must be appointed for them. Once the first branch is registered, further branches are registered like branches of domestic enterprises. Article 40(1) requires registration and announcement within fifteen days of opening, and Article 48(3) requires the branch’s trade name to show the location of the head office and of the branch and the fact that it is a branch.
Every contract the branch signs binds the foreign company with all its assets; there is no Turkish capital to limit exposure. The representative is personally exposed as well: under repeated Article 35 of Law 6183, public receivables that cannot be collected from a legal person are collected from the personal assets of its legal representatives, and the provision states expressly that it also applies to the representatives in Türkiye of foreign persons or companies, with a right of recourse against the principal.
For tax, the foreign company is a limited taxpayer (dar mükellef): under KVK Article 3(2), corporations with both legal and business centre outside Türkiye are taxed only on Turkish-source income, and Article 3(3)(a) includes commercial income earned through a place of business (iş yeri) in Türkiye within the meaning of the Tax Procedure Law or through a permanent representative (daimî temsilci). Article 156 of the Tax Procedure Law No. 213 lists the branch (şube) among places of business, and Article 8 of the Income Tax Law No. 193 deems commercial representatives and persons whose expenses the principal continuously pays to be permanent representatives. A registered branch is therefore a taxable presence by definition. Its profit is computed under the full-taxpayer rules (Article 22(1)), taxed at the Article 32 rate with advance tax (Article 32(2)) and declared to the tax office where the branch is located (Article 25(4)). Two deduction limits are specific to branches. Under Article 22(3)(a) interest and commissions paid to the head office or to foreign branches for purchases and sales on the branch’s account are not deductible, and under Article 22(3)(b) shares of the head office’s general administrative expenses or losses are deductible only under arm’s-length allocation keys, together with the travel costs of head-office staff sent to audit the Turkish operation. Finally, under Article 30(6), when a limited taxpayer filing an annual return remits to its head office the part of its pre-exemption income left after corporate tax, a withholding applies; the statutory rate is again 15 per cent, subject to the same Presidential power under Article 30(8). Economically it plays the role of the dividend withholding, triggered by the transfer rather than by a distribution decision.
Route three: a liaison office (irtibat bürosu)
The liaison office is the only vehicle defined by what it may not do. Under Article 3(h) of Law 4875 the competent authority may permit companies established under foreign law to open a liaison office in Türkiye on condition that it does not engage in commercial activity. The Law still names the Treasury Undersecretariat; today the permit is issued by the Ministry of Industry and Technology under the implementing regulation, initially for up to three years. The office may conduct market research, represent the parent and gather information; it may not invoice, sell or earn revenue. Because it earns no commercial income it is outside KVK Article 3(3)(a), and its costs are funded from abroad. The trade-off is the boundary: a liaison office whose staff negotiate and conclude contracts in the parent’s name, or whose expenses the parent pays while they carry out commercial transactions, begins to look like the permanent representative of Article 8 of Law 193, and the tax administration may treat the parent as having a Turkish place of business. For a US fund scouting deals or a manufacturer studying the market the office is the right tool; for the Berlin SaaS company with paying customers it is not.
Notifications and ongoing compliance for all three
Under the last paragraph of Article 4 of Law 4875, foreign investors notify statistical information about their investments in the manner set by regulation, and this information may not be used as evidence for other purposes. Under Article 5 of the implementing regulation, companies with foreign capital file the annual Activity Information Form through E-TUYS by the end of May and notify capital increases and share transfers within one month; a subsidiary and a branch are both within this duty. Companies also report their ultimate beneficial owners with the corporate tax return and within one month of any change under General Communiqué No. 529 of the Tax Procedure Law. Foreign managers who work from Türkiye need a work permit under Law No. 6735, which also serves as a residence permit (Article 12); a passive shareholder needs none. Groups building a regional service hub should note the new supplementary Article 1 of Law 4875, added in May 2026, which defines a qualified service centre (nitelikli hizmet merkezi) as a capital company set up to serve a related company or group of companies, with active operations in at least three different countries, and deriving at least 80 per cent of its annual revenue from related companies abroad, with the procedure to be set by the Ministry of Industry and Technology.
Decision table
| Question | Subsidiary (A.Ş. / Ltd. Şti.) | Branch (şube) | Liaison office (irtibat bürosu) |
|---|---|---|---|
| Legal personality | Yes (TCC Art. 125, 355) | No; the foreign company acts in Türkiye (TCC Art. 40(4)) | No |
| May sell and invoice in Türkiye | Yes | Yes | No commercial activity (Law 4875 Art. 3(h)) |
| Liability for Turkish debts | Company’s assets only; shareholders limited to subscribed capital (TCC Art. 329, 573, 602); Ltd. partners liable pro rata for uncollected public receivables (Law 6183 Art. 35) | Foreign company with all its assets; representative liable for uncollected public receivables (Law 6183 rep. Art. 35) | Parent; no commercial exposure if the limits are respected |
| Registration | Trade registry; capital rules (TCC Art. 344, 585) | Trade registry like a domestic enterprise; resident fully authorised representative (TCC Art. 40(4), 48(3)) | Permit from the Ministry of Industry and Technology; initial term up to three years |
| Tax status | Full taxpayer, worldwide income (KVK Art. 3(1)); 25% (Art. 32) | Limited taxpayer, Turkish-source commercial income through a place of business (KVK Art. 3(2), 3(3)(a), 22); 25% | No commercial income; outside KVK Art. 3(3)(a) while compliant |
| Tax on profits leaving Türkiye | Dividend withholding, statutory 15%, rate set by Presidential Decision (KVK Art. 30(3), 30(8)) | Branch remittance withholding, statutory 15%, rate set by Presidential Decision (KVK Art. 30(6), 30(8)) | Not applicable |
| Head-office charges | Deductible if at arm’s length (KVK Art. 13) | Interest and commissions to head office non-deductible; overhead only by arm’s-length allocation keys (KVK Art. 22(3)) | Not applicable |
| Notifications | E-TUYS annual form by end of May; capital increases and share transfers within one month; UBO report | E-TUYS annual form; UBO report | Ministry reporting under the permit |
Is a branch cheaper and faster than a subsidiary?
Not in a way that usually matters. Both are registered with the trade registry, both need a resident signatory (a fully authorised commercial representative for the branch under TCC Article 40(4)), both file corporate tax returns and E-TUYS forms. The branch saves the share capital but exposes the parent’s entire balance sheet to Turkish claims and the representative to personal liability under repeated Article 35 of Law 6183. Most operating businesses end up with a subsidiary.
Can the liaison office hire a sales manager?
It can employ staff, but the condition in Article 3(h) of Law 4875 is that the office carries out no commercial activity. A sales manager who negotiates and concludes contracts for the parent is the kind of person Article 8 of Law 193 treats as a permanent representative, which would make the parent’s commercial income Turkish-source under KVK Article 3(3)(a). Hiring for sales is the signal to convert to a branch or a subsidiary.
Does the subsidiary need Turkish shareholders or directors?
No. Law 4875 Article 3(a) places foreign investors on an equal footing with domestic investors, and the TCC does not require Turkish nationals as shareholders or board members. What a foreign director working from Türkiye needs is a work permit under Law 6735; a director who stays abroad and a passive shareholder do not.
Related: company formation for foreign founders · international desk · joint-stock company · startup law guide.
Sources. Foreign Direct Investment Law No. 4875 (Articles 1-4, supplementary Article 1); Turkish Commercial Code No. 6102 (Articles 40, 48, 125, 329, 344, 355, 573, 585, 602); Corporate Tax Law No. 5520 (Articles 3, 22, 25, 30, 32); Income Tax Law No. 193 (Article 8); Tax Procedure Law No. 213 (Article 156); Law No. 6183 on the Collection of Public Receivables (Article 35, repeated Article 35); Implementing Regulation of Law 4875 (Article 5, E-TUYS); Law No. 6735 (Article 12); Tax Procedure Law General Communiqué No. 529. Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
