Turkish law offers the possibility for foreign investors to set up in Turkey simply through a branch, called “Şube”.
This branch has been somewhat reformed by the new Turkish Commercial Code (“NCCT”) which was adopted by Law No. 6102 dated January 13, 2011 and entered into force on July 1, 2012.
This reform aims to simplify the task of the foreign investor who opts for this form of establishment and has a concern for transparency.
I. Constitution of the branch in Turkey
The branch can be defined as an entity without legal personality and which depends on the parent company.
The branch can be set up by a single investor and no minimum capital is required.
With the NCCT, the procedure for establishing the branch has been simplified. Thus, foreign investors are now exempt from the prior authorization of the Ministry of Science, Industry and Technology.
A certain number of documents containing information on the foreign parent company (such as the K-bis), as well as on the branch to be created (address, identity of the managers, etc.), and reflecting the will of the foreign parent company to create a branch in Turkey (decision of the general meeting, of the Board of Directors etc.) must be submitted to the Commercial Registry of the place of the registered office of the branch. Once the registration has been made with the competent Trade Register, the branch must also be registered with the Tax Center to which it belongs.
Moreover, with regard to the name of this branch, it must be composed of the following elements: “Corporate name of the parent company; country where the registered office of the parent company is located; Türkiye İstanbul Şubesi”.
Compared to the representative office, another form of establishment for which foreign investors sometimes opt, the branch has the advantage of being able to carry out a commercial activity. Indeed, the representative office cannot have a commercial purpose, i.e. a profit-making activity.
II. Branch life in Turkey
Having no legal personality, the parent company is fully responsible for the acts of the branch.
The only advantage that we found in it so far was the possibility of being set up by a single investor. Therefore, the branch loses all its attractiveness for foreign investors.
In addition, the branch continues to present as a disadvantage the obligation for the manager to reside in Turkey. In other words, the foreign manager must have a residence permit as well as a work permit to be able to run the branch legally.
In addition, for the sake of transparency, the manager of the branch of the parent company established abroad must publish within six months the financial tables of the branch, an extract from the consolidated financial tables and the annual report of the group to which the branch belongs.
Finally, being a foreign branch, the parent company has the status of restricted taxpayer; in other words, only activities carried out on Turkish territory are taxable in Turkey.
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