Supporting foreign investors to invest in Türkiye is of great importance today. Many regulations are introduced in order to encourage foreign investors to invest in Türkiye, and one of the regulations to encourage foreign investors to invest in Türkiye is the establishment of a liaison office. Law on Foreign Direct Investments numbered 4875 regulates the principles on encouraging foreign investments, protecting the rights of foreign investors and complying with international standards in investment and investor definitions, transforming the permission and approval system into an information system in the realisation of foreign direct investments and increasing foreign direct investments through the policies.

By establishing a liaison office before deciding to invest in Türkiye, foreign investors can conduct the necessary research on their sectors in the Turkish market; discover the potential, deficiencies or demands in the market in which they intend to operate; and decide whether or not to operate in Türkiye as a result of their research. However, it is important to note that liaison offices are prohibited from engaging in commercial activities; liaison offices cannot engage in any commercial activity that will generate profit. The Regulation on the Implementation of the Foreign Direct Investment Law regulates the subjects in which liaison offices may operate as follows.

  • Representation and hospitality: Representation of the foreign company before sectoral organizations and related organizations, coordination and organization of business contacts of foreign company officials in Türkiye, meeting their office usage needs.
  • Control and audit of suppliers in Türkiye in terms of quality and standards and selection of suppliers: Inspection of the companies that manufacture on behalf of the foreign company within the framework of the quality standards of the foreign company, supply of the product and manufacturer requests of the foreign company.
  • Technical support: Providing training or technical support to distributors and providing support services to supplier manufacturers to improve their quality standards.
  • Communication and information transfer: Gathering and transferring information on market developments, consumer trends, sales situation of competitors and distributors, performance of the distributor company, etc. to be delivered to the foreign company having business relations with Türkiye.
  • Regional management centre: Providing coordination and management services for the foreign company's units in other countries, such as formulation of investment and management strategies, planning, promotion, sales, after-sales services, brand management, financial management, technical support, R&D, outsourcing, testing of newly developed products, laboratory services, research and analysis, training of employees.

Foreign companies are required to apply to the Ministry of Industry and Technology ("Ministry") for permission to establish a liaison office. The company which will open a liaison office shall be established in the foreign country in accordance with the laws of that country. The Ministry may evaluate the requests of newly established companies to open a liaison office in Türkiye within the framework of factors such as the company's field of activity, capital and the number of personnel employed, and may stipulate that a period of at least one year must elapse from the establishment of the company in order to grant the activity permit. However, this condition is not valid for all companies and may be required in cases deemed necessary by the Ministry.

For the first applications of liaison offices, the maximum authorization period to be granted within the declared scope is 3 years. However, offices wishing to extend their activity period shall apply to the General Directorate of Incentive Implementation and Foreign Capital ("General Directorate") before the end of the activity period.

Liaison offices are obliged to send the documents on the previous year's activities of the office to the Ministry until the end of May each year at the latest. If the liaison offices fail to fulfil these obligations, their requests for extension of period shall not be taken into consideration and their activity permits may be cancelled ex officio. Whether the liaison offices carry out their activities in accordance with the legislation and the subject of activity specified in their permits may be audited by the Ministry ex officio or upon written notification of the relevant institutions and organizations. As a result of the audit, a 30 days period is given to the offices that are found to be operating outside the scope of the authorisation in order to apply for authorisation for the activity actually carried out. The activity permit of the offices that do not apply at the end of the given period is cancelled. The activity permit of the offices found to be carrying out commercial activities as a result of the audit is cancelled and notified to the relevant authorities.

An investor who decides to invest in Türkiye may establish a liaison office with the permission of the Ministry and conduct market research in Türkiye and make a more definite decision on an investment. However, investors should always consider that liaison offices are prohibited from carrying out commercial activities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.