Branch vs Subsidiary in Turkey: 2026 MNC Entry Guide

Branch office vs subsidiary in Turkey is one of the most consequential strategic decisions facing multinational corporations, foreign-controlled groups, and high-net-worth principals preparing to deploy capital into the Turkish market. The choice between a Turkish subsidiary, a branch of a foreign parent, and a liaison (representation) office is not a matter of administrative preference — it determines corporate tax exposure, shareholder liability, profit repatriation efficiency, procurement eligibility, and the enforceability of contracts signed in Turkey. Under the Turkish Commercial Code (TCC) No. 6102 and Foreign Direct Investment Law No. 4875, each entry mode operates within a distinct regulatory perimeter, and the wrong structural choice at the outset is expensive to undo.

For boards, CFOs, and general counsels evaluating Turkey as a growth market or regional hub, the legal architecture of the entry vehicle must be reverse-engineered from the commercial objective: Is the Turkish footprint a standalone profit center, an operational extension of the parent, or a non-revenue-generating market intelligence node? Istanbul Attorneys advises foreign groups on the choice between a branch, a subsidiary and a liaison office, and on the registration and reporting obligations that follow from each. This guide distills the 2026 legal, tax, and operational calculus that every foreign group must perform before signing a lease in Levent or Kağıthane.

Key Takeaways

• A Turkish subsidiary (typically an Anonim Şirket or Limited Şirket) is a separate legal person — the foreign parent's liability is limited to the capital it has subscribed (TCC arts. 329 and 573), except that LLC shareholders remain liable, pro rata, for public receivables that cannot be collected from the company (Law No. 6183, art. 35); the entity is taxed on its worldwide income at the standard 25% corporate income tax rate.

• A branch office is a legal extension of the foreign parent — it has no independent legal personality, the parent is fully liable for its obligations in Turkey, and it is taxed only on Turkish-source income, but profit remittances to the parent may trigger a 15% branch withholding tax (subject to reduction under applicable double taxation treaties).

• A liaison office may not conduct commercial activity, generate revenue, or invoice clients — its first permit is issued by the Ministry of Industry and Technology for up to three years and covers only the non-commercial activities declared in the application, such as market research, representation and parent-group coordination.

• Minimum capital thresholds for 2026: TRY 250,000 for a Joint Stock Company (A.Ş.) subsidiary with 25% deposited before registration, TRY 50,000 for a Limited Şirket (Ltd.) subsidiary (Presidential Decision No. 7887, in force since 1 January 2024); the Commercial Code sets no minimum capital for a branch.

• Changing the vehicle later is not a filing amendment. The Commercial Code's change-of-type rules apply only between company forms (TCC art. 181), and a branch is not a company, so moving from a branch to a subsidiary means incorporating a company, transferring the business to it and closing the branch.

The Three Legal Entry Modes for Foreign Investors in Turkey

Under Turkish law, a foreign parent entering the market has three structurally distinct vehicles available. Each carries a different package of legal personality, tax treatment, and operational latitude. Choosing among them is a gating decision that shapes everything downstream — from payroll registration to VAT recovery to litigation standing. Our corporate and commercial law practice architects the full decision matrix around the client's commercial, tax, and risk parameters.

Subsidiary (Anonim Şirket or Limited Şirket)

A Turkish subsidiary is a standalone Turkish legal entity owned — wholly or partially — by the foreign parent. It is incorporated under TCC No. 6102 as either a Joint Stock Company (Anonim Şirket, A.Ş.) or a Limited Liability Company (Limited Şirket, Ltd.). The subsidiary has its own balance sheet, its own tax ID, its own employment contracts, and — critically — its own limited liability shield. The foreign parent's exposure is limited to the capital it has subscribed (TCC arts. 329 and 573), which keeps the group's other assets out of reach of Turkish operational and litigation risk, subject, in an LLC, to the shareholders' pro-rata liability for public receivables the company cannot pay (Law No. 6183, art. 35).

Subsidiaries are the preferred vehicle when the foreign group intends to generate revenue, sign long-term commercial contracts with Turkish counterparties, participate in public procurement tenders, hire local staff at scale, or eventually prepare the Turkish operation for sale or IPO. Some regulated sectors prescribe the legal form of the licensed entity: a bank established in Turkey must be a joint stock company (Banking Law No. 5411, art. 7), and an insurance company operating in Turkey must be a joint stock company or a cooperative, with separate rules for foreign insurers (Insurance Law No. 5684, art. 3). Check the sector's own legislation before choosing the vehicle.

Branch Office (Türkiye Şubesi)

A branch is not a separate legal person. It is a physical and commercial extension of the foreign parent. It is registered with the trade registry in the same way as a domestic business, and a fully authorised commercial representative resident in Turkey must be appointed for it (TCC art. 40(4)). The branch may carry on the parent's activities subject to Turkish sectoral licensing rules. It signs contracts in the parent's name, and its obligations are the parent's obligations.

Branches are taxed in Turkey only on Turkish-source income at the standard 25% corporate income tax rate. However, when after-tax profits are remitted back to the foreign head office, a 15% withholding applies to the amount remitted (Corporate Tax Law art. 30(6); rate set at 15% by Presidential Decision No. 9286 from 22 December 2024), subject to any reduction under an applicable double taxation treaty. Branches are often selected by foreign banks, insurance companies, and project-based contractors (construction, EPC, consulting) where the parent wants direct contractual privity with Turkish counterparties without a separate legal shell.

Liaison Office (İrtibat Bürosu)

A liaison office — sometimes called a representative or representation office — is the most restricted of the three structures. It is established with the permission of the Ministry of Industry and Technology, through its General Directorate of Incentive Implementation and Foreign Investment. The first permit is granted for at most three years; an extension can be sought before it expires, but an office set up only for market research or for promoting the parent's products or services cannot have its term extended (FDI Implementing Regulation art. 8(a)–(b)).

Critically, a liaison office may not conduct any commercial activity. It may not sign revenue-generating contracts, invoice clients, or import goods for resale. Its permissible scope is limited to the non-commercial functions declared in its permit, such as market research, promotion of the parent's products, representation, supplier quality control and sourcing, technical support to distributors, and information gathering for the parent (FDI Implementing Regulation art. 8(b)). Liaison offices are ideal for early-stage market exploration by MNCs testing the Turkish opportunity before committing to a subsidiary or branch.

Comparative Analysis: Legal, Tax, and Operational Dimensions

The three structures diverge sharply across every meaningful decision dimension. Our cross-border tax and corporate team — working alongside our M&A and corporate transactions practice — can set the options side by side so the board sees the lifecycle cost of each before capital is committed.

Legal Personality and Liability

The subsidiary is a separate Turkish legal person; the parent's liability ends at the capital it subscribed, subject to the LLC public-receivables exception noted above. A branch has no independent legal personality — every lawsuit, tax assessment, or enforcement action against the branch is an action against the foreign parent itself, and a judgment obtained in Turkey can be enforced against the parent's Turkish assets directly; reaching assets abroad depends on recognition and enforcement in the country where they are located. A liaison office, while subject to supervision, typically does not generate litigation exposure because it cannot sign commercial contracts or owe commercial debts.

Taxation and Profit Repatriation

Subsidiaries pay Turkish corporate income tax at 25% on worldwide income, with dividends distributed to a foreign corporate parent subject to 15% withholding (Corporate Tax Law art. 30(3); rate raised from 10% to 15% by Presidential Decision No. 9286 from 22 December 2024), which an applicable tax treaty may reduce. Branches pay 25% corporate tax on Turkish-source income only (Corporate Tax Law art. 3(2)), and the after-tax profit they remit to the head office bears the same 15% withholding (art. 30(6)). Liaison offices pay no corporate tax because they generate no income. For a full analysis of Turkish corporate tax integration with treaty planning, see our earlier guide on the Turkish corporate tax framework for foreign investors. The optimal choice is almost always treaty-driven: the same commercial activity can yield materially different effective tax rates depending on whether the parent sits in the Netherlands, UAE, UK, Germany, or the United States.

Registration, Capital, and Timeline

Subsidiary incorporation is processed through the Turkish Trade Registry (Ticaret Sicili) via MERSIS. For an A.Ş., at least 25% of the cash-subscribed capital must be paid into a bank account opened in the company's name before registration (TCC arts. 344–345); the company acquires legal personality on registration (TCC arts. 355 and 588). A branch needs no Ministry approval: it is registered with the trade registry like a domestic business once its resident commercial representative is appointed (TCC art. 40(4)), and then reports to the Ministry of Industry and Technology through the E-TUYS system (FDI Implementing Regulation art. 5). For both, the timetable is driven mainly by the apostille and translation chain for the parent's documents. A liaison office permit is issued by the Ministry, which must decide a complete application within fifteen business days (Regulation art. 6); the file includes the parent's legalised or apostilled activity certificate, its activity report or balance sheet and income statement, and a declaration describing the office's work and undertaking that it will not engage in commercial activity (art. 7).

Hiring, Banking, and Regulatory Standing

All three structures can open Turkish bank accounts and hire employees. For a branch or liaison office, expect the bank's know-your-customer and MASAK compliance checks to extend to the foreign parent and the parent-office relationship. In public procurement, only Turkish citizens and legal entities established under Turkish law count as domestic bidders (Public Procurement Law No. 4734, art. 4), which matters where a tender is limited to, or gives a price advantage to, domestic bidders (art. 63). Some licensing regimes also require a Turkish company: private-law entities active in the electricity market must be incorporated as a joint stock or limited company (Electricity Market Law No. 6446, art. 4(3)). A branch, which is not a separate legal person, fits neither category.

Common questions about this topic

Which entry mode gives a foreign parent the strongest liability shield in Turkey?

A Turkish subsidiary — whether structured as an A.Ş. or a Limited Şirket — provides the strongest liability shield because it is a separate Turkish legal person. In an A.Ş. the shareholders are liable only for the capital they subscribed and only towards the company (TCC art. 329). In a Limited Şirket the shareholders are not liable for the company's debts beyond their subscribed capital and any additional or ancillary obligations in the articles (TCC art. 573), but they remain directly liable, in proportion to their shareholding, for public receivables that cannot be collected from the company (Law No. 6183, art. 35). Branches, by contrast, expose the parent directly to Turkish litigation, tax, and regulatory risk.

Can a liaison office ever invoice a Turkish client?

No. The Ministry of Industry and Technology grants a liaison office permit only on condition that the office carries on no commercial activity in Turkey (FDI Implementing Regulation art. 6). It cannot invoice, contract with Turkish customers for the sale of goods or services, or otherwise generate Turkish-source income. Where an inspection finds that an office is carrying on commercial activity, its permit is cancelled and the finding is reported to the relevant authorities (art. 8(d)). Groups that begin generating commercial opportunities during the liaison phase should open a branch or incorporate a subsidiary before any trading starts.

How does Turkey's new minimum corporate tax affect subsidiaries vs branches?

The domestic minimum corporate tax in Article 32/C of the Corporate Tax Law, added by Law No. 7524, applies to earnings from the 2025 tax period onwards: corporate tax cannot be less than 10% of corporate income before deductions and exemptions. The Revenue Administration's Corporate Tax General Communiqué No. 1 states that limited taxpayers required to file a corporate tax return on their Turkish income are also within scope, which covers a Turkish branch. A company commencing activity for the first time is outside the floor for three accounting periods, starting with the one in which it begins (art. 32/C(5)). Model the floor for both structures before the entity choice is finalised.

Is Trade Registry publication mandatory, and who can see the filing?

Registered facts are public. Matters registered with the trade registry — such as an incorporation, amendments to the articles of association, capital changes and, for a Limited Şirket, share transfers — are announced in the Turkish Trade Registry Gazette unless the law provides otherwise, and anyone may inspect the registry and the documents kept there (TCC art. 35). A transfer of registered A.Ş. shares, by contrast, is made by endorsement and delivery of the share certificate and entered in the company's share ledger rather than the registry (TCC arts. 490 and 499), although an A.Ş. that comes to have a single shareholder must register and announce that fact (TCC art. 338). For groups that require confidentiality around commercial terms, planning — such as a shareholder agreement kept separate from the articles of association — should be done before anything is filed.

Can the same foreign parent run both a liaison office and a subsidiary in Turkey?

In principle yes, provided the liaison office keeps to its non-commercial permit and does not perform functions that properly belong to the subsidiary (such as sales support that generates revenue on the subsidiary's books). When the office applies to extend its permit, the Directorate General assesses its past activities, the parent's business plan for Turkey, its current and planned spending and its headcount, and an office set up only for market research or promotion cannot have its term extended (FDI Implementing Regulation art. 8(b)).

What happens if a branch is inadvertently used to sign a contract outside the parent's registered scope?

A branch acts through the fully authorised commercial representative that must be appointed for it (TCC art. 40(4)). Towards third parties acting in good faith, a commercial representative is deemed authorised to carry out every transaction falling within the purpose of the business (Code of Obligations art. 548). Limiting that authority to the branch's affairs, or to joint signature, binds good-faith third parties only once registered with the trade registry, and any other internal limitation cannot be raised against them even if registered (art. 549). A contract signed through the branch can therefore bind the parent even where the parent had restricted the representative internally; the protection lies in how the representative's authority is drafted and registered, and in the sectoral licences the new activity may need.

This guide is general information on Turkish law, not legal advice on your own matter. Rules and practice change; check the position before you act.