Branch or Subsidiary in Turkey for a Foreign Company? Legal Personality, Liability, Tax and Profit Repatriation

1. The branch is the foreign company operating in Turkey; the subsidiary is a separate company

A branch does not create a new shareholder-owned legal person distinct from the foreign parent. The parent company remains the entity behind the branch’s contracts, assets and obligations.

A Turkish subsidiary, by contrast, is incorporated under the Turkish Commercial Code as a limited company, joint-stock company or another permitted form. It has its own legal personality and enters transactions in its own name.

This legal separation is the starting point for almost every later difference.

2. Parent-company liability is materially different

Because a branch is not legally separate, the foreign parent is directly connected to branch liabilities. A creditor of the branch can assert rights arising from the branch’s contracts against the foreign company under the applicable legal framework.

A Turkish subsidiary generally bears its own corporate liabilities. Shareholders are not ordinarily liable for company debts merely because they own shares, subject to statutory exceptions, unpaid capital, public debts in some company forms/roles, guarantees and veil-related doctrines.

Groups seeking liability ring-fencing therefore often prefer a subsidiary, while groups seeking direct parent operation may accept branch exposure.

3. Both structures require Turkish registration, but through different legal files

The official investment guide states that companies are established through Trade Registry Directorates using MERSIS. A foreign-company branch is also registered with the Trade Registry but requires parent-company documents and a branch-opening decision.

A subsidiary’s formation file focuses on founders/shareholders, articles, capital and corporate organs.

A branch file proves the existence and authority of the foreign parent and its decision to operate through a Turkish branch.

4. Foreign parent documents require authentication and Turkish translation

For a branch, typical official requirements include the parent company’s articles, certificate of activity/current status, competent-organ resolution to open the branch and powers appointing the Turkish representative.

Documents issued abroad generally need apostille or consular legalisation depending on the country and treaty framework, followed by official Turkish translation/notarial processing where required.

Corporate documents should be current enough to establish that the parent still exists and that the signing organ had authority.

5. A branch operates through a representative in Türkiye

The official guide requires authority for a resident representative with power to represent and bind the branch. The representative’s authority should match the parent resolution and trade-registry registration.

A representative’s personal identity, work authorisation and signature records are separate questions from the branch’s legal existence.

Contract counterparties should verify the registered authority before relying on unusual or high-value commitments.

6. A branch has no statutory shareholder capital in the same sense as a subsidiary

The official guide notes no capital requirement for a branch, although an operating budget should be allocated. The parent funds branch activities directly.

A Turkish limited or joint-stock company has statutory capital and corporate capital rules. Capital increases, share issuances and shareholder rights are governed by Turkish company law.

Funding strategy affects tax, thin capitalisation and creditor protection.

7. Branch activities cannot exceed the parent company’s purposes

A branch is an extension of the parent and may be incorporated only for purposes within the foreign company’s own corporate objects according to the official investment guidance.

If the Turkish operation needs a materially different business line, the parent’s constitutional documents may need amendment or a Turkish subsidiary may offer a cleaner structure.

Sector-specific licensing remains necessary regardless of branch/subsidiary form.

8. A branch is generally a limited taxpayer; a Turkish subsidiary is a full taxpayer

A branch of a foreign company operates through a Turkish workplace/permanent establishment and the foreign company is taxed as a limited taxpayer on Turkish-source profits attributable to the branch.

A Turkish-incorporated subsidiary is a full corporate taxpayer. Our foreign-owned Turkish company tax guide explains that system.

The economic tax burden cannot be compared solely by looking at the headline corporate rate.

9. Profit extraction uses different legal mechanics but can produce similar withholding layers

A subsidiary distributes dividends through a shareholder/general assembly decision. A branch has no shareholder distribution because the parent already owns the branch directly.

Instead, branch profit remaining after Turkish tax can be remitted to head office. The official Invest in Türkiye guide states that transferred branch profit is subject to 15% dividend withholding under domestic law.

A treaty can reduce the source-state rate in qualifying cases.

10. Tax treaties can materially affect branch profit and subsidiary dividends

The treaty’s permanent-establishment article determines whether and how branch business profit is taxable. The dividends article can apply to subsidiary distributions and treaties can also contain branch-remittance equivalent provisions or domestic-law limitations.

The relevant treaty should be reviewed before choosing structure because the after-tax result can differ by investor residence country.

Treaty benefits require residence documentation and anti-abuse compliance.

11. VAT and payroll obligations arise at operating level

Both an active branch and an active subsidiary can register for VAT, employ staff, withhold payroll taxes and meet Turkish invoicing/bookkeeping obligations.

The absence of separate branch legal personality does not eliminate operational tax compliance.

A liaison office is different because it cannot engage in commercial activity under its licence.

12. Both structures need banking and KYC preparation

A subsidiary bank account is opened in the Turkish company’s name. A branch account is opened for the branch/foreign-company operation.

Banks will require trade-registry, tax, signatory and beneficial-owner documentation. Foreign parent ownership increases the importance of corporate-chain documents.

Our foreign banking/KYC guide explains the general framework.

13. Foreign staff require separate work-authorisation analysis

Neither a branch nor a subsidiary automatically allows a foreign director, manager or employee to work in Türkiye.

Law No. 6735 and current work-permit criteria apply to the individual’s role and employer.

Our Turkey work permit guide covers those requirements.

14. Subsidiary governance is more autonomous and more formal

A subsidiary has shareholders, management organs, statutory meetings/resolutions, capital rules and separate books. This can support joint ventures, minority investors, equity incentives and future investment rounds.

A branch’s strategic authority remains with the foreign parent and registered branch representative.

Groups planning local co-investors generally need a company rather than a branch.

15. Contracting identity should be explicit

A branch contract should identify the foreign parent acting through its Turkish branch. The counterparty should not be left uncertain whether it contracted with a separate Turkish company.

A subsidiary signs in its own Turkish legal name and tax/trade-registry identity.

Guarantees from the parent should be documented separately where a subsidiary structure is used.

16. A subsidiary can be sold through shares; a branch cannot

An investor can exit a subsidiary by selling shares, subject to Turkish company law, tax and contractual restrictions.

A branch has no shares. Exit usually means transferring business/assets/contracts where legally possible or closing the branch.

This difference can be decisive for private-equity or strategic investors planning a later sale.

17. Closing a branch and liquidating a company are different procedures

A branch closure follows parent decision, trade-registry, tax and employee/creditor winding-down requirements.

A Turkish company liquidation is a formal corporate process involving liquidators, creditor notices, asset/liability settlement and deregistration.

Potential exit cost should be considered at establishment, not only when closure becomes necessary.

18. Choose based on liability, tax, governance and exit—not only formation speed

A branch can suit a foreign company wanting direct control, no separate shareholder structure and activities identical to the parent. A subsidiary can suit a group wanting liability separation, local investors, a standalone balance sheet, financing flexibility and a saleable equity interest.

A liaison office is a third option only for non-commercial activities and requires a Ministry licence.

Bakırcı & Keskin Hukuk Bürosu has one physical office in Mersin. Corporate matters throughout Türkiye can be coordinated from Mersin subject to competent trade registries, tax authorities and courts.

Conclusion

Branch and subsidiary are not interchangeable labels. The branch is the foreign parent operating in Türkiye; the subsidiary is a separate Turkish legal person. Liability, tax, governance, banking, employees and exit should all be modelled before registration.