Foreign companies that want a real commercial presence in Turkey without forming a separate Turkish company use the branch (şube) structure. A branch is not a separate legal entity. It is the foreign parent operating directly inside Turkey through a registered local extension, with a Turkey-resident representative, a Turkish tax registration, and full exposure of the foreign parent to Turkish creditors, courts, tax authorities, and labour inspectors. This is the most important point that gets overlooked: the branch does not shield the parent. Whatever the branch signs, owes, or causes is, in legal substance, the parent's obligation. Practice may vary by authority and year, but the headline rule has been consistent since the entry into force of the Turkish Commercial Code on 1 July 2012.
The branch route is governed by Article 40/4 of the Turkish Commercial Code (Law No. 6102) (TTK), Articles 118 to 122 of the Trade Registry Regulation (Ticaret Sicili Yönetmeliği), the Foreign Direct Investment Law (Law No. 4875) (DYY) and its Implementation Regulation, and a layer of tax, labour, and sector-specific rules that catch the branch the moment it starts operating. ER&GUN&ER Law Firm structures and registers branches for foreign companies in Istanbul and across Turkey, handles the Ministry of Trade authorisation, the E-TUYS notification, the Trade Registry filing, the tax office activation, the SGK employer registration, and the post-registration sector licences where the parent's activity needs them.
When a Branch Is the Right Vehicle, and When It Is Not
A Turkish lawyer is asked the same question every week by foreign founders, group treasurers, and in-house counsel: branch or subsidiary? The answer is rarely the same twice, but the analytical frame is. A branch makes sense when the parent wants to keep one global balance sheet, when the Turkish activity is an operational extension of the parent's existing business rather than a new venture, when the sector regulator (banking, insurance, aviation, certain financial services) explicitly contemplates branch licensing, and when the parent is comfortable accepting direct legal exposure in Turkey. A subsidiary, typically a limited liability company (limited şirket) or a joint stock company (anonim şirket), makes sense when the foreign group wants liability ring-fencing, a separate Turkish balance sheet, easier local financing, real-estate acquisition without the practical limitations applied to foreign legal persons, and a cleaner exit through share sale rather than asset sale.
An Istanbul Law Firm that has guided both routes will say plainly: branches are faster to open and slower to unwind. Subsidiaries are slower to open and easier to sell. There is no minimum capital requirement for a branch under Turkish law, but the parent must allocate a working capital figure to the branch in the registration declaration and the Trade Registry will record it. By contrast, a joint stock company requires a minimum capital of TRY 250,000 (TRY 500,000 in the registered capital system) under Article 332 TTK, and a limited liability company requires TRY 50,000 following the Presidential Decree that took effect on 1 January 2024. Practice may vary by authority and year, particularly on how strictly the Trade Registry tests the parent's documents and how local tax offices handle the first inspection visit.
Turkish lawyers who advise on cross-border expansion warn against one branch-specific trap that subsidiaries do not have. Article 40/4 TTK requires the parent's home-jurisdiction trade name rules to be respected, and Article 48/3 TTK requires the Turkish branch's commercial title to display the parent's full title, the location of the parent's head office, the location of the branch, and the word şube (branch) itself. Trade Registry Directorates reject filings that omit any of these elements, and the rejection costs translation, apostille, and notarisation rounds. We solve this at the drafting stage, not at the counter.
The Two Permission Layers: Ministry of Trade and the Trade Registry
Foreign branch registration in Turkey runs through two distinct permission layers, and conflating them is the most common source of delay. The first layer is the Ministry of Trade (T.C. Ticaret Bakanlığı), specifically the General Directorate of Domestic Trade (İç Ticaret Genel Müdürlüğü), which evaluates the foreign parent's eligibility to operate a Turkish branch and issues a permission letter (izin yazısı) together with an annex declaration (müzeyyel beyanname) bearing the Ministry's approval. The second layer is the local Trade Registry Directorate (Ticaret Sicili Müdürlüğü) where the branch will be physically located, which performs the actual registration, issues the Trade Registry Gazette announcement (Türkiye Ticaret Sicili Gazetesi), and triggers the legal personality of the branch as a Turkish commercial enterprise.
An English speaking lawyer in Turkey advising a first-time foreign client should explain the sequencing clearly. Step one: gather the parent's home-jurisdiction documents — current certificate of registration (sicil belgesi), articles of association, board resolution authorising the branch and appointing the Turkey representative, and a power of attorney to local counsel — all apostilled under the 5 October 1961 Hague Apostille Convention or, for non-apostille jurisdictions, legalised through Turkish consular channels. Step two: translate every foreign-language document by a sworn translator (yeminli tercüman) and notarise the translations before a Turkish notary. Step three: file the Ministry of Trade application with the bilingual file. Step four: once the Ministry's permission letter and approved annex declaration are in hand, file the Trade Registry application through the MERSİS portal (Merkezi Sicil Kayıt Sistemi). Step five: the Trade Registry registers the branch, the Gazette publishes the announcement, and the branch acquires its trade registry number. Step six: tax office and SGK activations follow within days.
The Trade Registry Regulation organises the documentary requirements at Articles 118 to 122. Article 122 is the operational core: it lists the documents required for first-branch registration of a foreign parent and the additional points the registry will verify. The first branch in Turkey requires both home-jurisdiction compliance evidence and Turkish-law compliance evidence; subsequent branches of the same parent only require Turkish-law compliance because the home-jurisdiction question has already been resolved at first registration. Practice may vary by authority and year, especially on the exact set of supplementary documents requested by individual Trade Registry Directorates — Istanbul, Ankara, and İzmir directorates each maintain slightly different document checklists, and recent Trade Bakanlığı circulars adjust them periodically.
The E-TUYS Notification: Often Missed, Always Required
A Turkish Law Firm that handles foreign branches frequently inherits files where the registration was completed but the E-TUYS step was skipped. E-TUYS (Elektronik Teşvik Uygulama ve Yabancı Sermaye Bilgi Sistemi) is the Ministry of Industry and Technology's online portal for foreign direct investment notifications. Under the DYY Implementation Regulation, every foreign-capital company and every Turkish branch of a foreign company must designate an authorised user on E-TUYS and file the "Şirket ve Şube Kuruluş Bildirim Formu" (Company and Branch Establishment Notification Form). Capital movements, share transfers, and annual activity reports are filed through the same portal.
The penalty for skipping E-TUYS is not headline-grabbing but it bites. The branch loses statistical reporting compliance, capital inflows can be questioned by the bank under MASAK and TPKK rules when the source-of-funds traceability is asked for, and any incentive application — investment incentive certificate, regional incentive, technology development zone status — gets rejected because E-TUYS data has to match Trade Registry data. We file E-TUYS in parallel with the Trade Registry application so the records align from day one. A lawyer in Turkey who treats E-TUYS as an afterthought is creating a problem the client will face at the first audit or first capital movement.
The Branch Representative: A Decision That Outlives the Registration
Every Turkish branch of a foreign company must have at least one fully authorised representative resident in Turkey. The representative is named in the parent's board resolution, included in the Ministry of Trade permission file, and recorded in the Trade Registry with a notarised signature declaration (imza beyannamesi) reflecting the branch's full commercial title. Article 40 TTK requires the signature declaration to show the exact registered name of the branch, which in turn must comply with Article 48/3 TTK. The representative does not have to be a Turkish citizen, but must reside in Turkey, which in practice means holding either a residence permit (ikamet izni) under the Law on Foreigners and International Protection (Law No. 6458) or a work permit under the International Labour Force Law (Law No. 6735).
Choosing the representative is more strategic than it appears. The representative binds the parent for every contract signed in the branch's name, every employment relationship, every tax filing, and every regulatory communication. If the parent later wants to remove the representative, the removal must be filed with the Trade Registry and announced in the Gazette. Until that filing is published, third parties may still rely on the prior authority. We draft the board resolution with a defined scope of authority — what the representative can and cannot sign, financial limits, joint signature requirements where appropriate — and we make the limits visible on the Trade Registry record. Practice may vary by authority and year on how scope limitations are recorded; some directorates accept detailed scope clauses in the registration entry, others record only the appointment and require the limitations to be evidenced through the underlying corporate documents.
Tax Position of a Turkish Branch: 25% CIT, 15% Branch Profit Withholding, and the New 10% Floor
The tax treatment of a Turkish branch is the single most consequential difference between a branch and a subsidiary, and most foreign founders learn it the wrong way: from their first quarterly advance tax filing, not from their pre-incorporation memo. A Turkish branch is a "limited taxpayer corporation" (dar mükellef kurum) under Article 3/2 of the Corporate Tax Law (Law No. 5520) (KVK), which means it is taxed in Turkey only on income attributable to its Turkish operations, not on the parent's worldwide income. The standard corporate income tax rate is 25% under Article 32 KVK, rising to 30% for banks, insurance companies, financial leasing companies, factoring companies, electronic payment institutions, and from 2025 onwards for build-operate-transfer concession holders and certain public-private partnership operators.
A Turkish Law Firm that audits cross-border structures sees the branch profit withholding mishandled regularly. When a branch transfers its after-tax profit to the foreign parent, that transfer is treated as a deemed dividend distribution under Article 30 KVK and is subject to a 15% withholding tax. The rate was raised from 10% to 15% by Presidential Decree at the end of 2024, applying the change to dividend distributions and equivalent transfers from that point forward. Turkey's network of more than 80 double taxation treaties reduces the rate, typically to 5% or 10% depending on the treaty and the parent's qualifying status, but treaty access requires a tax residency certificate (mukimlik belgesi) from the parent's home jurisdiction filed before the withholding moment. Filing it after the fact triggers a lengthy refund procedure. Practice may vary by authority and year on documentation strictness.
The 1 January 2025 reform added a new layer foreign branches need to model. Turkey introduced a domestic minimum corporate tax under which the branch's tax cannot be less than 10% of its corporate income calculated before certain exemptions and deductions. The standard 25% calculation runs in parallel; whichever produces the higher liability is paid. For a profitable branch with few exemptions the standard regime usually controls; for a branch using technology development zone exemptions, free zone exemptions under Law No. 3218, or substantial deduction items, the 10% floor often controls. Article 13 KVK transfer pricing rules apply to all related-party dealings between the branch and the parent or other group entities, and Article 11 thin capitalisation rules cap deductible interest on related-party debt where the debt-to-equity ratio exceeds 3:1.
VAT applies under the VAT Law (Law No. 3065) at 20% standard, 10% and 1% reduced rates depending on the supply. Stamp duty under the Stamp Duty Law (Law No. 488) applies at 0.948% on most commercial contracts, with statutory caps adjusted annually. Bookkeeping in Turkish under the Tax Procedure Law (Law No. 213) is mandatory; e-defter and e-fatura registration with the Revenue Administration follow once turnover thresholds are crossed or where the activity (e-commerce, certain B2B sectors) requires them from day one regardless of turnover.
Employment: Hiring Through a Branch
A branch can hire Turkish and foreign employees directly. The branch becomes the employer of record under the Labour Law (Law No. 4857), the Social Insurance and General Health Insurance Law (Law No. 5510), and the Occupational Health and Safety Law (Law No. 6331). SGK (Sosyal Güvenlik Kurumu) employer registration must be completed within 30 days of hiring the first employee. Payroll, severance accruals, notice periods under Article 17 of Law No. 4857, annual leave under Article 53, working time limits under Article 63 (45 hours per week), and the unjustified termination protection regime at Articles 18 to 21 (for workplaces with 30 or more employees) all apply identically to branches and to Turkish-incorporated companies.
The foreign-employee dimension is where branches differ in practice. Foreign nationals working at the branch require work permits under Law No. 6735, granted by the Ministry of Labour and Social Security through the e-izin portal. The general rule for work permit applications is a minimum of five Turkish employees per foreign employee at the workplace, applied from the second year onwards (the first foreign employee can be hired before the five Turkish employees are reached, but the threshold has to be met for renewals and additional foreign hires). The applying employer must hold either at least TRY 100,000 paid-in capital or report annual turnover above TRY 800,000, with sectoral exceptions and special regimes for technology development zones and free trade zones. For a branch, "paid-in capital" is read against the working capital allocated to the branch in the Trade Registry record, which is one of the reasons we set the allocation realistically at registration rather than at the symbolic TRY 1 some other firms use.
An English speaking lawyer in Turkey reviewing a branch's employment file looks for three documents on every desk: the bilingual employment contract aligned with Articles 8 to 32 of Law No. 4857, the SGK işe giriş bildirgesi filed before the employee's first day, and the OHS risk assessment under Law No. 6331 commensurate with the branch's hazard classification. Missing any of them turns a routine SGK or labour ministry inspection into a penalty file. Practice may vary by authority and year on inspection intensity.
Banking, Currency Control, and the Capital Inflow Documentation
The branch must open a Turkish bank account in its own registered name once the Trade Registry registration is complete and the tax office has issued the tax identification number. Banks request the Trade Registry Gazette announcement, the tax registration certificate, the signature declaration of the representative, the parent's apostilled and translated corporate documents, and a face-to-face KYC meeting with the representative. Multi-currency accounts (TRY, USD, EUR) are standard for foreign branches; Several Turkish public and private banks operate corporate desks that handle foreign-branch onboarding regularly.
When the foreign parent funds the branch's working capital, the inflow must be processed through a Turkish bank and supported by a foreign currency acquisition document (döviz alım belgesi, DAB) under the Decree No. 32 on the Protection of the Value of Turkish Currency and the Law on the Protection of the Value of Turkish Currency (Law No. 1567). The DAB is the legal evidence that the branch's capital is foreign-sourced, which matters for the eventual capital repatriation, for E-TUYS reporting, and for Central Bank (Türkiye Cumhuriyet Merkez Bankası) statistics. We coordinate the bank, the parent's outbound transfer reference, and the E-TUYS update as a single sequence, because if any of the three references the wrong amount, the capital becomes administratively "stuck" until the records are reconciled.
Invoicing rules under the Tax Procedure Law (Law No. 213) require Turkish-resident invoices to be issued in Turkish lira, with foreign currency amounts allowed alongside the TRY total in cross-border supplies. The Decree No. 32 contracting-currency rules, amended several times since 2018, restrict TRY-denominated contracting in some categories and allow foreign currency contracting in others; the analysis is contract-by-contract, not generic. Practice may vary by authority and year on enforcement.
Sector-Specific Licences: When the Parent's Activity Triggers Extra Approvals
The Ministry of Trade permission opens the door to general commercial activity. Sector-specific activities require separate approvals on top, and the branch can begin those activities only after the relevant regulator has issued its licence. Banking branches require Banking Regulation and Supervision Agency (BDDK) authorisation under the Banking Law (Law No. 5411); insurance branches require Insurance and Private Pensions Regulatory Authority (SEDDK) authorisation; capital markets activities require Capital Markets Board (SPK) approval under the Capital Markets Law (Law No. 6362); pharmaceutical branches require Turkish Medicines and Medical Devices Agency (TİTCK) approval; broadcasting requires Radio and Television Supreme Council (RTÜK) authorisation; energy activities require Energy Market Regulatory Authority (EPDK) licensing; private security and aviation each have their own regimes.
Turkish lawyers who manage sector entries usually run a two-track file from the start. Track one: the Ministry of Trade permission and the Trade Registry registration so the branch exists as a legal Turkish enterprise. Track two: the sector regulator's pre-application dialogue, often informal at first, to understand what the regulator will need to see in the parent's home-country licensing, capital adequacy, fit-and-proper assessment of the representative, and operational substance in Turkey. Running them sequentially can add several months to the timeline, whereas running them in parallel with structured internal milestones meaningfully shortens the path to live operations.
Closing or Converting a Branch: The Other End of the Lifecycle
Closing a Turkish branch is not a one-week exercise. The parent's board resolves to close the branch and appoints a liquidation officer. The Trade Registry records the entry into liquidation and publishes the Gazette announcement calling creditors. Tax office, SGK, and chamber of commerce records are updated to reflect liquidation status. The liquidation officer collects receivables, pays debts, completes any outstanding tax filings, settles employee severance and unused leave entitlements, terminates the lease, closes the bank accounts, and transfers any remaining net assets to the parent against the appropriate withholding (the same 15% deemed dividend withholding under Article 30 KVK applies to the residual remittance, with treaty relief where available and documented). Only after the tax office issues a closing tax certificate (kapanış vergisi yoklaması) does the Trade Registry strike the branch off the register. Books and records must be retained for the statutory period under Article 82 TTK and Article 253 of the Tax Procedure Law.
Conversion of a branch into a Turkish subsidiary is structurally a new incorporation followed by an asset and contract transfer from the branch to the new company, with employment continuation under Article 6 of Law No. 4857, lease assignment with the landlord's consent, and customer contract novation. Turkey does not have a one-step "branch-to-subsidiary" conversion procedure equivalent to some EU jurisdictions. The transfer is documented as a going concern transfer where the tax neutrality conditions of Article 19 KVK can be met, otherwise as a taxable asset disposal. Planning the route in advance avoids triggering exit-tax exposure on goodwill and inventory.
What ER&GUN&ER Law Firm Delivers on a Branch File
An Istanbul Law Firm that handles foreign branch files does not run the file as a checklist. The work is sequenced in five phases. Phase one: pre-registration structuring memo covering branch versus subsidiary trade-off, tax model with the 25% CIT, 15% deemed dividend withholding, treaty relief possibilities and the 10% domestic minimum tax floor, employment cost projection, and sector-licensing roadmap. Phase two: document collection and apostille coordination with the parent's home jurisdiction, sworn translation, notary, and bilingual board resolution and POA drafting. Phase three: Ministry of Trade filing, E-TUYS authorised user designation and notification form, Trade Registry application via MERSİS, Gazette announcement, tax office activation, SGK employer registration, and bank account opening. Phase four: post-registration compliance package — bookkeeping setup, e-fatura/e-defter registration where required, KVKK (Law No. 6698) data controller registration through VERBİS where the branch processes personal data, OHS file, and sector licence application where applicable. Phase five: ongoing legal support — monthly compliance calendar, quarterly tax advance review, annual E-TUYS activity report, employment changes, contract drafting and review, and litigation or arbitration when disputes arise.
Turkish lawyers who understand cross-border execution write contracts that travel. The branch's customer agreements are drafted with Turkish governing law where the activity sits in Turkey and with arbitration clauses pointing to ISTAC (Istanbul Tahkim Merkezi, established under Law No. 6570) or to ICC arbitration where the counterparty insists, with full enforceability under the New York Convention to which Turkey acceded on 25 September 1991 with reciprocity reservation. Cross-border employment is handled with attention to MÖHUK Articles 27 and 44 (Law No. 5718) on choice-of-law and protective rules. Tax positions are documented before they crystallise, not after. Practice may vary by authority and year, and we revise the firm's template suite as Resmi Gazete amendments require.
Frequently Asked Questions
- Does a Turkish branch have separate legal personality from the foreign parent? No. The branch is an extension of the parent. The parent is the contracting party, the debtor, and the defendant in any Turkish proceedings against the branch.
- Is there a minimum capital requirement for a Turkish branch? No statutory minimum applies under Turkish law, but the parent must allocate working capital recorded in the Trade Registry, and the realistic figure matters for work permit thresholds and bank KYC.
- Can a foreign company own 100% of its Turkish branch? Branches are not owned through shares; the branch is the parent operating in Turkey, so the parent has 100% control by definition under Article 40/4 TTK.
- Must the branch representative be a Turkish citizen? No. The representative must be resident in Turkey but can hold any nationality, subject to having a residence permit under Law No. 6458 or work permit under Law No. 6735.
- How long does branch registration take? Typically four to eight weeks from a complete document set, with the Ministry of Trade permission accounting for two to four weeks and the Trade Registry registration for one to two weeks. Practice may vary by authority and year.
- What is the corporate tax rate for a Turkish branch? 25% standard rate under Article 32 KVK; 30% for banks, insurance, factoring, financial leasing, electronic payment institutions, and certain BOT/PPP concessions from 2025; subject to a 10% domestic minimum corporate tax effective 1 January 2025.
- Is profit transfer to the parent taxed? Yes. Article 30 KVK treats the transfer as a deemed dividend subject to 15% withholding, raised from 10% by Presidential Decree at end-2024, with treaty reduction available where the parent's home jurisdiction has a double taxation treaty with Turkey.
- Can the branch hire foreign employees? Yes, through work permit applications under Law No. 6735, subject to the five-Turkish-employees-per-foreign-employee threshold and the TRY 100,000 paid-in capital or TRY 800,000 turnover requirement, with sectoral exceptions.
- Can the branch own real estate in Turkey? Foreign legal persons face specific constraints under the Land Registry Law (Law No. 2644) and reciprocity rules. In practice most branches lease their premises rather than purchase.
- Does the branch need to file annual financial statements? Yes. The branch files annual corporate tax returns under KVK and statutory books under VUK; the parent's consolidated accounts cover the branch in the home jurisdiction.
- What is E-TUYS and is it mandatory? E-TUYS is the Ministry of Industry and Technology's foreign investment notification portal. Notification is mandatory under the DYY Implementation Regulation for every foreign-capital company and every Turkish branch of a foreign company.
- Can the branch be registered remotely without the parent's executives travelling to Turkey? Yes. We register branches under a notarised, apostilled, and translated power of attorney authorising local counsel to file the Ministry of Trade application, the Trade Registry application, and all post-registration activations.
- What happens to existing branch contracts if the parent is acquired or merged abroad? The Turkish branch's contracts continue with the surviving entity by operation of law, but the Trade Registry record must be updated within prescribed periods, and counterparties may require novation depending on contract terms.
- How is a Turkish branch closed? Through liquidation under TTK rules, with creditor notification via Gazette, tax and SGK clearance, employee settlement, and final tax certificate before the Trade Registry strikes off the entry. Practice may vary by authority and year on timing and inspection intensity.
- Where does ER&GUN&ER Law Firm support branch-related work? Pre-registration structuring, Ministry of Trade and Trade Registry filings, E-TUYS notification, tax and SGK activations, sector-specific licensing, ongoing compliance, employment, contract drafting, and dispute resolution before Turkish courts and arbitral tribunals including ISTAC.
Author: Mirkan Topcu is an attorney registered with the Istanbul Bar Association (Istanbul 1st Bar), Bar Registration No: 67874. His practice focuses on cross-border and high-stakes matters where evidence discipline, procedural accuracy, and risk control are decisive.
He advises foreign companies, founders, and investors across Foreign Direct Investment, Company Formation and Branch Registration, Corporate and Commercial Law, Tax Law, Employment Law, and cross-border documentation matters where procedural accuracy and evidence discipline are decisive.
Education: Istanbul University Faculty of Law (2018); Galatasaray University, LL.M. (2022). LinkedIn: Profile. Istanbul Bar Association: Official website.