LIAISON OFFICE REGULATION AMENDED

In accordance with Turkish law, establishment by a foreign company of a liaison office in Turkey is governed by the Law No. 4875 on Foreign Direct Investments1 (the Law). Pursuant to the Regulation for Implementation of the Law2 (the Regulation), the foreign entity founding the liaison office (i.e., the investor itself) must be established in the form of a “company” in accordance with the laws of its country of origin. The major point to note is that liaison offices cannot engage in any commercial activity. In other words, the conduct of any income-generating activity in Turkey through a liaison office is strictly prohibited. An amended version of the Regulation was published in the Official Gazette on 3 July 2012. This article sets forth the main changes brought about by the amended Regulation:

• Applications for liaison office permits shall hereinafter be submitted to the General Directorate of Incentive Implementation and Foreign Capital, which is part of the Ministry of Economy.

• According to Article 6 of the amended Regulation, the Ministry shall have a particular discretionary power with regards to the granting of liaison office permits to foreign companies incorporated (in their origin countries) less than 1 (one) year ago. This provision is aimed at preventing shell companies to open liaison offices in Turkey. The Regulation provides that the Ministry shall be entitled to grant a conditional permit in this respect.

• Applications for liaison office permits shall be finalized within 15 (fifteen) business days from the submission date provided that the application file is complete. This term used to be five days before the amendment.

• Pursuant to Article 7 of the amended Regulation, some additional documents shall be provided by the applicants: A new application form and a signed undertaking letter whereby the applicants would undertake to not carry out any commercial activity in Turkey are among such documents.

• When first granted, liaison office permits shall have a term of 3 (three) years at the most. Extension applications shall be submitted before liaison office permits expire. The Ministry may extend the permits covering the following activities for another 5-year term: (i) Representation and Hosting, (ii) Control, Inspection and Provision of Local Suppliers, (iii) Technical Support, (iv) Communication and Transfer of Information. On the other hand, permits granted for market research and promotion of products and/or services of the foreign company shall not be extended. 1 Published in the Official Gazette dated 17 June 2003 and numbered 25141. 2 Published in the Official Gazette dated 20 June 2003 and numbered 25205.

YASAL UYARI

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