Entering the Turkish Market: Choosing the Right Structure (2026 Guide)
Entering the Turkish market remains high on the agenda of international investors, driven by a young population, a fast-growing digital economy, and Turkey’s position at the crossroads of Europe and Asia. Yet once the commercial decision to enter has been made, the first legal question is almost always the same: should we incorporate a company, register a branch, or is a liaison office enough?
The choice between these three structures is far more than a formality. It directly determines your tax exposure, your liability regime, your ability to hire, and even the cost of exiting the market. This guide compares all three options from a practical standpoint under Law No. 4875 on Foreign Direct Investment (the “FDI Law”) and related legislation. A more detailed Turkish-language version of this guide, Yabancı Şirketlerin Türkiye Pazarına Girişi, is also available for Turkish-speaking readers.
Entering the Turkish Market: The Legal Framework
The FDI Law adopts the principle of equal treatment: foreign investors enjoy the same rights and are subject to the same obligations as Turkish investors. Unlike the previous regime, there is no restriction on the type of company a foreign investor may establish. A foreign individual or legal entity may set up a wholly foreign-owned joint stock company (A.Ş.) or limited liability company (Ltd. Şti.), join an existing company as a shareholder, or acquire it outright. No local partner is required.
This freedom means the choice of structure can be driven purely by commercial and strategic considerations. The right question to ask is: will you generate revenue in Turkey, or do you first want to test the market?
Option 1: Liaison Office — The Market Exploration Phase
A liaison office may operate in Turkey only on a non-commercial basis. Its permitted activities are limited to market research, promotion of the parent’s products and services, representation and hospitality, supplier audit and sourcing, technical support, communication and information transfer, and acting as a regional management hub. It cannot sell, invoice, sign commercial contracts, or generate income.
The establishment permit is obtained from the Ministry of Industry and Technology. The application file includes the parent company’s certificate of activity (apostilled or consular-legalised), its activity report or financial statements, a power of authority for the office representative, and an undertaking that no commercial activity will be carried out. In practice, the Ministry expects the applicant company to have been incorporated abroad for at least one year.
The advantages are significant: a liaison office is not a corporate income tax or VAT payer, there is no minimum capital requirement, and under certain conditions, the salaries of its employees are exempt from income tax. In return, all expenses must be funded from abroad in foreign currency, and the office must report its previous year’s activities to the Ministry by the end of May each year.
One point frequently overlooked in practice: permits granted solely for market research or promotion are not extended at the end of their term. Structuring the scope of activities correctly at the application stage therefore directly determines the lifespan of the office.
Option 2: Branch Office — Commercial Activity Without a Separate Entity
A branch is an extension of the foreign parent in Turkey. It has no separate legal personality, but unlike a liaison office, it may carry out commercial activities, generate revenue, and issue invoices. The rights and obligations arising from the branch’s transactions ultimately belong to the head office — meaning liability cannot be ring-fenced within the Turkish operation. This is the branch model’s most significant drawback.
A branch is established through registration with the trade registry; in addition, notification obligations must be fulfilled through E-TUYS, the electronic incentive and foreign capital information system operated under the FDI implementation regulation. The branch must be represented in Turkey by a fully authorised branch manager.
For tax purposes, a branch is a limited (non-resident) taxpayer subject to Turkish corporate income tax on its Turkey-sourced profits, and the repatriation of branch profits to the head office may trigger withholding tax. The choice between a branch and a subsidiary should therefore usually be made together with an analysis of the applicable double tax treaty.
Option 3: Incorporating a Company — The Permanent Structure
For foreign investors targeting a long-term, scalable presence, the most common route is incorporating a joint stock company (A.Ş.) or a limited liability company (Ltd. Şti.). The company has its own legal personality, which, as a rule, confines liability to the Turkish entity’s assets.
Incorporation is completed through MERSIS (the central registry system): drafting the articles of association, committing the capital, registering with the trade registry, and completing tax registration. Where the file is complete, the process can be finalised within a few business days. The minimum capital is TRY 250,000 for joint stock companies and TRY 50,000 for limited liability companies. In regulated sectors — banking, insurance, financial leasing, payment services and the like — incorporation additionally requires the prior approval of the relevant authority (BRSA, CMB or the Central Bank).
Companies with foreign shareholders are also subject to E-TUYS notifications: investor, shareholder and affiliate information must be entered into the system following user authorisation, and the annual activity form must be kept up to date.
Which Structure Fits Which Investor?
In practice, the decision comes down to three questions. If no revenue will be generated in Turkey and the goal is to test the market, a liaison office is the lowest-cost option. If commercial activity will be carried out but a separate legal entity is not desired — for example, in project-based, time-limited work — a branch may be considered, provided the unlimited liability of the head office is acceptable. Where a permanent market presence, local contracting, hiring, and access to investment incentives are targeted, incorporating a company is usually the soundest route both for liability and for tax planning. In short, there is no single right answer for entering the Turkish market; the right structure depends on the investor’s commercial goals.
Hybrid strategies are also common: many investors first enter through a liaison office and later incorporate a company, either closing the office or running the two in parallel during transition. Although “converting” a liaison office into a company technically requires a fresh incorporation, the market knowledge and local team built up in the meantime make the transition considerably smoother.
After Registration: The Real Work Begins
Whichever structure you choose, registration is the beginning of the process, not the end. Personal data protection (KVKK) compliance, VERBIS registration, commercial electronic message consents, employment law documentation, and tax registrations all fall due within the first months. We cover these in detail in the second article of this series, The First 90 Days After Incorporation in Turkey: A Compliance Roadmap for Foreign Investors.
For technology companies, the tax and regulatory layer of market entry deserves separate attention: digital services tax and VAT liability on electronic services can apply even to structures earning Turkish revenue without any local presence. We examine this in the third article of the series.
Frequently Asked Questions
Can a foreign company establish a 100% foreign-owned entity in Turkey?
Yes. Under the FDI Law, foreign investors are treated equally with local investors; no Turkish partner is required, and the company may be wholly foreign-owned.
Can a liaison office issue invoices in Turkey?
No. A liaison office may not engage in commercial activity of any kind; it cannot sell, invoice or earn income, and all of its expenses must be funded from abroad in foreign currency.
Is a branch or a subsidiary more advantageous?
A branch can be practical for short-term or project-based operations, but the head office remains fully liable for its obligations. Where a permanent presence is planned, a subsidiary is generally preferable due to limited liability and access to incentives.
This article is provided for general information purposes only and does not constitute legal advice. For an assessment of your strategy for entering the Turkish market, please contact the KYO Legal team.
