For foreign companies planning to operate in Turkey, one of the most important decisions is whether to open a branch of the existing foreign company or establish a separate legal entity in Turkey.
This decision directly affects taxation, legal responsibility, operational flexibility, and long-term investment strategy. As of 2026, both options are legally possible, but their advantages and disadvantages should be carefully evaluated before making a decision.
What Is a Branch Office in Turkey?
A branch office is a business unit established in Turkey that operates as an extension of a foreign parent company.
Key characteristics include:
- No separate legal personality
- Operates as a direct extension of the parent company
- The parent company holds full legal responsibility
- Allowed to conduct commercial activities in Turkey
What Does Establishing a Company (Subsidiary) in Turkey Mean?
Foreign investors can establish a separate legal entity in Turkey. The most commonly preferred structures are:
- Limited Liability Company (Ltd.)
- Joint Stock Company (JSC)
In this model:
- The entity has its own legal personality
- Liability is limited to the company’s capital
- The company operates as a local Turkish company
Tax Comparison
Branch Taxation
- Corporate tax is applied to income generated in Turkey
- Profit transfers to the parent company may be subject to withholding tax
- Transactions with the parent company are subject to transfer pricing rules
Subsidiary Taxation
- Subject to standard corporate tax rules
- Dividend distributions are subject to withholding tax
- Provides more flexibility for tax planning
From a tax planning perspective, establishing a company is generally considered a more structured and manageable approach.
Legal Responsibility
In the branch model:
- The parent company is directly responsible for all obligations
- Debts and liabilities may affect the parent company
In the subsidiary model:
- Liability is limited to the company’s capital
- The parent company’s risk exposure is significantly reduced
From a risk management perspective, the subsidiary structure is usually safer.
Operational Differences
Branch Office
- The establishment process may be slightly more complex
- Parent company documents must be translated and apostilled
- The management center remains abroad
Company (Subsidiary)
- Operates more independently
- Allows local investors to participate
- Share transfers are possible
When Should a Branch Be Preferred?
- Short-term projects
- Representative office–type structures
- Low-risk business activities
When Should a Company Be Established?
- Long-term investments
- Hiring employees in Turkey
- Seeking investment or partnerships
- Planning business expansion
For most foreign investors, establishing a company in Turkey is considered the more sustainable long-term model.
Common Mistakes Made by Foreign Investors
- Making structural decisions without tax planning
- Establishing a structure without defining long-term goals
- Ignoring transfer pricing risks
- Failing to plan profit transfer strategies
Choosing the wrong structure at the beginning may result in costly restructuring in the future.
How Sunrise CPA Can Support You
At Sunrise CPA, we assist foreign investors in the following areas:
- Analyzing the most suitable investment structure
- Providing financial modeling for branch vs. company decisions
- Managing the company or branch establishment process
- Preparing tax planning strategies
- Providing ongoing accounting and compliance services
Our goal is to help foreign investors operate in Turkey efficiently, securely, and in full compliance with local regulations.
Conclusion
Both opening a branch and establishing a company are viable options for foreign investors in Turkey. However, the correct choice can significantly influence the success of the investment.
Tax, legal, and strategic considerations should always be carefully analyzed before making a final decision.