In this context, even though foreign companies are able to open liaison offices provided that they do not engage in commercial activities in Turkey, the activities of the liaison offices are limited to the tasks such as representation and entertainment, communications and information transfer, control and audit of suppliers in Turkey in terms of quality and standard and supplier procurement, technical assistance or creation of investment and management strategies, ensuring the management and coordination of activities such as planning, promotion, etc. 

In terms of tax;

• Liaison offices are not obliged to pay corporate and value-added tax in Turkey as they are not allowed to engage in commercial activities.
• In addition, salaries to be paid to liaison office employees are exempt from income tax and stamp tax under certain conditions.

Tax Audits before Liaison Offices

Considering the tax exemptions, one of the issues that attract the attention of the tax administration is that the personnel working in liaison offices engaging in activities – other than the limited activities allowed for liaison offices – aimed at obtaining commercial gain.

The tax administration adopts a restrictive approach regarding the scope of activities carried out by the personnel working in liaison offices and it is important to prove that no commercial gain is obtained as a result of these activities in Turkey. 

In this context, tax audits are initiated before liaison offices in terms of corporate tax, VAT and income tax, by alleging that activities aiming to obtain commercial gain are carried out. Considering the tax incentives benefited by liaison offices, it would not be wrong to say that this issue has been under the examination of the tax administration recently.

About the Tax Audit Process

Signing of the tax audit initiation minute is the beginning of the tax audit process for companies. Followed by the submission of the information and documents requested by the tax inspector duly and on time and the taxpayer practice should be explained clearly and accurately with its legal grounds regarding the matters that may be subject to criticism.

During the signing of the tax audit closing minutes, it is important that the applications of the company which may be subject to criticism and the company explanations are accurately conveyed to the report by the tax inspector. Therefore, in the administrative and judicial stages, the basis of managing tax disputes in the best manner is a cautious tax audit process that is properly managed within the framework of taxpayer rights.

In this context, we provide the following services to our clients during tax audit processes:

• Signing of the tax audit initiation minutes by proxy,
• Participating in meetings with tax inspectors and discussing the issues that may be subject to criticism and the requested documents with the inspectors,
• Evaluation of the issues that may be subject to criticism in light of the approach of the tax administration and up-to-date court decisions,
• Providing support regarding the documents requested by the tax inspector and the preparation of answers to the inspector's questions,
• Evaluation of the tax audit (closing) minutes and its signing by proxy,
• Representation of the company before the Report Evaluation Commission.
  
  We would be pleased to support you in the tax audit processes that need to be managed effectively in order to resolve tax disputes at the administrative stage.