Differences Between Branch and Subsidiary in Türkiye

Expanding your business into the Turkish market is a strategic move that offers access to a bridge between Europe and Asia. However, for international investors, the first and most vital hurdle is choosing the correct legal structure. As Finlexia Turkish Accounting Firm, we have guided foreign investors through company formation in Türkiye since 2017, ensuring their legal foundations are as robust as their business ambitions.

When entering the Turkish market in 2026, you will primarily choose between two structures: a Branch (Şube) or a Subsidiary. While both allow you to conduct commercial activities, they carry vastly different implications for liability, taxation, and administrative autonomy.

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As Türkiye continues to position itself as a strategic hub between Europe, Asia, and the Middle East, foreign companies increasingly seek efficient market-entry structures. One of the most critical early decisions is whether to operate through a branch or establish a subsidiary in Türkiye.

At Finlexia Turkish Accounting Firm, a full-service company formation and corporate governance firm based in Istanbul since 2017, we regularly advise multinational corporations, SMEs, and investors on selecting the most suitable legal structure.

Our corporate lawyers team provides a detailed, practical, and up-to-date comparison of branches and subsidiaries in Türkiye for 2026, with a focus on legal, tax, operational, and strategic considerations.

Understanding the Legal Framework in Türkiye

Turkish commercial law primarily governs business structures under the Turkish Commercial Code (TCC) and relevant tax legislation. While both branches and subsidiaries allow foreign companies to conduct business in Türkiye, they differ fundamentally in terms of legal personality, liability, taxation, and compliance.

Before proceeding, most foreign investors consult experienced company formation lawyers to ensure regulatory compliance and long-term efficiency.

What Is a Branch in Türkiye?

A branch is an extension of a foreign parent company and does not have a separate legal personality under Turkish law.

Key Characteristics of a Branch

• No independent legal entity
• Fully dependent on the foreign parent company
• Operates under the parent company’s name
• Must be registered with the Turkish Trade Registry
• Managed by a branch representative appointed by the parent company

Legal Liability

The most significant aspect of a branch structure is unlimited liability. The foreign parent company is directly and fully liable for all debts, obligations, and legal disputes arising from the branch’s activities in Türkiye.

What Is a Subsidiary in Türkiye?

A subsidiary is a separate legal entity incorporated under Turkish law, even though it is owned (fully or partially) by a foreign parent company.

Subsidiaries are typically formed as either a limited liability company or a joint-stock company, depending on investment scale and governance preferences.

Key Characteristics of a Subsidiary

• Independent legal personality
• Separate assets and liabilities
• Liability limited to subscribed capital
• Governed by Turkish Commercial Code
• Eligible for local incentives and financing

Subsidiaries are the most commonly recommended structure for long-term investment and operational autonomy in Türkiye.

Branch vs. Subsidiary: Key Differences Explained

1. Legal Personality

• Branch: No separate legal identity
• Subsidiary: Independent legal entity

This distinction affects liability, contractual capacity, litigation exposure, and regulatory treatment.

2. Liability Exposure

• Branch: Parent company bears full and unlimited liability
• Subsidiary: Parent company’s liability limited to capital contribution

From a risk management perspective, subsidiaries offer significantly greater protection.

3. Taxation Differences

Both branches and subsidiaries are subject to Turkish corporate tax on income generated in Türkiye. However, structural differences affect tax planning:

Branch:

• Profits are taxed in Türkiye
• Profit remittance to the parent company is generally not subject to withholding tax
• Permanent establishment rules apply

Subsidiary:

• Subject to corporate income tax
• Dividend distributions may be subject to withholding tax
• Eligible for double taxation treaty benefits

For complex tax structuring, subsidiaries often provide more flexibility and predictability.

4. Capital Requirements

• Branch: No minimum capital requirement
• Subsidiary:
  • Limited Liability Company: minimum capital applies
  • Joint-Stock Company: higher minimum capital thresholds

While branches appear simpler initially, subsidiaries are often preferred by banks, investors, and regulators.

5. Governance and Management

Branch Governance

• Managed by a branch representative
• Decisions ultimately controlled by the parent company
• Limited local governance structure

Subsidiary Governance

• Board of directors or managers
• Shareholder resolutions required
• Clear corporate governance framework

Subsidiaries align better with international compliance standards and ESG expectations.

6. Operational Flexibility

Subsidiaries enjoy greater operational autonomy, including:

• Hiring employees directly
• Entering contracts independently
• Owning real estate
• Accessing Turkish banking and financing systems

Branches, while operationally simpler, may face limitations in commercial perception and counterpart confidence.

7. Market Perception and Credibility

In Türkiye, subsidiaries are often perceived as:

• More stable
• More committed to the local market
• More credible by banks, suppliers, and public authorities

Branches are commonly used for:

• Representative activities
• Market testing
• Short- to medium-term projects

8. Compliance and Reporting Obligations

Both structures require:

• Trade registry registration
• Tax registration
• Accounting and bookkeeping under Turkish standards

However, subsidiaries face more extensive:

• Corporate governance compliance
• Annual general meetings
• Statutory filings

While more complex, this also enhances transparency and investor confidence.

Which Structure Is Right for Your Business?

The decision between a branch and a subsidiary depends on several strategic factors:

Foreign investors planning permanent operations, local partnerships, or scalable growth typically favor company formation in Türkiye through a subsidiary structure rather than a branch.

Common Mistakes Foreign Investors Make

• Underestimating liability exposure of branches
• Choosing a branch solely for speed without long-term planning
• Ignoring tax treaty implications
• Overlooking governance and compliance requirements

Professional legal structuring at the outset can prevent costly restructuring later.

How Finlexia Turkish Accounting Firm Can Assist

With over three years of experience, Finlexia Turkish Accounting Firm provides end-to-end support for foreign investors, including:

• Strategic structuring advice
• Branch and subsidiary incorporation
• Corporate governance setup
• Tax and compliance coordination
• Ongoing legal representation in Türkiye

Our multilingual team ensures clarity, compliance, and efficiency at every stage of your Turkish market entry.

Contact Finlexia Turkish Accounting Firm

Navigating the Turkish Commercial Code requires more than just a translation of documents; it requires a strategic partner who understands the nuances of the Istanbul Chamber of Commerce and the Ministry of Trade.

Since 2017, our team of expert company formation lawyers has specialized in setting up complex legal structures for Fortune 500 companies and SMEs alike. We provide end-to-end services, including:

• Drafting tailored Articles of Association.
• Handling all notarization, apostille, and translation processes.
• Opening corporate bank accounts.
• Providing ongoing tax and employment law consultancy.

The legal landscape in 2026 demands precision and foresight. Choosing between a branch and a subsidiary is not just a filing decision—it is a tax, liability, and growth decision that will define your success in Türkiye for years to come.

Contact Finlexia Turkish Accounting Firm today to schedule a comprehensive consultation with our English-speaking legal experts. Let us help you establish your Turkish presence with the confidence and security that only three years of experience can provide.