Risks and Points to Note in Cases of Not Setting-up an Activity Base (1)

Merhaba! I am Shun Yoshida from Tokyo Consulting Firm Turkey Office.

I hope you all are safe and stay healthy.

For the next 2 weeks I would like to mention regarding “Risks and Points to Note in Cases of Not Setting-up an Activity Base”.

While there is no activity base in Turkey, some companies might be engaging in business activities with companies in Turkey in forms of export sales and service provisions from the other country which has a parent company and group subsidiaries. As a premise, there is no problem in doing business without establishing any activity base in Turkey. On the other hand, it is also necessary to exercise caution since so-called ‘PE Risk’ etc. may occur in certain cases. This week I would like to explain the risks and points to keep in mind by taking as an example in case the company dispatches a business traveler from companies in abroad.

Case①: In Case the Company Dispatches a Business Traveler from Companies in Abroad

Even if a company does not have an activity base in Turkey, there might be cases of dispatching a business traveler for various purposes including visiting business partners, business negotiations with potential clients, and market investigation. *Please let me cite the case a company sending a Japanese business traveler as an example here. if the company dispatches a Japanese business traveler to Turkey, he/she will be exempt from applying for a working permit for a short stay up to 90 days or less in the last 180 days regardless of whether the company has an activity base. On the other hand, if the business traveler stays in Turkey over a period of more than 90 days, the one will need to obtain a work permit. In so doing, it is necessary to provide the information of an activity base in Turkey so as to apply for a work permit. Consequently, there will be no other choice but to become an expatriate by obtaining a work permit under the name of an activity base to legally stay in Turkey more than 90 days. In reverse, there is no restrictions on the length of one’s stay within the validation period of the work permit, so one can flow freely over borders between Japan and Turkey once obtaining it. In other words, unless there is an activity base in Turkey, the application itself cannot be made due to the reasons mentioned above. As a result, dispatching of a business traveler should be limited to a total of 90 days out of the last 180 days. In conclusion, if a business traveler stays in Turkey beyond the exemption period, the company will be required to establish an activity base like branches or subsidiaries.

*Rules and periods relevant to work permit exemption will be different depending on the nationality of the applicant and purpose of one’s stay.

Furthermore, as an additional point to note related to the above, in case the Turkish tax authorities judge that the company is engaging in business sales activities by substantively establishing a PE (Permanent Establishment) even if it does not have one in reality, there is a risk of being taxed (PE Risk) on business income generated in Turkey. Therefore, if a company dispatches a business traveler for a longer period of time to conduct market research or sales activities, it is recommended to establish an activity base in advance in order to avoid the aforementioned risks.

That is all for this week. I will talk about another case related to this matter next week.

We offer free meeting (online/offline) regarding establishment and business development in Turkey.

If you have any question other than the above topic, please do not hesitate to contact us.

Thank you very much for your time to read until the end.

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東京コンサルティングファーム・トルコ拠点
吉田瞬

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