IT AND SERVICE CENTRES

Setting Up a Software and Service Centre in Türkiye: Company, Branch or Employer of Record

German and Austrian companies are increasingly setting up teams in Türkiye to access qualified software developers, engineers and multilingual support staff. These teams sometimes start with a few developers and are sometimes planned from the outset as service centres with hundreds of employees. In either case, the first question is through which legal structure the team will be employed.

The solution that seems fastest at the outset may, however, turn out to cause the most problems as the team grows. The following sections address the main structures, and their consequences, that companies planning a software or service centre in Türkiye should consider.

Employer of Record

In the Employer of Record model, employees are on the payroll of a service provider operating in Türkiye and in fact work for the foreign company. Although this model may appear to offer a quick start without incorporating a company, under Turkish employment law an employer may place an employee on its payroll under the direction and management of another employer only where the statutory requirements for temporary employment relationships (geçici iş ilişkisi) are met, including the applicable licensing requirements where private employment agencies are involved. A structure set up outside these rules does not become lawful even if it is used only for a short time. The legality of the model therefore depends, before any question of duration, on how the model actually operates, and it must be examined separately from both an employment and a tax perspective.

The limits and risks of the Employer of Record model under Turkish law are discussed in detail in a separate Expertise article. Companies planning to build a team in Türkiye should therefore examine from the outset, when assessing an Employer of Record offer, whether the proposed structure is compatible with these rules.

Branch

A foreign company may open a branch in Türkiye that forms part of its own legal entity. The branch is registered with the trade registry and may employ staff in its own name. However, since the branch has no separate legal personality, the parent company is directly liable for obligations arising from its activities. This liability directly involves the parent company in proceedings in Türkiye, particularly in employment disputes and tax audits.

A liaison office, by contrast, is not a suitable structure for this purpose. A liaison office may not engage in commercial activity or generate income; a software or support centre providing services to group companies therefore cannot be operated through a liaison office.

Turkish company

The most common structure for permanent and growing teams is a limited liability company or joint stock company wholly owned by the foreign company. Since the company has a legal personality separate from the parent company, liability arising from activities in Türkiye is, as a rule, limited to the company's assets. The relationship between the company and the parent company is set up through an intra-group services agreement; its content and the transfer of personal data are discussed in a separate article in this sector.

Incorporating the company may take a few weeks because of the preparation of the foreign shareholders' documents and the apostille and translation processes. This period should be planned together with the team's start date.

Incentives

Companies exporting software and services may, under certain conditions, benefit from tax and social security premium incentives. Options such as operating in a technology development zone or obtaining research and development centre status may play an important role in choosing the structure. The conditions and tax consequences of these incentives should be assessed in coordination with tax advisers, and the company's scope of business and location chosen accordingly.

Employees

Whichever structure is chosen, employees are subject to Turkish employment law. The rules on employment contracts, working hours, remote work, overtime and termination may differ considerably from practice in the parent company's country. Topics such as remote work and non-compete obligations should also be addressed separately in the employment contracts.

Conclusion

When setting up a software or service centre in Türkiye, the structure should be chosen according to the size and duration of the team. Examining an Employer of Record offer for compliance with Turkish employment law at the outset, choosing a branch or company rather than a liaison office, incorporating a separate Turkish company where the parent company's liability is to be limited and assessing incentives before deciding on the structure make it easier for the team to grow on a sound footing. General questions on company formation are addressed on the page of the relevant practice area.