Agenda

COMMUNIQUE ON THE SCOPE OF CONTRACTS IN FOREIGN CURRENCY HAS BEEN PUBLISHED

16/10/2018

As it is known, Decree on The Protection of the Value of the Turkish Currency dated 07.08.1989 (Decision No.32) was amended through the Decree Regarding Amendment to the Decree No.32 which was published in the Official Gazette dated 13.09.2018 and numbered 30534. The scope of the amendment was prevention of foreign currency payment in most of the contract (types) executed by residents in Turkey among themselves. However, as the regulation was very unclear, there were too many questions about implication of the new amendment.

Therefore Treasury and Finance Ministry has issued a Communique (Communique No. 2018-32/51) Regarding Amendment on the Communique (Communique No. 2008-32/34) Regarding Decision No.32 which has been published in the Official Gazette numbered 30557 and dated 06.10.2018. The regulations in the aforementioned Communique are summarized as below.

For the contracts executed between residents in Turkey, parties cannot determine the below mentioned ones’ price and other payment obligations at foreign currency or as foreign currency indexed.

  • Contracts regarding sale of the real estate including house and roofed workplace which are located within Turkey boundaries and free zones
  • Contracts regarding lease of the real estate including house and roofed workplace which are located within Turkey boundaries and free zones
  • Employment contracts except those performed in abroad
  • The service contracts including consultancy, brokerage and transportation contracts except below stated ones:
  1. The service contracts that parties who are not citizens of Turkey Republic.
  2. The service contracts within the scope of export, transit trade, export sales and deliveries and foreign exchange earning services and activities
  3. The service contracts within the scope of the activities operated in abroad by Residents in Turkey
  4. The service contracts that are executed by residents in Turkey regarding electronic communication that starts in Turkey, terminates in abroad or starts in abroad, terminates in Turkey.
  • Contracts of work except those regarding construction, repair and maintenance of the ships defined in the Turkish International Ship Registry Law No. 4490 and dated 16.12.1999, and Law Amending on Delegated Legislation No. 491
  • Contracts regarding sale of vehicles including construction equipment
  • Contracts regarding lease of vehicles including construction equipment

Below mentioned contacts’ price and other payment obligations cannot be determined at foreign currency or foreign currency indexed.

  • Real estate sales and real estate lease contracts that state institutions and organizations and Turkish Armed Forces Foundation companies are party of,
  • Real estate sales, real estate lease and employment contracts that are executed by contractor and third parties on condition that these contracts are in scope of the tender, contracts and international convention that state institutions and organizations are part of it and in foreign currency or foreign currency-indexed.

Below mentioned contacts’ price and other payment obligations can be determined at foreign currency or foreign currency indexed.

  • Contracts, regarding sale of movable assets (except vehicles and construction equipment), executed between residents in Turkey
  • Contracts, regarding lease of movable assets(except vehicles and construction equipment), executed between residents in Turkey
  • Contracts, regarding sale of software produced abroad in the context of information technology and license and service contracts for hardware and software, executed between residents in Turkey
  • Employment contracts that are performed in abroad by residents in Turkey
  • Construction, repair and maintenance of the ships defined in the Turkish International Ship Registry Law No. 4490 and dated 16.12.1999, and Law Amending on Delegated Legislation No. 491
  • Contracts of work, regarding construction, repair and maintenance of the ships defined in the Turkish International Ship Registry Law No. 4490 and dated 16.12.1999, and Law Amending on Delegated Legislation No. 491, executed between residents in Turkey
  • Contracts regarding financial leasing of ships that are defined in the Turkish International Ship Registry Law No. 4490 and dated 16.12.1999, and Law Amending on Delegated Legislation No. 491
  • Financial leasing contracts executed under Article 17 and 17/A of Communique No. 32
  • Employment Contracts that are executed between non-citizen persons who are resident in Turkey Republic.
  • The contracts to which the state institutions, organizations and Turkish Armed Forces Foundation companies are parties of (except those regarding real estate sales and real estate lease)
  • The contracts except real estate sales, real estate lease and employment contracts that are executed by contractor and third parties on condition that these contracts are in scope of execution of the tender, contracts and international convention that state institutions and organizations are part of and in foreign currency or foreign currency-indexed
  • The contracts that are executed by banks relating to operations within scope of Law on the Regulation of Public Finance and Debt Management dated 28.03.2002 and numbered 4749, by the Ministry of Treasury and Finance
  • Employment and service contracts that are executed by non-residents’ branch, representation office, liaison office, located in Turkey and also companies with direct or indirect shareholding of fifty percent or more than fifty percent and companies in free zones within the scope of their activities in the free zone
  • The contracts that are executed by commercial airline companies residing in Turkey engaged in transport of passengers, delivery of freight or mail; companies providing technical maintenance services for air transport vehicles, engines and parts thereof; public or private entities having the license or authorized to perform ground handling services at the airports within the scope of civil aviation legislation and the partnerships of the said entities with the enterprises and companies they have established, which have at least 50% shareholding in their capital, directly or indirectly  except real estate sale contracts, real estate lease contracts and employment contracts which include in foreign currency or foreign currency indexed fees.

OTHER SUBJECTS

Without prejudice to the provisions of Decision No.32 and in accordance with the Capital Markets Law No. 6362 and the regulations made in accordance with this Law, creation of capital market instruments (including foreign capital market instruments and warehouse certificates and foreign investment funds) in foreign currency, their export, purchase and sale of liabilities in foreign currency is possible.

Pursuant to this article, securities that are covered by the contracts in which contract price and any other payment obligations arising from these contracts cannot be determined in foreign currency or as foreign currency indexed, cannot be determined in foreign currency or as foreign currency indexed.

Contracts indexed to precious metals and/or commodities whose price is determined in foreign currency in international markets and/or indexed to foreign currency indirectly are considered as foreign currency indexed contracts.

Abroad branches, agencies, offices, liaison office, funds to operate or manage, companies found that over fifty percent of the shares, ownership of a company directly or indirectly by residents of Turkey; is considered as resident in Turkey.

Contracts concluded before the date of the entry into force of the Provisional Article 8 of the Decision No.32, which were in the scope of the exemption pursuant to this article are also exempt from the said provisional article.

Vehicle leasing contracts, including working equipment, entered into force before the date of entry into force of the Provisional Article 8 of Decision No.32, are exempt from the provisional article.

In accordance with this article, the contract price and the other payment obligations arising from these contracts which cannot be determined in foreign currency or as foreign currency indexed are obliged to be re-determined by the parties as Turkish Lira. If reconciliation cannot be reached by the parties about the re-determination; amounts determined in foreign currency or as foreign currency indexed with the previous contracts shall be determined as follows;

  1. Firstly, by calculating the amount in Turkish Lira by using the effective exchange rate indicative determined by Central Bank of the Republic of Turkey at 2/1/2018,
  2. Secondly, amount determined in the first step shall be re-determined by using the consumer price index (CPI) of the Turkey Statistics Institution for each month and increasing the basis of monthly exchange rates from 01.02.2018 to the date of re-determination.

The amount determined in foreign currency or as foreign currency indexed in the housing and roofed workplace lease agreements which are concluded before the date of entry into force of Provisional Article 8 of the Decision No.32 shall be determined as Turkish Lira for a period of two years. However, if the parties cannot reach an agreement about the rent determined in Turkish Lira in accordance with the mentioned paragraph, for a year from the end of the lease year in which the determination is made in Turkish currency; rent shall be determined by using Turkey Statistics Institution’s consumer price index determined for each month (CPI) by increasing the basis of monthly exchange rates. If the parties cannot reach an agreement about the following rental year’s lease contract which was determined in Turkish Lira in the first year, rent shall be determined by applying Turkey Statistics Institute’s consumer price index (CPI) and increasing the basis of monthly exchange rates. The lease fee shall be valid until the end of the two-year period specified in this paragraph.

In accordance with the Provisional Article 8 of the Decision No.32, if the parties subject to exemption agree, the new contracts to be made between them shall be arranged in Turkish currency. In the case of the existing foreign currency or foreign currency indexed contracts, those contracts shall be re-arranged in Turkish currency.

If there is need of any other information about the article, please contact the below stated person.

Ersin Nazalı

Managing Partner, Attorney, CPA

enazali@nazali.av.tr

Mükerrem Yanar

Partner, CPA

myanar@nazali.av.tr