The Announcement on the Agreement Values Determined as Foreign Currency or Indexed to Foreign Currency Has Been Published

Within the scope of the Announcement on the Agreement Values Determined as Foreign Currency or Indexed to Foreign Currency (the “Announcement”) published by the Republic of Turkey Ministry of Treasury and Finance (the “MoT”) the transition process regarding the agreements that can or cannot be issued with foreign currency is completed. In this regard in case of noncompliance with the foreign exchange legislation the relevant real persons or legal entities may be subject to administrative sanctions.

Pursuant to Article 4/g of the Decree No. 32 on the Protection of the Value of Turkish Currency (the “Decree”) which was added on with the Presidential Decree numbered 85 entered into force as of its publication day in the Official Gazette dated 12 September 2018 and numbered 30533, Turkish residents cannot determine an agreement value, nor other payment obligations arising from the agreements executed among themselves to be in foreign currency or in a manner indexed to a foreign currency such as;

• Purchase and sale of movable and immovable properties, lease of all kinds of immovable and movable properties including vehicle and financial leasing,
• Employment Agreements,
• Construction Agreements,
• Service Agreements

However, the MoT has the authority to determine the exceptions regarding the foreign currency limitation as per the Decree. The exceptions determined by the MoT are including but not limited to the following;

• Real property sale and rental agreements where one of its parties are foreigner or the Turkish resident real persons and/or legal entities operating in free zones or the branches, offices, representative offices and liaison offices of foreign companies or the companies which foreigners have 50% or more direct or indirect shareholder or joint control as the buyer or the tenant,
• Service agreements where one of its parties is not the citizen of the Republic of Turkey,
• Service agreements of Turkish residents, where the agreement is subject to abroad activities of Turkish residents,

The exceptions determined by the MoT is regulated in the Communiqué Regarding the Decree No. 32 on the Protection of the Value of Turkish Currency published in the Official Gazette dated 28 February 2008 and numbered 26801 by the amendments that were made on 6 October 2018 and 16 November 2018.

• Service agreements of Turkish residents executed among themselves, starting in Turkey and ending abroad or starting abroad and ending in Turkey,
• Construction agreements of Turkish residents executed among themselves, containing the cost in foreign currency
• Movable sale agreements of Turkish residents executed among themselves excluding vehicle sale agreements,
• Movable rental agreements of Turkish residents executed among themselves excluding vehicle rental agreements,
• Employment agreements where the Turkish residents who are not Turkish citizens are party,
• Obligations related to forming in foreign currency, issuance, purchase and sale and other relevant transactions of capital market instruments within the scope of Capital Markets Law numbered 6362 and other relevant regulations based on this Law,
• Employment and service agreements of non-resident real persons and/or legal entities operating in free zones or the branches, offices, representative offices and liaison offices of foreign companies or the companies which foreigners have 50% or more direct or indirect shareholder or joint control.

Within the scope of Communiqué Regarding the Decree numbered 32 on the Protection of the Value of Turkish Currency the method of re-determination of the value of the agreements regarding the foreign currency restriction in case of the parties cannot reach an agreement has been stipulated and 2 (two) years of transition process has been granted by the MoT excluding exceptions aforementioned above.

It is not feasible for Turkish residents to determine an agreement value, nor other payment obligations arising from the agreements to be in foreign currency or indexed to a foreign currency due to transition process granted by the MoT is completed. In this regard it is recommended not to determine an agreement value or other payment obligations to be in foreign currency or indexed to foreign currency when the agreement is not subject to exceptions determined by the MoT as mentioned in the Announcement. Real persons or legal entities may be subject to administrative fines in case of non-compliance with the foreign exchange legislation.

In order to access the full text of the Announcement in Turkish, please click here.