Turkey

Authors: Beyza Büyükağaçcı The German Supply Chain Law[1] (“Law”) requires large companies to identify, address and prevent violations regarding human rights and related environmental issues in the operations of themselves and their direct suppliers. Within the scope of these regulations, the large companies that continue their operations in Germany are obliged to ensure compliance with certain social and environmental standards within their supply chains. In this context, the conditions set out in the Act have been applicable as of 1 January 2023 for enterprises that have their corporate seat, administrative headquarters or statutory seat in Germany and employ 3,000 or more workers, and as of 2024 for enterprises employing 1,000 or more workers. Foreign companies that do not have a central office or branch in Germany remain outside the scope of the Act, even if they supply goods or services to Germany. Accordingly, the companies covered by the Law must monitor and act on violations of their direct suppliers’ operations, as well as their operations from the extraction of raw materials to their delivery to the last customer. In addition, if the companies within the scope receive verified information regarding potential human rights or environmental rights violations by one of their indirect suppliers, they are deemed obliged to immediately carry out a risk analysis for these violations. In this context, Law has determined two main areas of protection and these areas are regarding environmental rights and human rights. Within the scope of environmental protection; issues such as the production and non-use of banned chemicals, processing, collection, storage, and disposal of wastes in a way that do not harm the environment, and export and processing of hazardous wastes shall be evaluated. In the framework of compliance with human rights rules; any act or violation that is unlawful, including but not limited to child labor, forced labor, freedom of association, unequal treatment/discrimination, and improper use of force by security forces, shall be evaluated. If enterprises fail to comply with their legal obligations in the Law, fines may be imposed. Fines for breaches of due diligence and reporting obligations can reach up to 8 million euros depending on the nature and severity of the breach. If the enterprise shave an average annual endorsement over 400 million euros, and does not take corrective precautions directly aimed at a direct supplier, they may may face fines up to 2% of their average annual turnover. At the same time, it is possible to ban these enterprises from participating in public tenders for up to 3 years if the obligations in the Law are not followed. Therefore considering that the Law stipulates sanctions that could be a deterrent, it is probable for the enterprises which are obliged according to the Law, concretely audit their suppliers and create new business models in this framework. The Law also affects companies in Turkey that are directly or indirectly involved in the supply chain of businesses operating under the Law and engaging in commercial relationships. Obligations Imposed On Companies By The Law:   Obligation To Conduct Risk Assessment Reporting On The Fulfilment Of Due Diligence Obligation Preparing the Guiding Principle Impact Assessment Responsibility for Internal Compliance Establishment of a Risk Management System Establishment of Preventive Measures Taking Remedial Measures Establishment of Complaint Procedure 1-   Obligation To Conduct Risk Assessment Companies may need to adapt their risk, management, and compliance processes to identify human rights-related and environment-related risks. . The relevant situation is valid for both companies’ commercial operations and the organizations in their extended supply chains. Companies shall comply with the rules as far as possible with their suppliers. The risks that companies need to address include internationally recognized human rights treaties and sustainability issues, as briefly mentioned above: Forced labor, child labor, discrimination, violations of freedom of association (especially in the framework of trade union rights), unethical employment (e.g. employing workers without insurance), unsafe working conditions, environmental degradation, etc. Companies should take appropriate preventive or remedial measures based on on the present risk analysis In terms of supply sector, this can be defined as reviewing supplier selection and supplier monitoring processes and having a clear supplier communication process within the prescribed rules.  2-   Reporting On The Fulfillment Of Due Diligence Obligation A report on the status of due diligence obligations regarding human rights must be documented annually and made publicly available free of charge on the company's website within 4 months from the end of the financial year for 7 years. This report should include: What risks the company has determined.    The issue of what measures were taken while fulfilling the due diligence obligation, including the issues written in the policy text. The company's assessment of the impact and effectiveness of the precautions and, Evaluation of future precautions. 3-   Guiding Principles During the drafting stage of the legislation concerning the implementation of the Act, explicit reference was made to the OECD Due Diligence Guidance for Responsible Business Conduct and the UN OHCHR Guiding Principles on Business and Human Rights. However, these references were not directly incorporated into the final enacted text of the law; instead, these international guidelines continue to serve as key reference sources within the administrative regulations and interpretative documents governing the Act’s implementation. These guidelines are considered substantial texts on how to establish the content and implementation of the due diligence obligation required by the Law. Accordingly, human rights may occur violations in trade; During the company's own commercial operation Directly or through a third party (government, other company, etc.) due to its own commercial operations in case of commercial relations with them in violations arising from third parties Therefore, companies will be expected to pay attention to risk areas, particularly in these three groups. The human rights within the scope of "corporate responsibility for human rights" consist primarily of the rights set forth in the Declaration of Human Rights ( including the Universal Declaration of Human Rights, International Covenant on Economic, Social and Cultural Rights, and International Covenant on Civil and Political Rights ) and the Declaration of the International Labor Organization on Fundamental Principles and Rights to be applied in the workplace. 4-    Impact Assessment Companies will confer with potential risk groups and other relevant persons (trade unions and especially non-governmental organizations specialized in this subject), taking into account the content of their activities for risk assessment. One of the points that need to be fulfilled for the next steps of the supply chain is to ask primary suppliers to do their own risk assessments and these primary level suppliers to do the same risk assessment for their own suppliers. In this way, the lowest and highest levels of the supply chain will be able to manage the process in harmony. Within the scope of this risk assessment, companies will be able to apply the following preventive measures against suppliers with whom they are in a contractual relationship or in the process of making a contract: Considering expectations in line with human rights in supplier selection. Asking suppliers to identify risks of human rights violations in their workplaces and supply chains. Establishing a contractual control mechanism to monitor whether set expectations are met to ensure human rights are respected and providing the necessary training to fulfill these expectations.  Ensuring the establishment of a risk-based control mechanism that monitors the compliance of direct suppliers with human rights strategies.  The content and level of these obligations regarding risk assessment depend on the company's impact on the supplier, the severity and difficulty of the breach, and the risk of the breach occurring. 5-   Responsibility For Internal Compliance Companies covered by the Law are obliged to appoint a “human rights officer” responsible for monitoring risk management. In this context, the appointment of a risk management officer does not necessarily require a new position, and it is possible to integrate it into existing departments (e.g. compliance officer, sustainability department, etc.). 6-   Establishing A Risk Management System Companies should establish an appropriate risk management system to ensure compliance with the obligations stipulated by the Law and analyze their own and their direct suppliers' human rights and environmental risks as part of this system. 7-   Establishing Preventative Measures Companies should take the necessary measures within the scope of the protection of human rights and environmental protection in their supply and supply relations, and establish preventative measures to ensure compliance with the strategies determined by the guidelines by providing training in the relevant business areas. 8-   Taking Remedial Measures If it is determined that a violation has occurred or is likely to be violated in matters protected by the Law, the Companies are obliged to take corrective/compensatory measures immediately to prevent, stop the violation, or minimize the consequences of the violation. Otherwise, companies may face the administrative fines regulated in the Law and explained above, as well as civil cases to be substituted by those who suffered from the said violations and by Non-Governmental Organizations. 9-   Establishment of Complaint Procedure Companies should establish a public complaints procedure to report potential violations of human rights or environmental obligations in their businesses or suppliers. Accordingly, the effectiveness of the complaint procedure should be reviewed annually and, if necessary, on an ad hoc basis. RESULT: The Supply Chain Law, which stipulates many obligations for companies operating in Germany, regulates the audit of companies’ direct operations and, in certain cases, the operations of indirect suppliers from the extraction of raw materials to the delivery of the product to the last customer. Law also regulates the prevention of violations and the compensation in case of violations. Companies operating in Turkey that are not covered by the relevant law but are in the supply chain of German companies subject to the Law are likely to face various demands. Another point that should be noted is that regulations similar to the German Supply Chain Act have also been adopted at the European Union level. Indeed, on 5 July 2024, the European Union adopted and brought into force the Corporate Sustainability Due Diligence Directive (CSDDD). However, negotiations on the ‘Omnibus’ package—which introduces amendments concerning the scope and implementation timeline of the directive—are still ongoing. For this reason, it is of great importance that our companies, which export to the European Union, especially Germany, and which are suppliers of the companies in this country, are aware of the obligations stipulated by Law and that they take the necessary measures. [1] 1 Gesetz über die unternehmerischen Sorgfaltspflichten zur Vermeidung von Menschenrechtsverletzungen in Lieferketten (Lieferkettensorgfaltspflichtengesetz - LkSG) [2] 2 Proposal for a Directive Of The European Parliament And Of The Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937    

Author: Beyza Büyükağaçcı With the sudden changes in the economy, unexpected fluctuations occur in the exchange rate. Therefore, parties would like to draw up certain contracts in foreign currency or indexed to foreign currency in order to assure themselves. However, this is not possible for all contracts, and some regulations are made under the Law on the Protection of the Value of Turkish Currency. One of these regulations is the  Decision No. 32 on the Protection of the Value of the Turkish Currency Rescript. With the aforementioned rescript, it is inhibited to determine the price and other payments as in foreign currency or indexed to foreign currency. However it is allowed for determining in foreign currency indexed regarding certain contracts, it is obligated to discharge in Turkish currency at the payment stage. The aforementioned prohibitions are restricted in terms of  persons  by stating that they are ‘’ agreements concluded or to be concluded between persons residing in Turkey". Regarding  the hereby note, the statement ‘’parties’’ shall be understood as persons resident in Turkey. Finally, the restrictions imposed on contracts by the Rescript and the impact of this situation on the issuance of negotiable instruments are presented to you with the information note we have prepared. Moveable Estate Sale and Lease Contracts: Parties may determine the contract price and other payment obligations arising from these contracts in foreign currency or indexed to foreign currency in the Moveable Estate Sale and Lease Contracts. However, vehicle sale and lease contracts are excluded from the scope of this exemption. Therefore the contract prices and other payment obligations arising from these contracts shall be determined in Turkish currency. For this reason, it is not possible to use payment instruments such as checks, etc., issued in foreign currency on or after April 19,2022 to fulfill payment obligations under moveable estate sales contracts concluded/to be concluded between Turkish residents. Vehicle Rent Contracts: Parties shall not determine the prices and other payment obligations of vehicle rent contracts and the sale of commercial vehicles for passenger transportation contracts signed after September 13,2018 in foreign currency. Contracts signed before this date are excluded from the scope of this exemption. Real Estate Sale And Lease Contracts: Except for the exemptions below, in real estate lease and sale agreements, including residential and roofed workplaces, the parties shall not agree on the contract price and other payment obligations arising from these agreements in foreign currency or indexed to foreign currency.  Real estate sale and real estate lease contracts to which Turkish residents who do not have citizenship ties with the Republic of Turkey or branches, representative offices, offices, liaison offices, direct or indirect 50% or more shareholding or joint control and/or control of companies located in Turkey of persons resident in Turkey or persons resident abroad are party as buyers or lessees Real estate lease contracts for the operation of accommodation facilities certified by the Ministry of Culture and Tourism.        Real estate lease contracts for the lease of duty-free shops. Employment Contracts: The parties may not determine the contract price and other payment obligations arising from these contracts in foreign currency or indexed to foreign currency in employment contracts other than those to be performed abroad and those to which seafarers are a party. In addition to this, in employment contracts to which persons who are resident in Turkey but do not have citizenship ties with the Republic of Turkey are parties, the contract price and the other payment obligations arising from these contracts may be determined in foreign currency or indexed to foreign currency. Service Contracts: The parties shall not determine the contract price or the other payment obligations in foreign currency or indexed to foreign currency in service contracts except the contracts listed below including consulting, brokerage and transport contracts.   Service contracts to which persons who do not have citizenship ties with the Republic of Turkey are parties.  Service contracts made within the scope of export, transit trade, sales and deliveries accounted for export and foreign currency-earning services and transactions.  contracts made within the scope of the transactions to be operated abroad by persons resident in Turkey.  Service contracts to be made among the persons resident in Turkey, starting in Turkey and ending abroad, starting abroad and ending in Turkey or starting abroad and ending abroad.    Accommodation services contracts to be made by persons resident in Turkey for the accommodation facilities certified by the Ministry of Culture and Tourism.   Sales contracts for software produced abroad within the scope of information technologies and license and service contracts for hardware and software produced abroad to be made among the persons resident in Turkey.   Employment and service contracts to which non-residents are party as employers or service recipients of branches, representative offices, offices, liaison offices, companies in which they directly or indirectly have fifty percent or more shareholding or joint control and/or control, and companies in free zones within the scope of their activities in free zones. Contracts of Construction: The parties may determine the contract price and the other payment obligations arising from these contracts in foreign currency or indexed to foreign currency in construction contracts involving costs in foreign currency. Software and License Contracts: In sales contracts for software produced abroad within the scope of information technologies and license and service contracts for hardware and software produced abroad, it is possible to determine the contract price and other payment obligations arising from these contracts in foreign currency or indexed to foreign currency. Leasing Contracts: The parties may determine the contract price regarding leasing contracts to be made within the scope of Articles 17 and 17A of Decision No. 32 in foreign currency. Contracts made by state institutions and organizations: The contract price and other payment obligations arising from the contracts below to which state institutions and organizations are parties, may be determined in foreign currency or indexed to foreign currency. Within the scope of the projects to be conducted within the scope of foreign currency or foreign currency-indexed tenders, contracts and international conventions to which public institutions and organizations are a party, contracts other than real estate sales contracts and employment contracts to be made with third parties by contractors or incumbent companies and their contracting parties or to be made within the framework of the aforementioned projects, and Contracts made in relation to transactions carried out under the Law on the Regulation of Public Finance and Debt Management. However, the contract price and other payment obligations arising from these contracts may be determined in foreign currency or indexed to foreign currency in contracts, other than real estate sale and real estate lease contracts, to which public institutions and organizations, companies of the Turkish Armed Forces Foundation (such as Aselsan, Havelsan, Roketsan, etc.), and companies holding (A) or (B) level certificates within the scope of the Industrial Competence Assessment and Support Program (EYDEP) are parties; and such obligations may be agreed upon, paid, and accepted in foreign currency or indexed to foreign currency. Contracts carried out under the Law on the Capital Market Law: Without prejudice to the provisions of Decision No. 32, within the framework of the regulations based on the Capital Markets Law No. 6362, it is possible to create, issue and trade capital market instruments (including foreign capital market instruments and depository receipts and foreign investment fund shares) in foreign currency and to determine the obligations related to the transactions in foreign currency. Regulations regarding negotiable papers: In accordance with Article 8 of the Rescript on Decision No.32, it is not possible to determine the prices in foreign currency or indexed to foreign currency in the negotiable instruments to be issued within the scope of the contracts, the contract price and other payment obligations arising from these contracts, which are clearly explained above, cannot be determined in foreign currency or indexed to foreign currency. However, the negotiable instruments issued and got into circulation before the enforcement date (September 13, 2018) of the Temporary Article 8 of the Rescript on Decision No.32 are exemptions from the aforementioned Temporary Article. Finally, pursuant to the aforementioned article, this paragraph does not apply to negotiable instruments in contracts where the contract price and other payment obligations arising from these contracts cannot be determined in foreign currency or indexed to foreign currency, collected or overdue receivables and deposits given within the scope of real estate lease agreements and got into circulation within the scope of the performance of the contracts CONCLUSION Pursuant to Article 3/1 of Law No. 1567, administrative fines amounting to TL 91.240 and TL 760.385 for the year 2026 for each party to the contract separately for the breaches in the Rescript will be applied. These amounts are updated annually based on the revaluation rate determined each year. If the violation of the prohibition of making contracts in foreign currency or indexed to foreign currency is repeated, the administrative fine to be imposed will be doubled. Moreover, pursuant to Law No.6183 on the Procedure for Collection of Public Receivables, default interest will be applied to be collected with a fine at the rate of default interest for the period between the date of misdemeanor and the date of collection of the administrative fine to be imposed. Besides, there is not any adjudgment in this scope, there are several remarks stating the contracts made against the aforementioned regulations may be invalid.

Authors: Gizem Ak Yürek, Serdarhan Güler Arbitration is a method of resolving disputes related to private law that serves as an alternative to judicial procedures, where the parties, in accordance with their will or due to mandatory provisions stemming from specific agreements, submit the dispute to be resolved by an independent and impartial arbitrator or arbitration board. Although the competent arbitration board may rule a decision as a result of an arbitration agreement between the parties, foreign arbitral awards rendered outside of Türkiye can only be enforced in Türkiye through the process of recognition and enforcement. In other words, for a foreign arbitral resolution to be enforced in Türkiye, it must first be recognized and enforced through a court procedure. In this article, we will explain this enforcement process along with its legal basis. Legal Basis for the Enforcement of Foreign Arbitral Awards The regulations regarding the enforcement of foreign arbitral awards are set in Articles 60 to 62 of the Private International Law and Civil Procedure Code ("IPPL"). However, pursuant to Article 90/5 of the Constitution and Article 1/2 of IPPL, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Resolution, to which Türkiye is a party, will primarily apply. Therefore, it can be stated that only arbitral awards that do not involve within the scope of the New York Convention may be enforced under the provisions of IPPL. The applicable provisions, regardless of the nationality of the arbitrators, the citizenship or nationality of the parties, arbitral awards rendered in another country that is a party to the New York Convention, or awards issued in Türkiye that involve foreign elements but are not subject to the mandatory rules of the Civil Procedure Code (CPC) or International Arbitration Law (IAL) by the parties' will, will be enforced according to the New York Convention. Therefore, it would not be incorrect to state that the majority of enforcement procedures today are carried out in accordance with the New York Convention[1].   Procedural Rules in the Enforcement of Foreign Arbitral Awards The New York Convention refers to the procedural rules of the country where the enforcement action is to be filed. Therefore, the competent and authorized court, the type and amount of collateral and charge, the form of the proceedings, and the appeals process will be determined according to the procedural law of the country where the enforcement action is initiated. According to Turkish law, the party requesting the enforcement of a foreign arbitral award must apply to the authorized commercial court of first instance with the necessary documents (as stipulated in Article 61 of IPPL and Article IV of the New York Convention) (Law No. 5235[2], Article 5). Enforcement actions, in the absence of an agreement on jurisdiction between the parties, should be filed in the court of domicile of the losing party in Türkiye, or, if such residence does not exist, in the place where the party is residence. If neither of these applies, the enforcement action should be filed in the court located where assets subject to enforcement are found. If none of these locations exist, it will be stated that there is no competent court in Türkiye to enforce the relevant arbitral award. However, if it has not been filed in the authorized jurisdiction, it is essential for the defendant to raise an objection to jurisdiction within the prescribed time limit[3]. Following the application by the applicant, the request will be examined and decided in accordance with the simplified procedure. Additionally, the decision ruled in the case is subject to appeal. An appeal or cassation petition filed against the relevant decisions will automatically suspend the execution of the decision[4]. Furthermore, the foreign arbitral award enforced by Turkish courts must be executed within 10 years from the date the enforcement decision becomes final (Article 39 of the Enforcement and Bankruptcy Law).   Grounds for Refusal of the Enforcement of Arbitral Awards In an enforcement action concerning an arbitral award, the Court will not examine the substance of the case. According to the New York Convention, the Court may refuse to enforce the arbitral award if: - The parties to the arbitration agreement are under some incapacity, or the agreement is invalid under the law it is subject to, or failing any indication thereon, under the law of the country where the award was made; - The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; - The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, - The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; - The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. If any of these conditions are proven by the party against whom the award was given, the court may refuse the enforcement of the foreign arbitral award. In addition: - If the dispute that the arbitral award concerns pertains to a matter that, under the law of the country where recognition or enforcement is sought, cannot be resolved through arbitration (the matter is not arbitrable); - If the recognition or enforcement of the arbitral award is contrary to the public policy of the country where recognition or enforcement is sought, the judge may refuse to enforce the award ex officio. Under IPPL , the grounds for refusal of enforcement are quite similar. A key difference between the two legal frameworks is that under IPPL if the circumstances outlined for refusal of enforcement exist, the judge has no discretion in deciding whether to reject the enforcement request, while under the New York Convention, even if one of these grounds is present, the judge has discretion to accept enforcement[5]. In addition, there are some other differences, but overall, the two legal frameworks contain parallel regulations[6].   Enforcement of Foreign Arbitral Awards Without a Judgment and the Provisional Attachment Procedure Under usual circumstances, the party in favor of a foreign arbitral award must have the award enforced in Türkiye and then proceed to enforce the judgment by initiating an execution proceeding based on the decision (execution with judgment). However, in some cases, this procedure may be bypassed, allowing the party to initiate an execution proceeding without a judgment (non-judgment execution proceedings), relying on the foreign arbitral award as the basis. Nevertheless, the procedure of execution proceeding and the subsequent annulment  of  objection process  is a subject of significant legal debate[7].   Additionally, it is important to note that the applicant party also has the possibility of applying for a precautionary attachment procedure. In some of its rulings, the Court of Cassation has held that the condition of enforcement of a foreign award is not required for granting a precautionary attachment - which is a provisional measure - regarding a debt established by a decision of a foreign court or arbitral tribunal[8]. Although there are decisions contrary to this, it cannot yet be said that a consistent case law has been established on this issue[9]. Conclusion: - Foreign arbitral awards rendered outside of Türkiye can only be executed in Türkiye upon being enforced. As explained above, arbitral awards that do not fall within the scope of the New York Convention will be enforced in accordance with the provisions of IPPL. Therefore, the applicability of these two legal frameworks should be evaluated in the context of the recognition and enforcement application process. - Enforcement actions should be filed in the competent court of the place of domiciliation of the losing party in Türkiye, or, if no domiciliation exists, in the place where the party is residenced. If neither of these applies, the case should be filed in the court located where assets subject to enforcement are found. - In enforcement proceedings, the court shall not be entitled to conduct an examination on the merits of the case. It may only conduct a limited review with respect to the grounds specifically enumerated in the law. [1] Cemal Şanlı, Emre Esen, İnci Ataman-Figenmeşe, Milletlerarası Özel Hukuk, 10th Edition, Beta Yayınları, 2023, İstanbul, p. 825-826. [2] 5235 sayılı Adlî Yargı İlk Derece Mahkemeleri İle Bölge Adliye Mahkemelerinin Kuruluş, Görev Ve Yetkileri Hakkında Kanun (Law No. 5235 on the Establishment, Duties and Powers of the Courts of First Instance of the Judicial Judiciary and the Regional Courts of Appeal) [3] Şanlı/ Esen/ Ataman-Figenmeşe, ibid., p. 832. [4] Şanlı/ Esen/ Ataman-Figenmeşe, ibid., p. 833. [5] Ziya Akıncı, Milletlerarası Tahkim, 6th Expanded and Updated Edition, Vedat Kitapçılık, İstanbul, 2021, p. 649-650. [6] Akıncı, ibid., p. 643. [7] Cemre Tüysüz, “Tenfiz Edilmemiş Yabancı Hakem Kararları Açısından İlamsız İcra Takiplerine ve İhtiyati Hacze İlişkin Bazı Meseleler”, 41(2) PPIL 701, 2021. https://doi.org/10.26650/ppil.2021.41.2.997201 [8] Ruling of the 6th Civil Chamber of the Court of Cassation, Merits No. 2014/3906, Decision No. 2014/4941, dated 14.04.2014: "The regulation states: 'A preliminary injunction or precautionary attachment decision rendered by the court upon the request of one of the parties before or during the arbitration proceedings shall automatically expire once the award of the arbitrator or arbitral tribunal becomes enforceable, or if the case is dismissed by the arbitrator or arbitral tribunal.' According to this article, since it is possible to decide on a precautionary attachment before or during the arbitration proceedings, it is also possible to decide on a precautionary attachment after the award has been rendered. In this regard, while the court should have evaluated the plaintiff's request for precautionary attachment by considering the conditions set forth in Article 257 of the EBL (Execution and Bankruptcy Law), it was not appropriate to decide on the rejection of the request based on written justification." (Note: The original text of the ruling is in Turkish and has been translated from the original by us.) [9] Ruling of the 15th Civil Chamber of the Court of Cassation, Merits No. 2014/7100, Decision No. 2015/365, dated 26.01.2015: "In the concrete case, it is understood that the decision of the [...] Court, which has not been enforced, does not yet possess the status of a court decree (judgment) under Turkish Law. Following this admission, if the question of whether the debt has become due (i.e., whether it is exigible) needs to be discussed; there is no debt tied to a specific maturity date between the parties, and the existence of the debt is not certain and is of a nature that requires trial. Therefore, one cannot speak of a debt that has fallen due. Even if it were considered a debt that has not yet fallen due; although conclusive evidence is not sought regarding any of the matters listed among the conditions for precautionary attachment for debts not yet due, no evidence has been submitted showing that the conditions in Article 257/2 of the Law—which may be considered justified and reasonable—have been met. In this situation, rather than accepting the objection regarding the precautionary attachment whose conditions were not met and deciding to lift the attachment, the rejection of the objection as a result of a misinterpretation was not correct, and the decision had to be reversed." (Note: The original text of the ruling is in Turkish and has been translated from the original by us.)  

The Turkish property market offers strong opportunities for foreign investors, with steady growth, rising property values, and a dynamic rental market in major cities such as Istanbul, Ankara, and Izmir. However, for foreigners, managing property in Turkey and complying with property tax obligations can be complex due to distance, language barriers, and local regulations. Professional property management and legal guidance are therefore essential to secure rental income, protect property value, and ensure full compliance with Turkish laws. In this 2026 legal guide, we explain how to manage property in Turkey, the unique aspects of property management in Istanbul, and how foreigners can pay property tax in Turkey. We also outline practical ways to minimize tax liabilities, explore real estate investment options, and highlight why working with a law firm is the safest way to protect and grow your property investment in Turkey. Step 1-Understand Property Management in Turkey for Foreign Owners Managing property in Turkey as a foreign investor can be challenging due to distance, language barriers, and complex legal regulations. Professional property management in Turkey is therefore not only about collecting rent or handling maintenance—it is about protecting your rights as a property owner and ensuring compliance with Turkish law. Benefits of Hiring a Law Firm for Property Management in Turkey Working with a law firm for property management in Turkey provides foreign owners with a significant advantage. Lawyers ensure that lease agreements, tenant selection, and rent collection are handled in line with local regulations. They also represent you in case of disputes, evictions, or regulatory checks, minimizing legal risks while maintaining steady rental income. Instead of spending valuable time managing property issues from abroad, foreign investors can rely on experienced legal professionals who combine property management services with legal expertise. This approach offers peace of mind, reduces vacancies, and ensures that your investment is legally protected while continuing to generate income. Benefit Explanation Lease Agreements in Compliance with Turkish Law Contracts are drafted according to Turkish regulations, protecting owners from ambiguities and future disputes. Tenant Disputes and Evictions Lawyers represent owners in conflicts, handle eviction cases, and ensure legal procedures are followed. Regulatory Compliance Full adherence to rental laws, zoning regulations, and municipal requirements, preventing costly penalties. Risk Reduction Legal oversight minimizes financial risks, litigation exposure, and compliance issues. Peace of Mind Owners abroad can rely on lawyers to manage properties safely, ensuring stable rental income and long-term investment security. Law firms may also carry out matters reserved exclusively for attorneys, such as filing lawsuits, conducting mediation, or reconciling the parties in a lease relationship. For instance, rent increase lawsuits or tenant evictions may only be initiated by licensed attorneys. Attorneys who are well-versed in the process determine the most effective strategy for landlords and contribute to achieving outcomes in the landlords’ favor. Step 2 – How to Manage Property in Istanbul Istanbul is Turkey’s most vibrant and dynamic real estate market, offering unparalleled opportunities for foreign investors. However, property management in Istanbul requires a nuanced approach, as the city’s cultural heritage, diverse property types, and complex regulations create unique challenges. The table below highlights the key aspects of managing property in Istanbul and the legal solutions that law firms can provide. Unique Aspects of Property Management in Istanbul & Legal Solutions Unique Aspect Challenges for Owners Legal Solutions by Law Firms Diverse Property Portfolio Different needs for historic homes, luxury apartments, and commercial offices Tailored lease agreements and compliance with property-specific regulations Cultural & Historical Significance Preservation rules in districts like Sultanahmet and Galata Legal guidance on restoration, compliance with cultural heritage laws High Demand & Dynamic Market Rapid tenant turnover, pricing volatility Lawyer-drafted contracts that protect landlords, flexible tenant agreements Complex Regulatory Environment Different zoning and usage rules across districts Legal review of zoning, construction permits, and municipal compliance Luxury & High-End Market Affluent tenants require premium service & legal safeguards Customized contracts, dispute prevention, asset protection High Rental Yields Risk of non-compliance in high-yield rentals Legal tax planning, tenant management, ongoing compliance Growing Expat Community Foreign tenants with unique legal needs Multi-lingual contracts, flexible lease structures, cross-border legal support Commercial Hub Managing office leases for businesses Corporate lease drafting, compliance with commercial property law Tourism & Airbnb Rentals Short-term rental regulations and taxation Legal compliance with Airbnb law, licensing, and tax obligations As the table shows, property management in Istanbul is far more than basic rent collection. Each district, property type, and tenant profile brings its own challenges, from heritage preservation to zoning compliance and Airbnb regulations. By working with a law firm specializing in property management in Istanbul, foreign investors can ensure that every legal requirement is met, risks are minimized, and rental income remains secure. This professional support transforms Istanbul’s complexity into a profitable and legally safe investment environment. Step 3 – How to Pay Property Tax in Turkey as a Foreigner Owning property in Turkey comes with certain tax obligations that every foreign investor must comply with. Understanding the different types of property taxes, payment procedures, and legal exemptions is crucial to protecting your investment and avoiding unnecessary penalties. A law firm specializing in property tax in Turkey for foreigners can guide you through the entire process, ensuring full compliance while helping you minimize liabilities. Main Property Taxes in Turkey for Foreigners Type of Tax Rate / Basis Key Points for Foreign Investors Property Purchase Tax (Title Deed Fee) 4% of declared value (split between buyer & seller) Must ensure accurate declaration to avoid penalties; legal review recommended. Annual Property Tax Residential: 0.1%–0.2% Commercial: 0.2%–0.4% Vacant Land: 0.3%–0.6% Doubled in metropolitan areas like Istanbul. Payable to municipalities annually. Environmental Tax Small fee added to water bills Funds waste management; low amount but mandatory. Capital Gains Tax 15%–40% on profit from sale within 5 years After 5 years, sales are exempt. Timing of sale is critical for tax planning. Rental Income Tax 15%–40% (progressive) Deductible expenses allowed (maintenance, management fees, insurance, loan interest) You may be interested in: How to Challenge Property Tax Increase in Turkey in 2025 How to Minimize Property Tax Liabilities in Turkey Foreign investors can legally reduce their tax burden in Turkey through strategic planning and compliance. A law firm specializing in property management can guide you in applying deductions, exemptions, and treaties to optimize your investment returns. Below is a detailed overview of the most effective strategies: Strategies to Minimize Property Tax Liabilities in Turkey Strategy Explanation Practical Legal Tip Accurate Valuation & Declaration Ensure the property’s declared value matches the real market value at the time of purchase. Avoid under-declaration, which can result in fines, tax reassessment, or even criminal liability. A lawyer can verify proper valuation during title deed transfer. Use Tax Deductions Deduct eligible expenses such as repairs, management fees, insurance premiums, and loan interest from rental income. Keep invoices and receipts. A law firm ensures your deductions are legally valid and documented for tax audits. Benefit from Exemptions Certain exemptions exist, e.g., rental income under the annual threshold is tax-free. Properties sold after 5 years are exempt from capital gains tax. Monitor threshold updates annually. Legal advice ensures you don’t miss available exemptions. Plan Sale Timing Selling a property within 5 years can trigger high capital gains tax (15–40%). Holding beyond 5 years removes this liability. Strategic timing of sales, guided by legal and financial advice, can save investors significant amounts. Optimize Ownership Structure Properties may be held individually or via a company. Corporate ownership can sometimes reduce overall tax liability. A lawyer can assess whether company-based ownership aligns with your investment goals and treaty benefits. Leverage Double Taxation Treaties Many countries have treaties with Turkey that prevent taxation of the same income in both countries. Legal professionals can apply treaty provisions correctly to reduce or eliminate double taxation. Minimizing property tax liabilities is not just about paying less—it is about staying fully compliant with Turkish law while protecting your long-term profits. Without proper legal guidance, foreign investors risk missing valuable exemptions, misusing deductions, or facing unexpected penalties. By working with a law firm experienced in Turkish property tax, you can structure your ownership strategically, time your sales effectively, and take full advantage of deductions and treaties. This proactive approach ensures both profitability and legal security in your Turkish real estate investments. You may be interested in: Deadline for Challenging Property Tax Increase– Last Days to Avoid Losing Your Rights! Step 4 – How to Invest Safely in Real Estate in Turkey Foreigners are increasingly attracted to the Turkish real estate market thanks to its growing economy, high rental yields, and the opportunity to obtain Turkish citizenship through property investment. However, investing without proper legal guidance carries significant risks, including title deed problems, hidden debts, and regulatory non-compliance. By following the right steps and working with a law firm experienced in Turkish real estate law, foreign investors can secure their investments and avoid costly mistakes. Safe Real Estate Investment in Turkey – Key Steps & Legal Guidance Step What It Means Legal Protection for Foreign Investors 1. Conduct Due Diligence Check title deeds, zoning status, and existing debts on the property. Lawyers verify ownership, ensure no mortgages or liens exist, and confirm compliance with zoning laws. 2. Verify Seller and Contracts Confirm seller’s legal authority and draft contracts correctly. Law firms prepare sale agreements, add protective clauses, and prevent fraudulent transactions. 3. Secure Purchase Process Complete official transfer at the Land Registry with tax payments. Lawyers represent you during title deed transfer, ensuring all fees and taxes are paid correctly. 4. Choose Optimal Ownership Structure Decide whether to buy as an individual or through a company. Legal assessment ensures the most tax-efficient structure (e.g., corporate ownership for investment portfolios). 5. Manage Rental and Tax Obligations Rental income is taxable in Turkey; annual property taxes apply. Lawyers handle rental contracts, register tax obligations, and apply deductions and exemptions. 6. Plan Exit Strategy Selling within 5 years can trigger capital gains tax. Lawyers guide sale timing to benefit from exemptions and prevent double taxation under treaties. Common Mistakes Foreign Investors Make in Turkey Many foreign investors are drawn to the opportunities in the Turkish real estate market, but certain mistakes can lead to serious financial or legal problems. Some of the most common pitfalls include: Buying property without checking the title deed for restrictions or debts. Some properties in Turkey may carry hidden mortgages, liens, or usage restrictions that are not obvious at first glance. Without a proper title deed check at the Land Registry, buyers risk inheriting debts or facing limitations on how they can use the property. Signing sales contracts in Turkish without legal translation. Contracts in Turkey are usually drafted in Turkish, and foreign buyers often sign them without fully understanding the details. This can result in agreeing to unfavorable terms or missing essential clauses that protect the buyer’s rights. A professional legal translation ensures clarity and prevents disputes later. Under-declaring purchase value to reduce taxes. It may seem tempting to declare a lower property value to save on purchase tax, but this practice is illegal and risky. If authorities discover the discrepancy, buyers may face heavy fines, reassessment of taxes, or even criminal liability. It also reduces the declared value for future resale, which increases potential capital gains tax. Relying on unlicensed agents instead of qualified legal advisors. Unlicensed real estate agents may promise fast results or cheap deals, but they often lack the legal authority to protect the buyer’s interests. Without a lawyer’s involvement, investors may face fraud, invalid contracts, or regulatory non-compliance. Overlooking municipal regulations on property usage. Each municipality in Turkey has its own zoning and usage rules, such as restrictions on converting residential properties into commercial ones. Investors who fail to check these regulations may later discover they cannot use the property as planned, resulting in financial loss. Investing in Turkish real estate can be highly rewarding, but only if approached with careful planning and legal oversight. A law firm can conduct due diligence, draft protective contracts, and manage tax compliance, ensuring your investment is both profitable and legally secure. With professional legal support, foreigners can avoid the pitfalls of the market while maximizing the long-term value of their real estate assets in Turkey. Step 5 – Citizenship by Investment in Turkey One of the most attractive aspects of property investment in Turkey for foreigners is the opportunity to obtain Turkish citizenship. The Turkish government allows foreign investors to qualify for citizenship by purchasing real estate worth at least $400,000 and holding it for three years. This program not only grants residency rights but also provides full citizenship benefits, including access to healthcare, education, and visa-free travel to numerous countries. Working with a law firm experienced in Turkish citizenship by investment ensures that all legal procedures are completed accurately and efficiently. Lawyers assist with property due diligence, compliance checks, and the preparation of citizenship application documents, minimizing risks for foreign investors. In addition to obtaining citizenship, many foreigners see Turkey real estate investment as a safe way to secure long-term assets and generate income. By combining property investment in Turkey with the citizenship program, investors gain both financial returns and the legal right to reside in Turkey, making this one of the most attractive dual-benefit opportunities worldwide. However, obtaining citizenship is only the first step. To truly protect and maximize the value of your Turkey property investment, foreign owners should also consider professional property management in Turkey. From ensuring compliance with legal regulations to handling tenant relations and property taxes, working with a law firm provides both peace of mind and long-term financial stability. In this way, your investment not only secures Turkish citizenship but also continues to generate reliable income. Step 6 – Choosing the Right Property Management Service in Turkey When evaluating a property management service in Turkey, foreign investors should focus on two essential elements: legal reliability and local market expertise. A law firm offers a significant advantage because it ensures that lease agreements, tax filings, and tenant relations are fully compliant with Turkish law. This eliminates the risk of future disputes, fines, or unexpected liabilities. At the same time, property management is not only about law—it also requires a deep understanding of the local market. Istanbul, Ankara, and other major cities have unique dynamics, from district-based rental yields to differences in demand between residential and commercial units. A professional manager who knows these nuances can minimize vacancies, secure reliable tenants, and maximize rental income. Equally important is financial transparency. A trustworthy service should provide clear reporting on rental income, expenses, and tax obligations, so that foreign investors can manage their portfolio remotely with confidence. Finally, comprehensive management—covering tenant screening, maintenance, dispute resolution, and even representation before authorities—ensures that your property investment continues to grow without creating additional stress for you as the owner. FAQs Can foreigners buy property in Turkey in 2026?  Yes. Foreigners from most countries can purchase real estate in Turkey, except for a few restricted areas for security reasons. Residential, commercial, and land investments are allowed, provided they comply with zoning and title deed regulations. How can foreigners pay property tax in Turkey? Foreigners must pay annual property tax to the local municipality. Payments can be made in person at the municipal tax office, via Turkish banks, or in some cities through online municipal portals. A law firm can handle the entire process on behalf of the owner. Is rental income taxable for foreigners in Turkey?  Yes. Rental income earned in Turkey is subject to progressive income tax rates between 15% and 40%. However, foreigners may deduct certain expenses (repairs, management fees, insurance, loan interest) to reduce taxable income. What happens if property tax is not paid on time? Late payments result in interest charges and potential enforcement actions by municipalities. Consistent non-payment may also complicate future property sales or legal processes. Can foreigners obtain Turkish citizenship through property investment?  Yes. Foreign investors who purchase property worth at least $400,000 and hold it for three years are eligible for Turkish citizenship. This includes full residency rights, healthcare, education, and visa-free access to many countries. Why should I hire a law firm for property management in Turkey?  A law firm ensures compliance with Turkish property laws, drafts legally valid lease agreements, manages tenant disputes, and handles tax obligations. This minimizes risks and allows foreign owners to protect their investments while maximizing rental income. Conclusion: Making the Most of Property Investments in Turkey Investing in property in Turkey can be highly rewarding, but true success depends on how well your asset is managed and how effectively you comply with Turkish property laws. From understanding property tax in Turkey for foreigners to ensuring legal tenant agreements, professional property management is the key to protecting your investment and maximizing returns.At Paldimoglu Law Firm, we assist foreign investors not only with property management in Turkey but also with the full range of legal matters that come with owning real estate. If you have a residential property in Istanbul or a commercial investment elsewhere in Turkey, we make sure your contracts are valid, your tax obligations are handled correctly, and your property continues to bring you safe and steady returns. Contact us today to learn how our law firm can manage your property in Turkey while protecting your investment through expert legal guidance.