Exceptions to the Prohibition of Payments in Foreign Currency among Residents in Turkey

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The payments in foreign currencies or indexed foreign currency have been prohibited on September 13, 2018 by the Presidential Decree which is amending The Decree Numbered 32 on Protection of the Value of Turkish Currency. The Amendment Communique (No.2018-32/51) which clarifies the new implementation and exceptions has been published in the Official Gazette on October 6, 2018 by the Ministry of Treasury and Finance.

The provisions of the Communique which are related to
the some of the most frequent agreements are shown below;

  • Real Property Rental
    & Sales Agreements

    • The contract prices and
      other payment obligations between the residents in Turkey cannot be
      agreed upon foreign currency or indexed foreign currency for the rental
      and sales agreements about the real properties within the borders of
      Turkey.
  • Movable Property Rental
    & Sales Agreements

    • It is possible to
      determine a contract price or a contractual payment obligation in foreign
      currency or indexed foreign currency for rental and sales of the
      movables. (excluding vehicles and construction equipment)
  • Labor Contracts
    • The contract price and
      other payment obligations of a labor contract cannot be agreed upon
      foreign currency or indexed foreign currency unless the work would be
      performed abroad.
    • It is possible to
      determine the contract price and other payment obligations in foreign
      currency with Turkish residents who do not have Turkish citizenship
      (expat contracts).
    • If one of the parties is
      a branch/representation/contact office of a non-resident or a company
      that 50% of its shares are directly or indirectly owned by a non-resident
      or a company conducts its activities in the free trade zones, the
      contract price or other contractual payment obligations can be agreed
      upon foreign currency or indexed foreign currency in labor contracts.
  • Service Agreements
    • Turkish residents cannot
      determine the contract price in foreign currency or indexed foreign
      currency in the service agreements including consultancy, brokerage and
      transportation unless;

      • one of the parties is
        not citizen of the Republic of Turkey,
      • the service agreement
        is made for exportation, transit trade or services that bring foreign
        currencies,
      • the service contracts regarding
        the activities that carried out abroad,
      • the service agreement
        related to electronic communication that starts in Turkey and ends
        abroad or electronic communications that starts abroad and ends in
        Turkey.
    • If one of the parties is
      a branch/representation/contact office of a non-resident or a company
      that 50% of its shares are directly or indirectly owned by a non-resident
      or a company conducts its activities in the free trade zones, the
      contract price or other contractual payment obligations can be agreed
      upon foreign currency or indexed foreign currency for service agreements.
  • Ship Construction
    Agreements

    • The contract price
      cannot be determined in foreign currency in a work agreement unless the
      agreement is made for construction, repairing or maintenance of the ship
      which defined in the Law no: 4490.
  • IT Software-Hardware
    Sales & License & Service Agreements

    • Contract price and other
      payment obligations for sales of softwares produced in a foreign country
      or the license or service agreements regarding software and hardware can
      be determined in foreign currency or indexed foreign currency.

The Communique regulates other significant agreements
that needs to be examined carefully such as aerial transportation agreements
and agreements executed by banks in relation to transactions of Ministry of
Treasury and Finance, etc.

The Communique carries some uncertain provisions
within its content and in terms of its spelling. We expect that additional
legal arrangements should be made or the subject will be shaped by the
implementation in order to clarify the regulation in the following days.

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