Extension Of Loans From Abroad

This Briefing Note seeks to guide the residents of Turkey who provide foreign currency loans from foreign financial institutions and summarizes the major principle and exception as well as the restrictions applicable under Turkish legislation including taxation rules with respect to extension of foreign currency loans from abroad.

For the purposes of protecting the value of Turkish currency and regulating capital movements arising from foreign lending, Turkish lawmakers have introduced certain rules and restrictions to Turkish residents.

1. Legal Framework Surrounding the Extension of Loans from Abroad

The need to extend loan from abroad, either directly or through the intermediation of a bank residing in Turkey, arises for private sector firms and especially for investors, when internal resources are inadequate and external sources are sought. Based on this need, the extension of loans from foreign financial institutions ("FFI")¹ residing outside of Turkey is