Ministry of Finance and Treasury ("Ministry") published a communiqué numbered 2018-32/521 ("Communiqué") amending Article 8 of Communiqué No: 2008/32-34, which regulates matters related to the restrictions imposed on foreign currency denominated contracts as being left to the Ministry's discretion by Decree No: 32 on Protection of the Value of Turkish Currency2 ("Decree"). In fact, this Communiqué amends the list of exceptions previously published in the Communiqué numbered 2018-32/513 concerning Article 8 titled "Foreign Currency Denominated or Foreign Currency Indexed Agreements". You may find our previous memorandum on this subject here.

Below you may find the summary of the new exceptions and amendments.

  1. The Communiqué introduces new exceptions allowing determination of contract prices or other payment obligations in foreign currency or indexed to foreign currency which are:

    1. Real estate lease and sales agreements executed by (i) a non-Turkish citizen person resident in Turkey or (ii) branch or representative office or office or liaison office or company controlled or held above 50% of shares or directly or indirectly of person resident abroad;
    2. Real estate lease agreements executed with a view to operating accommodation facilities approved by the Ministry of Culture and Tourism;
    3. Real estate lease agreements related to the lease of duty-free shops; and
    4. Employment agreements executed by seamen.
  2. The wording of the restriction imposed on work agreements (eser sözleşmeleri) has been altered. Previously, work agreements except for construction, repair and maintenance of ships4 were prohibited from being denominated or indexed to foreign currency. Upon this amendment, on the condition that work agreements comprise of the costs priced in foreign currency, such contracts may now be denominated or indexed to foreign currency..
  3. Previously, the Ministry allowed for lease and sales agreements related to movable properties to be denominated or indexed to foreign currency, save for vehicle lease and sale agreements including the construction equipment . The amendment omitted the construction equipment out of the scope of the exception.
  4. The Ministry also changed the scope of the exceptions granted to the foreign-currency denominated or indexed tenders, agreements and projects to be carried out under international treaties, where public institutions or organizations are parties. Accordingly, in addition to the contractors, now commissioned companies and third parties with which these companies conclude an agreement, are allowed to denominate or index their contract price or other obligations in foreign currency (except those for sale of immovable properties or employment). This amendment further omitted real estate lease agreements which now falls under the list of exceptions.

Footnotes

1. Published in the Official Gazette dated 16 November 2018 and numbered 30597

2. Published in the Official Gazette dated 11 August 1989

3. Published in the Official Gazette dated 6 October 2018 and numbered 30557

4. Defined in Additional Provision (2) of Law No: 488 and Additional Provision (1) of Law No: 492

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.