Turkey: The Communiqué On The Amendments To The Communiqué Regarding The Decree Numbered 32 On The Protection Of The Value Of Turkish Currency Has Been Published

Last Updated: 14 November 2018
Article by Aslı Pamukkale, Karaca Kacar, Duygu Bozkurt, Hande Solak and Asu Motur

"The Communiqué on the Amendments to the Communiqué Regarding the Decree numbered 32 on the Protection of the Value of Turkish Currency (Communiqué No. 2018-32/51)" (the "Amending Communiqué") has been published in the Official Gazette dated 6 October 2018 and numbered 30557, and entered into force as of its publication date.

The Amending Communiqué sets forth the details for the amendments to the "Communiqué Regarding the Decree numbered 32 on the Protection of the Value of Turkish Currency" (the "Communiqué") introduced by the Presidential Decree numbered 85 which is published in the Official Gazette dated 13 September 2018 and numbered 30534. The principles of the amendments introduced by the Amending Communiqué are the following:

Types of Agreements Which Cannot be Executed in Foreign Currency or as Indexed to Foreign Currency:

  • The sales value and the other contractual financial obligations in the agreements executed by and between real and/or legal entities residing in Turkey on the sales of the residential premises and roofed workplaces cannot be determined in foreign currency or as indexed to foreign currency for the real properties located within the boundaries in Turkey, including the real properties located in the free zones.
  • The rental value and the other contractual financial obligations in the agreements executed by and between the real and/or legal entities residing in Turkey on the lease of the residential premises and roofed workplaces cannot be determined in foreign currency or as indexed to foreign currency for the real properties located within the boundaries in Turkey, including the real properties located in the free zones.
  • The agreement value and the other contractual financial obligations in the employment agreements executed by and between the real and/or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, excluding the agreements to be executed abroad.
  • The agreement value and the other contractual financial obligations in the service agreements executed by and between the real and/or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, including the consulting, carriage and brokerage agreements. Exceptions to this provision are the following:

    1. Service agreements signed by the real persons which are not citizens of Turkey.
    2. Service agreements to be executed within the scope of sales and deliveries considered as export, transit trade, import and foreign exchange earning activities and services.
    3. Service agreements executed within the scope of the activities to be performed abroad by the real and/or legal entities residing in Turkey.
    4. Service agreements regarding the electronic communication executed by and between the real and/or legal entities residing in Turkey which are commenced in Turkey and concluded abroad or vice versa.
  • The agreement value and the other contractual financial obligations in the construction agreements executed by and between the real and/or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, excluding the building, repairment and maintenance of the vessels defined in Turkish International Vessel Registry Law dated 16 December 1999 and numbered 4490 and the Law on the Amendments to the Decree-Law numbered 491.

Types of Agreements Which May Be Determined in Foreign Currency or as Indexed to Foreign Currency

  • The sales value and the other contractual financial obligations in the sales agreements executed by and between the real and/or legal entities residing in Turkey for the sale of the movables may be determined in foreign currency or as indexed to foreign currency, excluding the sales agreements for the vehicles including the heavy equipment.
  • The rent value and the other contractual financial obligations in the rental agreements executed by and between the real and/or legal entities residing in Turkey for the rent of the movables may be determined in foreign currency or as indexed to foreign currency, excluding the rental agreements for the vehicles including the heavy equipment.
  • The agreement value and the other contractual financial obligations in the financial leasing agreements executed by and between the real and/or legal entities residing in Turkey may be determined in foreign currency or as indexed to foreign currency for the financial lease of the vessels defined in the Turkish International Vessel Registry Law dated 16 December 1999 and numbered 4490 and the Law on the Amendments to the Decree-Law numbered 491.
  • The agreement value and the other contractual financial obligations in the service and license agreements executed by and between the real and/or legal entities residing in Turkey may be determined in foreign currency or as indexed to foreign currency for the hardware and software or the software developed abroad within the scope of information technologies.
  • The agreement value and the other contractual financial obligations in the financial leasing agreements executed by and between the real and/or legal entities residing in Turkey may be determined in foreign currency or as indexed to foreign currency for the loans procured both domestically and abroad within the scope of the Decree numbered 32 on the Protection of the Value of Turkish Currency (the "Decree").
  • The agreement value and the other contractual financial obligations in the employment agreements executed by the real persons residing in Turkey who do not have Turkish citizenship may be determined in foreign currency or as indexed to foreign currency.
  • The agreement value and the other contractual financial obligations in the agreements executed by the governmental institutions and organizations, and Turkish Armed Forces Foundation may be determined in foreign currency or as indexed to foreign currency, excluding the real property sales and rental agreements, and the employment agreements.
  • The agreement value and the other contractual financial obligations in the agreements executed by and between the contractors and third parties may be determined in foreign currency or as indexed to foreign currency only within the scope of the execution of the public tenders, agreements and international treaties executed in foreign currency or as indexed to foreign currency where the governmental institutions and organizations are parties of, excluding the real property sales and rental agreements, and the employment agreements.
  • The agreement value and the other contractual financial obligations in the agreements executed by the banks with respect to the transactions of the Ministry of Treasury and Finance regarding the Public Finance and Debt Management Law dated 28 March 2002 and numbered 4749, may be determined in foreign currency or as indexed to foreign currency.
  • Provided that the provisions of the Decree are reserved, the capital market instruments (including the foreign capital market instruments and depositary receipts, and foreign investment fund shares) may be issued and/or traded in foreign currency or as indexed to foreign currency, or the obligations regarding such transactions may be determined in foreign currency or as indexed to foreign currency within the framework of the Capital Markets Law numbered 6362, and the secondary legislation with respect to the aforementioned law.
  • The agreement value and other contractual financial obligations in the employment and service agreements executed by the branches, representation or liaison offices of the real or legal entities that do not reside in Turkey or companies in which they directly or indirectly hold 50% or more of the shares, may be determined in foreign currency or as indexed to foreign currency.
  • The agreement value and other contractual financial obligations in the employment and service agreements executed by the companies operating in the free zones, within the scope of their operations in the free zones may be determined in foreign currency or as indexed to foreign currency.
  • The agreement value and other contractual financial obligations in the agreements executed by the Turkish-resident commercial airline companies operating in transportation of passengers, freight and mails, the companies providing technical maintenance to means of aerial transportation, engines and their components, public or private legal entities institutions that operate on ground services in airports within the scope of civil aviation legislation, or their companies and associations they directly or indirectly hold 50% or more of the shares, may be determined in foreign currency or as indexed to foreign currency, excluding the real property sales and rental agreements, and employment agreements.

The Determination of the Scope of Being a Resident in Turkey

Pursuant to the Amending Communiqué, the branches, representation or liaison offices of Turkish residents located abroad, their funds which they operate or manage, companies that they hold the 50% or more of the shares, and companies which they directly or indirectly own shall be accepted as the residents in Turkey.

The Determination of the Exchange Rate of Turkish Lira

Within the scope of the amendments to the Decree, in the event of the parties cannot mutually agree on the exchange rates to be applied to the agreement values or other contractual financial obligations either in foreign currency or as indexed to foreign currency shall be determined by applying the monthly consumer price index rate ("CPI") on the date of redetermination which set by the Turkish Statistical Institute ("TSI") for each month to the exchanged amount in Turkish currency that calculated based on the indicative effective selling rate on 2 January 2018 announced by the Central Bank of the Turkish Republic.

The Principles on the Exchange of Rental Values of the Residential Premises and Roofed Workplaces

It is stipulated that the agreement values which are determined in foreign currency or as indexed to foreign currency regarding rental agreements of residential premises and roofed workplaces which are signed before 13 September 2018 which is the publication date of the provisional article 8, shall be determined in Turkish currency for two (2) years' period according to principles stipulated hereinabove.

However, in the event of the parties cannot mutually agree to determine the rental value according to the principles indicated hereinabove on the date of the determination to stay in effect for one (1) year period following the rent year the determination has been made, it is stipulated that the rental value shall be increased based on the monthly changing rates of the CPI that are determined by the TSI for each month from the date of determination until the end of such rental year.

In the event of the parties cannot mutually agree to determine rental amount in TL regarding upcoming rental year, the rental amount for the upcoming rental period shall be determined by increasing the previous rental amount on the basis of the monthly CPI rate and such rental amount shall be valid until the end of two (2) years' period.

In addition to that, the provisions regarding the exchange of agreement values regarding the rental agreements of the residential premises and roofed workplaces shall not be implemented to collected or deferred debts.

Other Provisions

The Amending Communiqué indicates that the value of the securities issued within the scope of the agreements indicated hereinabove which cannot be determined in foreign currency or as indexed to foreign currency shall not be determined in foreign currency or as indexed to foreign currency.

It is indicated that the agreements indexed to precious metals where values are determined as foreign currency in international markets and/or indexed to commodity and/or indexed to foreign currency indirectly shall be considered as an agreement indexed to foreign currency within the scope of the Decree.

It is indicated that it is not required to determine the agreement values and other contractual financial obligations in Turkish currency of rental agreements for the vehicles including construction vehicles, and the other agreements excluded from the amendments introduced with the Amending Communiqué which signed before 13 September 2018, the publication date of the Presidential Decree No. 85 introduced the amendments to the Communiqué.

However, it is stipulated that it is required to determine the agreement values and other contractual financial obligations in Turkish currency of the agreements specifically indicated in the Amending Communiqué and other agreements excluding the agreements stated in the previous paragraph.

In the event that the parties who are granted exemption request to make their new agreements in Turkish currency or request to redetermine their present agreement values in Turkish currency which have been executed in foreign currency or indexed to foreign currency, the agreement values shall be determined in Turkish currency.

In order to access the full text of the Amending Communiqué, please click here.

To read this article in full, please click here.

Originally published October 8, 2018

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.

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