Turkey: Current Sıtuatıon Wıthın The Scope Of Communıque Regardıng The Decree No.32

Last Updated: 28 November 2018
Article by Sistem Law Firm

The Communique No. 2018-32/51 Making Amendments on the Communique No. 2008/-32/34 related to the Decree Law No.32 regarding the Protection of The Value of Turkish Currency ("the Former") had published in the Official Gazette on 06.10.2018 which determines the foreign currency prohibition and the types of agreements which are subject to the prohibition and exemptions from such prohibition. Then the Communique No. 2018-32/52 Making Amendments on the Communique related to the Decree Law No.32 regarding the Protection of The Value of Turkish Currency ("the Latter") was published in the Official Gazette No. 30597 dated 16.11.2018 and replaced the Former.

The matters come up with the Former are peresented hereinbelow;

  • Although lease and sale agreements regarding immovables located in free zones were subject to prohibition pursuant to the Former, "free zones" term was removed from wording in the Latter which makes it seem the lease and sale agreements regarding immovable property located in free zones can be executed in foreign currency or indexed to foreign currency.
  • Lease and sale agreements regarding immovable property to which the foreigners resident in Turkey are parties, can be executed in foreign currency or indexed to foreign currency.
  • Lease agreements regarding lodging areas having obtained certificate from the Ministry of Culture and Tourism can be executed in foreign currency or indexed to foreign currency.
  • Lease agreements regarding duty-free stores can be executed in foreign currency or indexed to foreign currency.
  • According to the Former, Turkish residents cannot execute inter se labour agreements in foreign currency or index to foreign currency. Pursuant to the Latter, labour agreements to be executed abroad however signed between foreigners resident in Turkey and Turkish citizens and labour agreements to which shipmans are a party, are included in the scope of exemption and can be executed in foreign currency or indexed to foreign currency.
  • It was determined that inter se service agreements regarding electronic communication to be exercised from Turkey to abroad and from abroad to Turkey could be executed in foreign currency or indexed to foreign currency by Turkish residents pursuant to the Former. However, pursuant to the Latter, all inter se service agreements to be exercised from Turkey to abroad, from abroad to Turkey and abroad can be executed in foreign currency or indexed to foreign currency by Turkish residents
  • Although the agreements for work, except the shipbuilding agreements, could not be executed in foreign currency or indexed to foreign currency pursuant to the Former, the Latter allows for all agreements for work involving costs in foreign currency to be executed in foreign currency or indexed to foreign currency.
  • Although the lease and sale agreements regarding movable properties, except vehicles including heavy machinery could not be executed in foreign currency or indexed to foreign currency, "including heavy machinery" was removed from the wording in the Latter which makes it seem the lease and sale agreements regarding heavy machinery can be executed in foreign currency or indexed to foreign currency.
  • The Latter clarifies one of the most controversial issue under the Former, and explicitly determines the license and service agreements regarding solely softwares and hardwares written and produced abroad can be executed in foreign currency or indexed to foreign currency.
  • Within the scope of projects to be realised as part of exercising tenders, agreements and international traties executed in foreign currency or indexed to foreign currency to which public institutions and organisations are parties; all agreements except property sale and labour agreements to be executed by incumbent companies and contractors and between their contractors and third parties can be in foreign currency or indexed to foreign currency.
  • The Latter determines that the agreement price and other payment obligations in labour and service agreements to which; (i) branches, representations, offices, liaison offices of non-residents located in Turkey or (ii) entities located in Turkey in which such non-resident directly or indirectly holds fifty percent or more shares or which are under common control of and/or controlled by such non-resident and (iii) companies located in free trade zones on the basis of their activities in free trade zones; are a party to as employer or service receiver may be determined in foreign currency or in foreign-currency indexed form.
  • Negotiable instruments executed in foreign currency or indexed to foreign currency and circulated before 13.09.2018 are exempted from prohibition under the Latter.
  • The service agreements regarding transportation can be indexed to the petroleum prices pursuant to the Latter.
  • Although it was indicated in the Former that even they are located abroad, liaison offices, branch offices, agencies, offices, funds of the Turkish companies' and also the companies established abroad of which the Turkish companies owns 50% of its capital are deemed as "domiciled in Turkey" and subject to the prohibition, the Latter allows for the agreements to be executed by the aforementioned but to be exercised abroad be in foreign currency or indexed to foreign currency.
  • Financial lease agreements executed before 13.09.2018 concerning movable and immovable properties are exempted from prohibition under the Latter.
  • The Latter indicates that security deposits based on the property lease agreements executed before 13.09.2018 are exempted from prohibition and do not have to be re-arranged in Turkish Liras.

The table below contains the main differences between the Former and the Latter. 20.11.2018

Regards,

SUBJECT FORMER COMMUNIQUE LATTER COMMUNIQUE
REAL ESTATE LEASE AGREEMENTS Lease agreements concerning real estate, including real estates located in free zones, cannot be executed in foreign currency or indexed to foreign currency. Lease agreements concerning real estates can be executed with foreigners or the companies with a foreign shareholder (at least 50% direct or indirect ownership of foreigners or joint control or control ownership of foreigners) can be executed in foreign currency or indexed to foreign currency.

Real estate located in free zones are excluded from the scope of prohibition.

Lease agreements concerning duty-free stores can be executed in foreign currency or indexed to foreign currency.

Lease agreements concerning lodging areas having obtained certificate from the Ministry of Culture and Tourism can be executed in foreign currency or indexed to foreign currency.
REAL ESTATE SALES AGREEMENTS Sales agreements concerning real estate, including real estates located in free zones, cannot be executed in foreign currency or indexed to foreign currency. Sales agreements concerning real estates can be executed with foreigners or companies with a foreign shareholder (at least 50% direct or indirect ownership of foreigners or joint control or control ownership of foreigners) can be executed in foreign currency or indexed to foreign currency.

Real estate located in free zones are excluded from the scope of prohibition.
AGREEMENTS FOR WORK Agreements for work, except the shipbuilding agreements, cannot be executed in foreign currency or indexed to foreign currency. Although the agreements for work cannot be executed in foreign currency or indexed to foreign currency, agreements for work including any cost in foreign currency can be executed in foreign currency or indexed to foreign currency.
SALES AGREEMENTS CONCERNING MOVABLE PROPERTIES Sales agreements concerning movable properties, except vehicles including heavy machinery can be executed in foreign currency or indexed to foreign currency. Sales agreements concerning movable properties, except vehicles, can be executed in foreign currency or indexed to foreign currency. Sales agreements concerning heavy machinery can be executed in foreign currency or indexed to foreign currency.

Agreements executed for commercial sales of vehicles on passenger transportation purposes before 13.09.2018 are not subject to prohibition.
LEASE AGREEMENTS CONCERNING MOVABLE PROPERTIES Lease agreements concerning movable properties, except vehicles including heavy machinery can be executed in foreign currency or indexed to foreign currency. Agreements executed before 13.09.2018 for vehicles including heavy machinery are not subject to prohibition. Lease agreements concerning movable properties, except vehicles can be executed in foreign currency or indexed to foreign currency. Heavy machinery can be executed in foreign currency or indexed to foreign currency henceforward. Agreements executed before 13.09.2018 are not subject to prohibition.
SOFTWARE AND HARDWARE Within scope of information Technologies, sale agreements for softwares written abroad and service and license agreements for softwares and hardwares can be executed in foreign currency or indexed to foreign currency. Within scope of information Technologies, sale agreements for softwares written abroad and service and license agreements for softwares and hardwares written and produced abroad can be executed in foreign currency or indexed to foreign currency.
FINANCIAL LEASE AGREEMENTS No provision. Financial lease agreements executed before 13.09.2018 concerning movable and immovable properties are not subject to prohibition.
LABOUR AGREEMENTS Labour agreements signed between foreigners resident in Turkey can be executed in foreign currency or indexed to foreign currency. Labour agreements to be exercised abroad however signed between foreigners resident in Turkey and Turkish citizens and labour agreements to which shipmans are a party are included in the scope of exemption and can be executed in foreign currency or indexed to foreign currency.
SERVICE AGREEMENTS Service agreements including Mediation/consultancy/transportation agreements cannot be executed in foreign currency or indexed to foreign currency.

Service agreements executed
  • with foreigners
  • for sales and delivery deemed as import, export, transit trade,
  • for foreign currency gaining transactions,
  • for the activities exercised abroad by Turkish residents
  • between Turkish residents for electronic communication from Turkey to abroad and from abroad to Turkey, are exempted from prohibition.
Service agreements including Mediation/consultancy/transportation agreements cannot be executed in foreign currency or indexed to foreign currency.

Service agreements executed
  • with foreigners
  • for sales and delivery deemed as import, export, transit trade,
  • for foreign currency gaining transactions,
  • for the activities exercised abroad by Turkish residents
  • between Turkish residents and exercised from Turkey to abroad, from abroad to Turkey or abroad are exempted from prohibition.
SERVICE AND LABOUR AGREEMENTS (FOREIGN COMPANIES) Service and labour agreements regarding liaison offices, branch offices, agencies, offices, funds of the Turkish companies' and also the companies established abroad of which the Turkish companies own 50% of the capital and the activities in free zones, of the companies located in free zones can be executed in foreign currency or indexed to foreign currency. Service and labour agreements to which; (i) branches, representations, offices, liaison offices of non-residents located in Turkey or (ii) entities located in Turkey in which such non-resident directly or indirectly holds 50% or more shares or which are under common control of and/or controlled by such non-resident and (iii) companies located in free trade zones on the basis of their activities in free trade zones; are a party to as employer or service receiver can be executed in foreign currency or indexed to foreign currency.
PUBLIC FINANCE The agreements to which the banks are a party pursuant to the Public Finance and Debt Management Law No. 4749, can be executed in foreign currency or indexed to foreign currency. The agreements to which the banks are a party pursuant to the Public Finance and Debt Management Law No. 4746, can be executed in foreign currency or indexed to foreign currency.
NEGOTIABLE INSTRUMENTS Negotiable instruments based on the agreements subject to prohibition cannot be executed in foreign currency and indexed to foreign currency. Negotiable instruments based on the agreements subject to prohibition cannot be executed in foreign currency and indexed to foreign currency. Negotiable instruments executed before 13.09.2018 are not subject to prohibition.

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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