Turkey: The Analysis Of The Communiqué On The Limits Of The Foreign Exchange Prohibition In Terms Of Employment Contracts

Last Updated: 22 February 2019
Article by Esra Baş

On 13.09.2018, with the Presidential Decree no. 85, some provisions were added to the ''Decree No. 32 on the Protection of the Value of Turkish Currency'' and accordingly ''the prohibition of the determination of contract price or other contractual obligations in foreign currency or foreign currency indexed, in some type of contracts between Turkish Residents''(''The Foreign Currency Prohibition'') has been regulated.

Thereafter, "The Communiqué on the Resolution No. 32 on the Protection of the Value of Turkish Currency'' (the "Communiqué'') prepared by the Ministry of Treasury and Finance has been published in the Official Gazette on 06.10.2018. With the Communiqué; there are some exceptions to this restriction on the determination of foreign currency or foreign currency indexed price. These exceptions are based on the sub-types, the parties and execution place of the contractual obligations of the contracts listed in the Decision regulating The Foreign Currency Prohibition.

In this text, the Communiqué is analyzed in regard to Employment Contracts.

With the Communiqué, the following Employment Contracts are stated within the scope of Foreign Currency Prohibition:

  1. The Employment Contracts signed by and between public institutions and organizations and third party institutions
  2. The Employment Contracts signed by and between Turkish residents and

    • Commercial airline companies operating in passenger, freight or mail transportation;
    • Companies providing technical maintenance services for air transport vehicles, engines and parts thereof;
    • Operating license to perform ground handling services at airports within the scope of the civil aviation legislation, the field or the authorized public or private legal entities with business founded by concerned organizations and institutions in the status and companies directly or indirectly capital of at least 50% of the partnership owned shares ratio


  1. The Employment Contracts that are performed abroad; or
  2. The Employment Contracts where the employee is not a Turkish citizen;
  3. The Employment Contracts that are signed by

    • non-Turkish residents' Turkish branches, representative offices, liaison offices;
    • Turkish companies in which a non-resident person directly or indirectly holds 50% or more of the share capital; and
    • free zone companies, only for their activities in the free zone

has been excluded.

In the same Communiqué, there are some provisions that determine the scope and limits of the aforementioned Foreign Exchange Prohibition in terms of the settlement date, price type and date of the contract; and there are some regulations on the exchange rate and increase rates that should be taken into account in the calculation of the re-value.

  • In the Communiqué, there are examinations related to residential requirement in Turkey. According to these examinations;

In terms of associations and extensions on abroad, belonging Residents in Turkey:

  • Branches, agencies, offices, liaison offices, operated or managed funds,
  • Companies with over fifty percent of shareholdings; and
  • Companies with direct or indirect ownership

are within the scope of the prohibition and they are determined as resident in Turkey.

  • Concerning the Price:
    • The prices included in the negotiable instruments to be regulated within the scope of contracts that cannot be determined in terms of foreign currency or foreign currency indexed within the scope of the prohibition.
    • Contracts indexed to the precious metals and/or commodities whose price is determined in foreign currency in international markets and/or indirectly indexed to foreign exchange, are also considered as a foreign currency indexed contract. The related contracts are under the scope of the Foreign Currency Prohibition, if they meet the other requirements for the foreign exchange prohibition, and if they cannot be assessed under any exceptions.
  • Concerning the Date of Contracts:
    • Contracts signed before the date of the entry into force of the Provisional Article 8 of the Decree No. 32 on the Protection of the Value of Turkish Currency (13.09.2018) are exempt from the Foreign Currency Prohibition.

Within the scope of the Communiqué, there are some regulations related to re-determination of contract prices determined in foreign currency before the date of 13.09.2018. According to these regulations, if the parties cannot agree on a conversion amount, they should utilize the indicative selling rates of the Turkish Central Bank on 02.01.2018. The converted amount must then be adjusted based on the monthly consumer price index rates changes determined by the Turkish Statistical Institute for the period from January 2, 2018 to the restatement date.

The indicative effective sales rates determined by the Central Bank at the mentioned date are as follows:

Currency Code Unit Currency Banknote Selling
EUR/TRY 1 EURO 4.5525
JPY/TRY 100 JAPAN NEW 3.3771

In that case, the Parties are free in the stage of price redetermination as TRY in accordance with the principle of ''freedom of contract''; however, in cases where the price cannot be determined, Turkish Central Bank banknote selling rate in the date of 02.01.2018 is taken as the basis. The parties, who cannot freely and consensually determine the price, are able to use the relevant indicator exchange rate directly, without applying to the court.

The Parties determine the price for each month separately, by making an increase according to the monthly Turkish Statistical Institute change rates determined for each month.

However, these provisions relating to the re-calculation of contract prices shall not be applied for collected or overdue receivables.

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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