Turkey: Legal Update On Changes To Law On Protection Of Value Of Turkish Lira

Last Updated: 5 April 2019
Article by Ebru Temizer and Yavuz Şen

I. INTRODUCTION

Presidential Decree no. 85 ("Decree No. 85") amending Decree No. 32 on the Protection of the Value of Turkish Currency ("Decree No. 32") was published in the Official Gazette on 13 September 2018. Decree No. 85 requires that the contract price and any other payment obligation arising under any sale and purchase agreements for movable and immovable assets; lease agreements for any movable and immovable assets, including vehicles and financial leasing; employment, service and construction contracts or contracts for works that are executed between persons resident in Turkey must be denominated (or for existing contracts redenominated from a foreign currency) in Turkish Lira. Persons resident in Turkey include both real and legal persons.

Decree No. 85 provided that exemptions from this requirement may be determined by the Ministry of Treasury and Finance (the "Ministry"). On 6 October 2018, the Ministry published various exemptions under a Communique (the "Communique"). This memorandum has been prepared to summarise the details set forth in the Communique.

II. EXEMPTIONS

The Communique provides for the following exemptions from the requirement to convert foreign currency contracts into Turkish Lira:

1. Employment Agreements

Persons residents in Turkey can agree employment contracts in foreign currency or indexed to foreign currency contract prices where:

a. the performance of the contract is outside of Turkey;

b. the employee is not a Turkish citizen; or

c. where the employer is a branch, representative or liaision office of, or is owned 50% or more directly or indirectly by, a non-Turkish entity or is a company operating in a free trade zone in relation to its activities in the free trade zone.

2. Service Agreements

Persons residents in Turkey can agree consultancy agreements, intermediary contracts or transportation contracts or other types of service agreements in foreign currency or indexed to foreign currency contract prices:

a. where one of the parties, whilst resident in Turkey, is not a Turkish citizen;

b. for export, transit trades, export sales, deliveries and service agreements that generate foreign currency earnings;

c. where the agreement is carried out outside of Turkey;

d. where the service is provided to a branch, representative or liaision office of, or to a company owned 50% or more directly or indirectly by, a non- Turkish entity or to a company operating in a free trade zone in relation to its activities in the free trade zone.

3. IT Sector Agreements

The following broad exemptions have been introduced for the IT sector to permit foreign currency or foreign currency indexed prices for:

a. electronic communication services which start in Turkey and conclude abroad or vice versa; or

b. agreements relating to software produced abroad for sale or for licensing and service agreements relating to the hardware and software.

4. Movable Assets

Persons resident in Turkey can agree prices in foreign currency or indexed to foreign currency in relation to:

a. agreements for the sale or rental of movable goods excluding vehicle and construction machinery sales and rentals;

b. leasing agreements for ships.

5. State Tender Agreements

Contractors may conclude agreements with third parties (except for real estate and rental agreements and employment agreements) in foreign currency or foreign currency indexed for the performance of tenders or contracts executed with public institutions and organizations.

6. Other Special Types of Agreements

The exemptions also apply in certain other sector specific contracts between persons resident in Turkey as follows:

a. Financial leasing agreements regulated under Decree No. 32 regarding foreign borrowing;

b. Agreements other than real estate sales and real estate rentals which are made by public institutions and the Turkish Army Forces Foundation companies;

c. Agreements to which banks are parties relating to transactions carried out by the Ministry of Treasury in foreign currency or indexed to a foreign currency (e.g. Treasury bonds issued in foreign currency);

d. subject to the other provisions of Decision No. 32, the sale and trading of capital markets instruments;

e. various entities operating in the airline sector (including airline companies, technical maintenance providers or ground handling service providers) can conclude real estate sales, rental agreements and employment agreements in foreign currency or indexed to a foreign currency; or

f. agreements indexed to precious metals and/or commodities whose price is determined in foreign currency in the international market.

It remains the case that real estate sales and rentals, except for certain very specific exceptions (e.g. airport contracts), need to be concluded in Turkish Lira between residents in Turkey and no broad exemptions have been made in this space.

III. BASIS FOR CONVERSION TO TURKISH LIRA

The other main open issue from Decree 85 concerned the basis for the conversion of foreign currency contracts into Turkish lira where an exemption does not apply. The Communique has brought some clarity on this but there remain some questions of interpretation.

For existing non-real estate contracts, where parties have not been able to agree a Turkish lira price for existing contracts then the Communique states that the price to apply will be the Turkish Lira amount calculated by using the indicative effective sale rate published for 2 January 2018 by the Turkish Central Bank. For prices that are to apply after that date then this sum is increased by reference to the monthly change to the consumer price index published on a monthly basis by the Turkish Statistical Institute after 2 January 2018 until the date at which the price conversion is made.

For existing real estate rental contracts a more complicated conversion regime applies. The parties may agree the contract price to apply for a period of 2 years on the same basis above as applies to non-real estate contracts. However if the parties do not agree then the conversion must apply as follows: In relation to the first year from the date at which the conversion should occur the contract price is adjusted by the rate of the monthly changes to the consumer price index determined monthly by the Turkish Statistical Institute. The price for the second year is determined by increasing the contract price applying for the year before in accordance with the rates of the monthly changes on the consumer price index determined monthly by the Turkish Statistical Institute.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions