Free trade zones are special sites which, despite being located within the political borders of a country, are legally considered to be outside of its customs area. Goods that enter the borders of a free trade zone from a foreign country are not subject to foreign trade regulations of the relevant country.

Free trade zones are designed to offer a business climate that makes commercial and industrial activities less burdensome and costly to conduct than in other parts of the relevant country.

Eligible currencies that can be used in free trade zone dealings are subject to regulation under Article 9 of the Free Trade Zones Law numbered 3218 and dated 6 June 1985 (the "Law"). Under this authority, the Council of Ministers has issued Decree No 2017/10051, published in the Official Gazette dated 11 May 2017 and numbered 30063 (the "Decree").

After a number of ambiguities arose as to the application of the Decree, the Ministry of Economy has issued clarifications in its latest explanatory circulars dated 11 May 2017, 15 May 2017 and 22 May 2017.

According to relevant circulars, transactions between Free Trade Zones and 3rd country parties and loans which are granted by parent companies located in Turkey can be carried out in foreign currencies. However, rents, license fees and security deposits must all be paid in Turkish Lira. Furthermore, tariffs subject to regulation will need to be re-cast in Turkish Lira within 3 months following the Decree.

Broadly speaking, while the Decree requires fixed costs to be paid in Turkish lira, it allows investors to conduct commercial dealings in foreign currency and, potentially, benefit from the currency spread given the recent upwards trend of hard currencies against Turkish Lira.

Further detail with respect to eligible currencies in free trade zones can be found in the Decree and the related circulars.

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.