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New Communiqué on Decree No. 32 and FX Restrictions

The Communiqué Regarding Amendment on the Communiqué Regarding Decree No. 32 on the Protection of the Value of the Turkish Lira Currency (Communiqué No: 2018-32/34) is published in the Official Gazette dated 06.10.2018, numbered 30557, which came into force on its publication date.

The Communiqué basically provides explanations regarding the implementation of the restrictions on agreements in foreign currency or foreign currency-indexed under the Decree no.85 on the Protection of the Value of Turkish Currency.

According to the Communiqué, the contracts regarding raw materials and supplies, semi-finished goods, finished-goods sales can be arranged in foreign currency. In addition, the Communiqué basically brings new restrictions and rules on employment contracts, sale and purchase contracts regarding real estate, renting/leasing contracts regarding real estate, sale and purchase contracts regarding movable properties, leasing/renting contracts regarding movable properties, and services contracts.

What is introduced in Decree No. 32?

Published in the Official Gazette on September 13, Amending Presidential Decree Regarding the Decree on Protection of the Value of the Turkish Currency (“Decree No. 32”) introduced FX restrictions on certain domestic transactions accomplished among Turkish residents. These transactions include sale and purchase of real estate, sale and purchase of movable properties, leasing of real estate and movable properties, including financial leasing and leasing of vehicles (cars and other vehicles) and employment agreements, service contracts and independent constructor agreements.

With the Amending Decree, a 30-day period has been granted for the renewal of the contracts between the parties. When we consider the 30- day period granted and the publication date of the Amending Decree, the agreements concluded earlier and denominated in foreign currency between residents in Turkey need to be renewed until October 13, 2018. However, there is no need to renew the contracts that are included in the exceptions announced by the Ministry of Treasury and Finance.

With Amending Presidential Decree, the Ministry of Treasury and Finance is authorized to determine exceptions for agreements to be regulated in foreign currency or indexed to foreign currency.

What are the Conversion Principles to Turkish Lira?

Parties of a contract can re-determine prices upon reaching an agreement for conversion rate of Turkish Lira.

If there is a conflict on said conversion rate, it will be calculated through increasing Turkish Lira equivalent of the amounts determined in foreign exchange or indexed to foreign exchange using the monthly consumer price index (CIP) of the Statistical Institute of Turkey as of 02.01.2018 until such conversion date.

The initial conversion rate to be increased will be the indicative effective sales quotation of the Central Bank of Turkey as of 02.01.2018.

What are the Rules and Restrictions on Certain Type of Agreements?

The Communiqué announced by the Ministry of Treasury and Finance includes exceptions for arranging agreements in foreign exchange or indexed to foreign exchange.  In this sense, general rules and exceptions regarding the certain type of agreements which is included in aforementioned Communiqué summarized in the table below:

Contract/Agreement Type

General Rule

Exception

Real estate sales and
rental agreements including those for residential and roofed workplaces,
relating to real estate in Turkey (including those in free trade zones)

Said agreements cannot
be in Foreign Currency or Indexed to Foreign Currency

 

Employment Agreements

Said agreements cannot
be in Foreign Currency or Indexed to Foreign Currency

i)Employment
contracts related to the work to be performed abroad,
ii)Employment contracts in which the counterparties are not citizens of the
Republic of Turkey,
iii) Employment  contracts regarding non-residents’  branches, representative
offices, liaison offices, or their companies whose at least 50% shares are
directly or indirectly held by those non-residents; or- within the scope of
their activities in free trade zones- companies in free trade zones

Service agreements
including consultancy, brokerage and transportation services

Said agreements cannot
be in Foreign Currency or Indexed to Foreign Currency

i)Service contracts
within the scope of export, transit trade, export sales and deliveries, and
foreign exchange earning services and activities,
ii)Service contracts within the scope of activities to be carried out abroad
by Turkish residents,
iii)Service contracts related to electronic communication that starts in
Turkey and ends abroad as well as electronic communication that starts abroad
and ends in Turkey
iv)Service contracts of persons who do not have Turkish citizenship

Independent
Contractor Agreements

Said agreements cannot
be in Foreign Currency or Indexed to Foreign Currency

Independent
contractor agreements related to the construction, repair and maintenance of
the ships that are defined in the Law Amending Turkish International Ship
Registry Law numbered 4490 and dated 16.12.1999 and Legislative Decree
numbered 491

Movable Property
Sales Agreements

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

Sales agreements
including vehicles

Rental agreements
related to movable properties

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

Rental agreements
including vehicles (excluding agreements made after 13 September 2018)

Sales agreements
related to software produced abroad within the scope of information
technologies and license and service agreements related to hardware and
software

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

 

Independent
contractor
agreements related to the
construction, repair and maintenance of the ships that are defined in the Law
Amending Turkish International Ship Registry Law numbered 4490 and dated
16.12.1999 and Legislative Decree numbered 491

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

 

Financial leasing
agreements that will be executed within the scope of articles 17 and 17/A of
the Decree No.32

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

 

Agreements of a
public entity, a public institution or a company of Turkish Armed Forces
Foundation (Türk Silahlı Kuvvetlerini Güçlendirme Vakfı)

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

Excluding sales and
rental agreements related to immovable properties

Contracts -other than
those for real estate sales, real estate rental or for employment in which
the contractors contract with third parties within the scope of fulfilment of
tenders, contracts, international agreements in foreign currency which public
institutions and organizations are party to

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

Excluding sales and
rental agreements related to immovable properties and employment contracts

Contracts executed by
banks in relation to transactions of the Treasury and the Ministry of Finance
in accordance with the Public Finance and Debt Management Law dated 28/3/2002
and numbered 4749

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

 

Agreements other than
real estate sales and rental agreements and employment agreements executed by
(i) commercial aviation enterprises resident in Turkey which provide
passenger, cargo load and mail transportation services; (ii) companies which
provide technical maintenance services related to air freight vehicles,
motors and parts and pieces of these; (iii) public or private law legal
entities licensed or authorized to perform ground handling services at the
airports within the scope of civil aviation legislation; (iv) companies and
businesses established by aforementioned enterprises and where such entities
have at least 50% of the shares of the companies directly or indirectly

Said agreements can
be in Foreign Currency or Indexed to Foreign Currency

Excluding sales and
rental agreements related to immovable properties and employment contracts