The Turkish Ministry of Finance and Treasury has issued a new Communique on the Protection of the Value of Turkish Currency concerning the activities of exporters in Turkey. The decision has been published on the Official Gazette on 4^th of September, 2018. In general, the newly issued Communique No. 2018-32/48 on the Decree No. 32 regarding the Protection of the Value of Turkish Currency regulates the time limit for transferring the export proceeds to Turkey. The communique will be valid from the date of its issuance to the following 6 months.

Bringing Export Proceedings to Turkey

Accordingly, the proceeds arising from the export activities facilitated by the residents in Turkey should be either transferred directly and immediately to the bank that mediates the export transaction or directly brought into country.

The duration for export proceeds to be brought into country should not exceed 180 days after actual export date. It is compulsory to convert at least 80% of the aforementioned export proceeds into Turkish Lira.

The export proceeds can be received through one of the following payment methods: (a) letter of credit; (b) cash against documents; (c) cash against goods; (d) acceptance credit; (e) documents against acceptance; (f) goods against acceptance; or (g) advance payment.

In case of the proceeds to be transferred effectively accompanying by a passenger, it is compulsory to make the declaration at customs administration.

The export activity needed to be realized within 24 months for export proceedings paid in advance in foreign currency.

Special Export

The legal time period for the export proceeds in foreign currency to be brought into Turkey and sold to a bank is;

1. 365 days if the export activity is realized by Turkish resident contractors
2. 180 days after an event is completed if the goods are sent to an international fair or exhibit for export on consignment purposes
3. 90 days if a temporary export is made, and temporarily exported goods are not received back within given time limits or they are sold within these time periods.
4. 90 days if export is made via credits or leases within the scope of Export Regime and Financial Leasing Legislation.

Intermediary banks

The intermediary banks are liable for monitoring and assuring the compliance of the processes of bringing the export proceeds into Turkey, and closing the sale of the foreign currency into Turkish Lira.

The expenses on export activities such as commission, freight, expertise costs can be deducted from export proceeds by intermediary banks.

If two parties performs both export and import activities with each other, amounts can be set off by intermediary banks.

Closure of Export Accounts

If export proceeds brought into Turkey within legal time limits, intermediary banks will close the export accounts. Otherwise, intermediary banks will notify the tax office regarding the situation within 5 business days after deadline.

Tax office will send a warning letter in ten days requesting relevant exporter to close its export accounts in 90 days. Exporter should either provide justifiable reasons (vis major) regarding why cannot close its accounts or close its accounts within this time limit. Otherwise, exporters may be subject to penalties or sanctions indicated in aforementioned law.

Conclusion

In the environment of challenging economic conditions, the aforementioned measures are taken by Turkish government to reduce the impact of ‘exchange rate war’. However, these new obligations may negatively affect some exporters.

In the absence of such obligations, the exporters who import their raw materials or intermediary goods had been paying directly from their foreign currency accounts without facing any currency risk. Acknowledging the new temporary implementation, those exporters will assume currency risks due to converting export proceedings into Turkish Lira. This may not directly affect big-scale exporters since they may hedge their currency risks while it affects small-scale exporters who are unable to convert their Turkish lira into foreign currency at the same exchange rate.

In this sense, we advise that Turkish resident exporters should be careful regarding these temporary obligations brought by this communique.