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THE RULES AND PROCEDURES GOVERNING THE PROHIBITION TO USE FOREIGN CURRENCY OR INDEXATION TO FOREIGN CURRENCY IN THE CONTRACTS

The Decree Amending the Decree No:32 Regarding the Protection of the Value of the Turkish Currency (“Amending Decree”) had come into force by being published in the Official Gazette dated 13 September 2018.

The Amending Decree has prohibited under certain conditions to enter into contracts where the price and other contractual payment obligations are agreed in foreign currency or indexed to foreign currency (“Prohibition”).

In this respect, the Communique numbered 2018- 32/51 amending the Communique (Communique No: 2008-32/34) Regarding the Decree No: 32 on the Protection of the Value  of the Turkish Currency (in Turkish “Türk  Parası Kıymetini Koruma Hakkında 32 Sayılı  Karara  İlişkin  Tebliğ  (Tebliğ  No:  2008-32/34)’de  Değişiklik  Yapılmasına  Dair Tebliğ– Tebliğ No: 2018– 32/51) (“Communique”)  has  been  published  in  the  Official Gazette   dated   6  October  2018   and   come   into   force   on   the   same   date.     The Communique provides the rules and procedures governing  the Prohibiton.

In Section I. here-below, we have summarized in the chart, the contracts that are subject to Prohibition and are excluded from the Prohibition.

You may find here below in the Section II., the rules and procedures applicable to the contracts signed before 13 September 2018.

 

 

I. Contracts in Foreign Currency or Indexed to Foreign Currency
Not Allowed Allowed
For and between the real or legal persons residing or established in Turkey, contracts for sale of real estates, including residence and place of business with a roof (in Turkish “konut ve çatılı işyeri”) (including real estates at free zone) (art. 8/1) None
For and between the real or legal persons residing or established in Turkey, contracts for renting real estates, including residence and place of business with a roof (including real estates at free zone) (art. 8/2) None
For and between the real or legal persons residing or established in Turkey, employment contracts (art. 8/3)
  1. Employment contracts regarding services to be performed abroad (art. 8/3) ;
  2. Employment contracts to be signed with the individuals who reside in Turkey but who are not Turkish citizen  (art.  8/11) ;
  3. The employment contracts signed by the entities acting as branches, agencies, representation offices, liaison offices of the persons residing abroad or by the companies owned 50 % or more with the real or legal persons residing or established abroad or by the companies carrying out their activities at free zones (art. 8/16) ;
For and between the real or legal persons residing or established in Turkey, service agreements including  consultancy, brokerage and transportation (art. 8/4)
  1. Service agreements to be signed with the individuals who are not Turkish  citizen (art. 8/4-a) ,
  2. Service agreements signed for export, transit trade, sales and deliveries to be accepted as export and foreign currency saving service activities (art. 8/4-b) ,
  3. Service agreements signed for the activites of the persons residing in Turkey to be carried out abroad (art 8/4-c) ,
  4. Electronic communication services that begin in Turkey and end outside the Turkey or that begin outside the Turkey and end in Turkey (art. 8/4-ç),
  5. License and service agreements of the hardware and software produced abroad (art. 8/8) ,
  6. The service agreements signed by the entities acting as branhes, agencies, representation offices, liaison offices of the real or legal persons residing or established abroad or by the companies owned 50 % or more with the persons residing abroad or by the companies carrying out their activities at free zones, (art. 8/16),
For and between the real or legal persons residing or established in Turkey, contracts of construction (in Turkish “Eser Sözleşmeleri”) (art. 8/5) Contracts regarding construction, repair and maintenance of the vessels (art. 8/5)
For and between the real or legal persons residing or established in Turkey, contracts for sale of vehicles, including construction equipment (in Turkish “İş Makinesi”) (art. 8/6)
  1. Contracts for sale of movables except for vehicles including construction equipment (art.8/6) ,
  2. Contracts for sale of software produced abroad under the scope of information technologies (art. 8/8)
For and between the real or legal persons residing or established in Turkey, contracts for renting vehicles, including construction equipment (art. 8/7) Contracts for renting movabels except for vehicles including construction equipment (art. 8/7)
Financial  Leasing  /Leasing    Contracts (art 8/9- 8/10)
  1. Financial Leasing /Leasing contracts regarding vessels (art. 8/9) ,
  2. Financial Leasing /Leasing contracts under the scope of articles 17 and 17/a of the Decree No: 32 (art. 8/10)
None Within the context of the Capital Market Law numbered 6362 and the secondary legislation, the contracts on constituting capital market instruments in foreign currency, issuance, sale and purchase and other transactions of the same (art.8/15)
(for the ones established in Turkey) Contracts regarding sale and renting of real estates and employment contracts signed by commercial airway operators carrying passengers, goods or mail, by the companies giving technical maintenance services, the establishments acting as public legal entity or private legal entity for giving ground servicing at the airports under the scope of the civil avaiation legislation, the companies or enterprises founded by these establishments or indirectly owned by these establishments at least 50 percent (art.8/17). (for the ones resident in Turkey) Contracts (excluding the ones regarding sale and renting of real estates and employment contracts) signed by commercial airway operators carrying passengers, goods or mail, by the companies giving technical maintenance services, the establishments acting as public legal entity or private legal entity for giving ground servicing at the airports under the scope of the civil avaiation legislation, the companies or enterprises founded by these establishments or indirectly owned by these establishments at least 50 percent (art. 8/17).

 

  • The negotiable instruments within the scope of the contracts subject to Prohibition cannot also be issued in foreign currency or indexed to foreign currency (art. 8/18).
  • The contracts indexed to precious metal and/or goods that are priced with foreign currency in international markets and /or indexed indirectly to foreign currency shall be deemed as contracts indexed to foreign currency (art. 8/19).

II. What will happen to the contracts that have already been signed in foreign currency and/or indexed to foreign currency?

  • If these contracts are excluded from the Prohibition, the price and other contractual payment obligations are not needed to be re-determined by the Parties in Turkish currency (art. 8/21) .
  • If the contracts for renting vehicles including construction equipment have been signed before 13 September 2018, the price and other contractual payment obligations in foreign currency or indexed to foreign currency are not needed to be re- determined by the Parties in Turkish currency (art. 8/22) .
  • If the contracts signed before 13 September 2018 are under the scope of the Prohibition, the price and other contractual payment obligations in foreign currency or indexed to foreign currency should be re-determined in Turkish currency within 30 (thirty) days as of 13 September 2018 i.e. until 13 October 2018 (art. 8/23) .

What happens if the parties of the contract cannot come to an agreement in re- determining the price and other contractual obligations in Turkish currency?

In case of not coming to an agreement by the parties, the price and other contractual obligations in foreign currency or indexed to foreign currency are transferred into Turkish currency as per the applicable exchange rate of the central bank on 2 January 2018 and increased as of this date until the date of redetermining by taking into account consumer price index of Turkish Statistical Institute determined for each month (art. 8/24) .

What will happen to the contracts for renting real estates including residence and place of business with a roof , if they have been signed before 13 September 2018 and are still in effect ?

The price and other contractual obligations in foreign currency or indexed to foreign currency in the contracts for renting real estates, including residence and place of business with a roof (signed before 13 September 2018)  should be re-determined in Turkish currency for a two-year period (art. 8/24) .

However, if the parties cannot come to an agreement for the first year, as of the date of re-determination, to be valid until the end of the year of rent (in Turkish “kira yılı sonu”), an increase is made by taking into consideration consumer price index of Turkish Statistical Institute determined for each mont (art 8/24).

If the parties cannot come to an agreement for the second year, the rent amount to be valid until the end of second year should be re-determined by increasing the rent amount in the first year as per the monthly change of rates of consumer price index of Turkish Statistical Institute (art. 8/24) .

Our Law Firm remains at your disposal for any further information you may need.

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