TURKEY: COMMUNIQUE REGARDING DECREE NO. 32 ON THE PROTECTION OF THE VALUE OF TURKISH CURRENCY
On 13 September 2018, the Presidency of the Republic of Turkey published a Decree imposing restrictions in sense of contract prices in foreign currency regarding the contractual parties who are residents in Turkey. Employment, service and works agreements where the both parties reside in Turkey cannot be made in foreign currency according to the Decree. Rental and sales agreements are in the scope of the restrictions as well. Furthermore, On 06 October 2018, the Communiqué, where the exemptions of the Decree of using foreign currency are defined, has become effective.
The most significant changes under the Communiqué are listed under two headings herein: (1) Contract Types Cannot Be Executed in Foreign Currency and (2) Contract Types May Be Determined in Foreign Currency.
1- Contract Types Cannot Be Executed in Foreign Currency:
- Agreements to be executed between persons/entities resident in Turkey regarding the sale and rental of real property (immovable).
- Employment agreements to be executed between contractual parties resident in Turkey
- Service agreements to be executed between parties resident in Turkey; including consultancy, intermediation and transportation services. Contracts within the scope of exports, transit trade, sales and deliveries that are considered as exports are out of this limitation
2 – Contract Types May Be Determined in Foreign Currency:
- Agreements to be executed between persons/entities resident in Turkey regarding the sale and rental of movables other than vehicles and construction equipment
- Contract prices relating to and other payment obligations arising from employment and service agreements to be executed by the Turkish branches, representative offices, liaison offices of the persons resident abroad, the companies where they hold fifty percent or more than fifty percent of the shares
- Employment agreements to be executed by persons/entities who are resident in Turkey and who do not have Turkish citizenship
The Communiqué also sets right how to convert the contract prices in foreign currency to Turkish Lira. Accordingly; regarding the contracts types cannot be executed in foreign currency, the parties shall take into consideration the currency at the date of 02 January 2018 and multiply with the total amount of CPI (Consumer Price Index) from 02 January 2018 to date of redetermination.
It is also important to note that, those who do not comply with the above mentioned regulations are subject to administrative fines per transaction.
