THE USE OF FOREIGN CURRENCY LOAN BY RESIDENTS OF TURKEY WHO HAVE FOREIGN EXCHANGE INCOME 7 May 2021
Regulations on foreign and domestic use of foreign currency loans are regulated within the scope of the Capital Movement Circular ("Circular") dated 2 May 2018. The Circular has been prepared by the Central Bank of the Republic of Turkey based on Decree No. 32 on the Protection of the Value of Turkish Currency and Article 16 of the Communique on the Decision No. 32 on the Protection of the Value of Turkish Currency.
Restrictions on foreign currency loans are regulated in articles 20 and 21 of the relevant Circular. In this context, while natural persons can't use foreign currency loans, legal entities are subjected to a dual distinction in terms of whether they have foreign currency income or not. For our article in which we examine the conditions of obtaining loans from abroad for legal entities without foreign exchange income, see. http://www.kasaroglu.av.tr/tr/doviz-geliri-olmayan-kisileri-yurt-disindan-kredi-almasi. In this article, the use of foreign loans by residents of Turkey who have foreign currency income will be examined.
I- Residents of Turkey with Foreign Exchange Income
According to the 1st paragraph of the 20th article of the Circular, "Persons resident in Turkey, who have foreign currency income and whose loan balance is below USD 15 million at the date of use, can use foreign currency loans from abroad provided that the sum of the loan amount and the current loan balance does not exceed the total foreign currency income of the last three fiscal years." provision is included.
To examine the conditions in the regulation, it is useful to explain certain definitions first.
a) Foreign Exchange Income: Income generated from export, transit trade sales, and deliveries deemed export, foreign exchange earning services, and transactions as determined by the relevant legislation.
The scope of foreign exchange income is listed in detail in article 15 of the Circular. In this context, except for sales and deliveries, which are considered exports, and revenues from foreign exchange income services and activities, it is regulated by the Circular that foreign exchange obtained from residents in Turkey will not be considered as foreign exchange income. However, revenues from TL-denominated exports, transit trade, export-deemed sales and deliveries, foreign exchange earning services, and activities obtained from non-residents will be evaluated within the scope of foreign exchange revenues. However, the Ministry has the authority to determine other commercial activities whose revenues will be included in foreign currency revenues.
b) Loan Balance: The total unpaid portion of cash loans denominated in foreign currency utilized from abroad or in Turkey. In addition, foreign currency loans and foreign currency indexed loans used before May 2, 2018, will also be included in the loan balance calculation.
II. Loan Conditions for Residents of Turkey with Foreign Exchange Income
In foreign currency loans to be used from abroad by residents of Turkey with foreign exchange income,
1- If the total loan balance of the user of the loan is below 15 million USD at the date of use, the sum of the loan amount to be used and the current loan balance should not exceed the total of the foreign currency revenues of the last three fiscal years. Controls regarding this will be required to be carried out by intermediary banks. If it is later determined that the loan balance extended by the branches of banks and financial institutions abroad exceeds the total foreign currency income of the last three financial years, the part causing the excess is recalled or converted into a Turkish lira loan.
2-In line with this purpose, during the foreign currency loan utilization request of the borrower, the foreign currency revenues of the last three fiscal years, based on the unconsolidated financial statements of the last three years, together with a report prepared and approved by the SMMM or YMM, and annex number 2 of the Capital Movements Circular it must be submitted to banks and financial institutions with the Foreign Exchange Income Declaration Form and documented.
3- Foreign currency income statements are made based on companies, including companies within the same group or holding. SMMMs and YMMs are obliged to check the compliance of the foreign currency revenues in the declaration form with the scope of foreign currency income defined under the legislation. Every year, from the last business day of the fourth month (April) following the annual accounting period, the previous year is included in the previous year and the part of the old foreign currency income statements belonging to the third year is not taken into account.
