What are the exemptions regulated by the Communiqué on the Protection of the Value of Turkish Currency? 16 October 2018

One of the recent mostly discussed topics in Turkey was whether the contractual value and any other payment obligations arising from the agreements can be determined in foreign currency. As is known, the Presidential Decision No. 85 (“Decision No. 85”) was published in Official Gazette and entered into force on 13 September 2018 which brought a restriction for the determination of contractual value and any other payment obligations in foreign currency relating to certain types of agreements. However, although these restrictions are determined in principle under Decision No. 85, the application of this rule was a matter of concern as it was not clear which contracts would be exempted from this rule and how this rule would be applied.

Accordingly, the Communiqué No. 2018-32/51 on the Amendment of the Communiqué No 2008 – 32/34 regarding the Decree No. 32 on Protection of the Value of Turkish Currency (“Communique”) which was published in the Official Gazette and entered into force on 06.10.2018 clarified such concerns of many business people. Under the respective Communiqué, .Details of the application of the Decision No. 85 are clarified and not only the type of agreements to be executed in Turkish Lira (“TL”), but also the ones to be exempted from the prohibition of foreign currency are regulated in an explicit manner

Pursuant to the provisions of the Communique, the types of agreements under which  the contractual value and other payment obligations should be determined in TL are generally as follows:

• All types of real estate lease and sale agreements including agreements involving public institutions,
• Employment agreements which is performed in Turkey,
• Service agreements including consultancy, intermediary and logistics except for the following type of agreements:

• Service agreements to which non-Turkish citizens are parties,
• Sales and deliveries related to export and transit trade and service within the scope of foreign exchange earning services and activities,
• Service agreements related to activities to be performed abroad,
• Service agreements regarding the electronic communication which starts in Turkey and ends abroad or starts abroad and ends in Turkey.

• Work agreements except for the agreements related to the construction, repair and maintenance of vessels,
• Vehicle sales and rental agreements including construction machinery,

On the other hand, under the Communiqué, following agreements among Turkish residents are excluded from the context of compulsory determination of contractual value and other payment obligations in TL:

• Employment agreements to be performed abroad
• Financial leasing agreements of vessels
• Financial leasing agreements under the articles 17 and 17 / A of Decree No. 32,
• All kinds of leasing and sale agreements except for vehicle agreements, including construction machinery,
• Service, license and sales agreements related to all kinds of software produced abroad within the information technologies,
• All kinds of agreements made with public institutions and organizations and Turkish Armed Forces Foundation except for real estate sales and leasing agreements,
• All kinds of agreements except for the employment, real estate sales and leasing agreements to be executed between the contractor and third persons provided that such agreement is related to the tender, agreement, international agreements in which the public institutions and organizations are involved
• Employment agreements are executed by Turkish residents which are Turkish citizens,
• Service and employment agreements executed by non-Turkish residents who have branch office, liaison office and companies of which fifty percent and more shares are owned by non-Turkish residents,
• Issuance, sales and purchase of capital instruments in accordance with Capital Market Law,
• Agreements by executed by banks related to transactions are exercised by Ministry of Treasury and Finance under the Law on Public Finance and Debt Management;
• Commercial airway companies, companies providing technical maintenance services and companies providing ground services in airports and the companies established by them and entities which directly or indirectly participate at least 50% in the capital of these entities except for real estate sale and rental agreements and employment agreements
• Vehicle sales and rental agreements, including construction machinery, which were executed before 13 September 2018,

Furthermore, according to  the Communique and Decision no.85, amounts of negotiable instruments that will be issued within the scope of agreements which are subjected to the prohibition also cannot be determined in or indexed to foreign currency.

It is mandatory to determine the contractual values in TL under agreements to be executed between Turkish residents as from 13 September 2018 which is the effective date of Decision No. 85.   It is also mandatory to redefine the contractual values indexed to foreign currencies under already executed the agreements in TL, within 30 days as from 13 September 2018. Since the said period has expired, it would be necessary to take the necessary measures quickly in order not to be subjected to any sanctions in a possible inspection and investigation.

The Communiqué clarifies the exchange rate of the agreements that were executed prior to the date of the Decision No: 85. In case the parties of a contract cannot agree on the exchange rate for redefining the contractual value, new contractual value shall be determined by the indicative selling rates announced Central Bank of the Republic of Turkey on 2 January 2018 which shall be adjusted based on the monthly consumer price index rates determined by the Turkish Statistical Institute for the period from 2 January 2018 to the adjustment date.

In this context; it should be noted that the foreign branches, representative offices, liaison offices and funds of Turkish residents, as well as the foreign entities which are directly or indirectly managed or owned by Turkish residents with a minimum shareholding of 50% shall also be considered as a Turkish resident under the Communiqué and shall be subject to such restriction.

Although there are certain types of exemptions regarding some of the agreements executed by Turkish branches, representative offices, liaison offices and funds  of foreign residents, as well as Turkish entities which are directly or indirectly managed or owned by a foreign resident with a minimum shareholding of 50%; it would not be possible to accept that all agreements concluded by these branches, representative offices, liaison offices and companies shall fall within the scope of the exemption, since the agreements which are exempted under the Communique are limitedly listed under the same.

For all these reasons, it is important to receive professional assistance from an expert in order to determine whether the agreements executed and/or to be executed by and between the companies and real persons would be subjected to the Communiqué and to restructure the agreements accordingly, if necessary.

Türkçe Versiyonu İçin

http://www.kasaroglu.av.tr/tr/Turk-Parasi-Kiymetini-Koruma-Hakkinda-Teblig