Exemptions to FX Payment Ban Announced
The amendments to the Decree No. 32 Regarding the Protection of the Value of the Turkish Currency (the "Decree No. 32") published in the Official Gazette on September 13, 2018 introduced a ban on FX and FX-indexed payments for certain agreements between Turkish residents. The Ministry of Treasury and Economy (the "Ministry") was authorized to provide exemptions to these restrictions. Accordingly, the Ministry amended the Communiqué No: 2008-32/34 on the Decree No. 32 Regarding Protection of the Value of the Turkish Currency introducing these exemptions. The exemptions were published in the Official Gazette dated October 6, 2018.
The following agreements will be exempt from the FX payment ban:
- Employment agreements (i) that are performed abroad; or (ii) where the employee is not a Turkish citizen; and (iii) that are made by (a) non-Turkish residents' Turkish branches, representative offices, liaison offices; (b) Turkish companies in which a non-resident person directly or indirectly holds 50% or more of the share capital; and (c) free zone companies, only for their activities in the free zone.
- Service agreements (including advisory, intermediary and transportation agreements) (i) where one of the parties is not a Turkish citizen; (ii) executed by (a) non-Turkish residents' Turkish branches, representative offices, liaison offices; (b) companies in which a non-resident person directly or indirectly holds 50% or more of the share capital; and (c) free zone companies, only for their activities in the free zone; (iii) that are made in connection with export, transit trade, sales and deliveries deemed export and FX earning services and activities; (iv) executed between Turkish residents regarding electronic communication that starts in Turkey and ends abroad, or vice versa; and (v) concerning the activities of Turkish companies conducted abroad.
- Independent constructor agreement regarding the construction, maintenance and repair of vessels.
- Agreements regarding sale, purchase and leasing of movable properties (except for cars and engineering vehicles).
- Financial leasing agreements regulated the section of the Decree No. 32 regarding FX borrowing.
- Agreements executed by public institutions and agreements executed by the subsidiaries of the Turkish Armed Forces Foundation (i.e., ASELSAN, TAI and Roketsan) (except for agreements regarding sale, purchase and leasing of real estate).
- Agreements made by and between constructors and third parties institutions for the performance of FX denominated or FX indexed agreements and tenders of public institutions and international treaties (except for agreements regarding the sale, purchase and leasing of real estate and employment agreements).
- Agreements to which banks are parties in connection with transactions undertaken by the Ministry in accordance with the Law on Public Finance and Debt Management No. 4749.
- Agreements regarding the form, issue, purchase and sale of securities conducted under the Turkish Capital Markets Law No. 6362 and its secondary regulations.
- Agreements regarding the sale of software developed abroad.
- License and service agreements regarding hardware and software.
Conversion of FX into Turkish Lira
- The 30-day grace period for the conversion of FX into TRY was not extended.
- Agreements regarding the leasing of cars and engineering vehicles that are made prior to September 13, 2018 do not need to be converted
- If the parties cannot agree on a conversion amount, they should utilize the indicative selling rates of the Central Bank of the Republic of Turkey on January 2, 2018. The converted amount must then be adjusted based on the monthly consumer price index rates changes determined by the Turkish Statistical Institute for the period from January 2, 2018 to the restatement date.
- The amounts already paid or due under the FX denominated or FX indexed agreements that are now subject to the FX payment ban cannot be restated as shown above.
- Restatement of the real estate lease agreements that are made prior to September 13, 2018 must be for a two year term.
- Agreements regarding the sale, purchase and leasing of real estate (including houses and workplaces) will remain subject to the FX payment ban.
- Turkish residents' branches, representative offices, liaison offices, bureaus and funds that they operate or manage, and non-resident companies of which Turkish residents hold 50% or more of the share capital directly or indirectly will be considered resident in Turkey, and the agreements that are made by and between these institutions and Turkish residents will be subject to the FX payment ban.