Turkish Ministry of Finance and Treasury has recently issued a new Communique on the Protection of the Value of Turkish Currency concerning the activities of exporters in Turkey. The Communique was published on the Official Gazette on 4th of September 2018.
In general, the newly issued Communique No. 2018-32/48 on the Decree No. 32 regarding the Protection of the Value of Turkish Currency regulates the time limits for transferring the export proceeds to Turkey. The communique will be valid from the date of its issuance to the following 6 months and constitutes a temporary regulation.
Transferring Obligation of Export Proceedings to Turkey
Under the new regulation, the proceeds arising from the export activities facilitated by the residents in Turkey must be either transferred directly and immediately to the bank that mediates the export transaction or directly brought into country.
The duration for export proceeds to be brought into country should not exceed 180 days after actual export date. It is also compulsory to convert at least 80% of the aforementioned export proceeds into Turkish Lira by transferring respected proceeds to a Turkish bank.
The export proceeds can be received through one of the following payment methods:
- Letters of Credit
- Documentary Collections
- Open Account
- Acceptance Credited Payment by Letter of Credit
- Acceptance Credited Documentary Collections
- Acceptance Credited Open Account and
- Advance Payment.
Besides, in case of the proceeds to be transferred effectively accompanying by a passenger, it is compulsory to make the declaration at customs administration.
The export activities shall need to be realized within 24 months for export proceedings paid in advance in foreign currency.
The Communiqué states that in some cases, the time allowed for bringing export income to Turkey is different from the general rule of 180 days following the actual export date.
Accordingly, the legal period for the export proceeds in foreign currency to be brought into Turkey and sold to a bank is;
- 365 days if export activity is realized by Turkish resident contractors;
- 180 days after the event is completed if the goods are sent to an international fair or exhibit for export on consignment purposes;
- 90 days if a temporary export is made, and temporarily exported goods are not received back within given time limits or they are sold within these time periods;
- 90 days if export is made via credit sale or financial lease agreement within the scope of Export Regime and Financial Leasing Legislation.
Under the temporary regulation, intermediary banks are liable for monitoring and assuring the compliance of the processes of bringing the export proceeds into Turkey and closing the sale of the foreign currency into Turkish Lira.
The expenses on export activities such as commission, freight, expertise costs can be deducted from export proceeds by intermediary banks.
If two parties perform both export and import activities with each other, amounts can be set off by intermediary banks.
Closure of Export Accounts
If export proceeds brought into Turkey within legal time limits, intermediary banks will close the export accounts. Otherwise, intermediary banks will notify the tax office regarding the situation within 5 business days after deadline.
Tax office will send a warning letter in 10 days requesting relevant exporter to close its export accounts in 90 days. Exporter should either provide justifiable reasons (vis major) regarding why he cannot close its accounts or close its accounts within this time limit.
Otherwise, exporters may be subject to penalties or sanctions indicated in aforementioned legislation.
In the environment of challenging economic conditions, the aforementioned measures are taken by Turkish Government to reduce the fluctuations in the ‘exchange rates’. However, we believe that these new obligations may affect some exporters.
In the absence of such obligations, the exporters who import their raw materials or intermediary goods had been paying directly from their foreign currency accounts without facing any currency risk.
Acknowledging the new temporary implementation, those exporters will assume currency risks due to converting export proceedings into Turkish Lira.
This may not directly affect big-scale exporters since they can hedge their currency risks while it affects small-scale exporters who are unable to convert their Turkish lira into foreign currency at the same exchange rate.
In this sense, we advise that Turkish resident exporters should be careful regarding these temporary obligations introduced by the Communique.