Published in the Official Gazette on September 13, Amending Presidential Decree Regarding the Decree on Protection of the Value of the Turkish Currency ("Decree No. 32") introduced FX restrictions on certain domestic transactions accomplished among Turkish residents. These transactions include sale and purchase of real estate, sale and purchase of movable properties, leasing of real estate and movable properties, including financial leasing and leasing of vehicles (cars and other vehicles) and employment agreements, service contracts and independent constructor agreements.

You may find the details of new regulation and our evaluations in the following sections.

1. Scope of New Regulation

Scope of the new regulation published in the Official Gazette falls on residents in Turkey. Accordingly, agreements signed among the natural and legal persons in Turkey and/or among themselves will be subject to FX restrictions.

In this regard, the residents mean all natural and legal persons, whose place of residence is in Turkey, including overseas workers, self-employed and independent business owners who are Turkish citizens. Accordingly, all companies incorporated in Turkey (including 100% foreign owned companies) are also included in this scope.

However, the contracts among Turkish residents and non-residents are not covered by the scope of the new regulation and these contracts may be continued to be regulated in foreign currency or indexed to foreign currency.

Following agreements are covered by the new regulation:

  • real estate sale and purchase agreements,
  • sale and purchase agreements of movable properties,
  • leasing agreements of real estate and movable properties, including financial leasing and leasing of vehicles (cars and other vehicles) agreements
  • other leasing agreements
  • employment agreements, service contracts and independent constructor agreements (work contracts)

As can be understood from these explanations, agreements (e.g. car leasing agreements and labour contracts) to be signed among Turkish residents have become mandatory denominated in Turkish Lira.

2. Exceptions

With Amending Presidential Decree, the Ministry of Treasury and Finance is authorised to determine exceptions for agreements to be regulated in foreign currency or indexed to foreign currency.

Accordingly, the agreements to be announced by the Ministry of Treasury and Finance which are included in the scope of the exemption could be regulated in foreign exchange or indexed to foreign exchange. However, due to fact that the new regulation is quite recent, the Ministry of Treasury and Finance has not made a statement on this issue, yet.

Along with this situation, there are currently many parties in Turkey that perform goods and service purchases and sales transactions and make collections and payments in foreign currency. For that reason, exceptions to be announced by the Ministry of Treasury and Finance are highly important. In this regard, we recommend that the Ministry 's statements be closely followed.

3. Amendment Obligation for Existing Agreements

By means of Amending Decree, a temporary article was added to Decree Regarding the Protection of the Value of the Turkish Currency ("Decree No. 32"). According to the said article, if the agreements enforced earlier and the amounts therein are based on the foreign currency, the parties will need to renew these contracts by amending to Turkish Lira.

With the Amending Decree, a 30-day period has been granted for the renewal of the contracts between the parties. When we consider the 30-day period granted and the publication date of the Amending Decree, the agreements concluded earlier and denominated in foreign currency between residents in Turkey need to be renewed until October 13, 2018. However, there is no need to renew the contracts that are included in the exceptions to be announced by the Ministry of Treasury and Finance.

As indicated in the previous section, it has become compulsory to renew exiting agreements for many persons and companies carrying out transactions in buying and selling goods and services in the domestic market, as well as collection and payment in foreign currency.