Presidential Decree No. 85, which was released on 13 September 2018 and which entered into force on the same day, amended Decree No. 32 on the Protection of the Value of Turkish Currency ("Decree"). Details regarding how the Decree would be enforced, and certain exemptions from the rule established in the Decree, were expected to be clarified in a communique. The expected communique, called the Communiqué (No. 2018-32/51) Amending the Communiqué (No. 2008-32/34) Regarding Decree No. 32 On the Protection of the Value of Turkish Currency ("Communiqué"), was published in the Official Gazette on 6 October 2018 and entered into force on the same day. The Communiqué provides details on which agreements are barred from being denominated in foreign currency or being indexed to foreign currency, and the exemptions from that rule.

A. The agreement price and other payment obligations arising from the types of agreements listed below may not be denominated in foreign currency or be indexed to foreign currency if executed between persons who reside in Turkey:

1. Sale and lease agreements for real estate located inside the borders of the country, including free zone areas; 

2. Sale and lease agreements for vehicles, including construction equipment;

3. Employment agreements, excluding those to be performed abroad;

4. Service agreements, including consultancy, brokerage and transportation agreements;

5. Construction agreements.

B. Where parties to a contract that must be converted into Turkish Lira are unable to come to a mutual agreement, the following principles will apply:

1. Prices denominated in foreign currency or indexed to foreign currency in agreements that were executed before the entry into force of the Decree will be converted into Turkish Lira at the exchange rate published by the Central Bank of Turkey for sale of banknotes as of January 2, 2018, as adjusted for the month-over-month change in the consumer price index, as published by the Turkish Statistical Institution, from January 2 through the date when the conversion is made.

2. Prices in lease agreements for residential and roofed workplace properties that were executed before the entry into force of the Decree that were denominated in foreign currency or indexed to foreign currency will be converted into Turkish Lira for a period of two years.

3. For residential and roofed workplace lease agreements adapted in line with the above, in the absence of the parties' mutual agreement, the rent that will apply in the one-year term following the end of the lease year in which the conversion is made will be calculated by adjusting the rent that was in effect as at the date of the conversion through the end of the lease year in which the conversion was made at the month-over-month change in the consumer price index published by the Turkish Statistical Institute. For the following lease year, in the absence of the parties' mutual agreement, the rent that will apply will be calculated by adjusting the previous lease year's rent at the month-overmonth change in the consumer price index published by the Turkish Statistical Institute. This rent will remain in effect until the end of the two-year period specified in the Communiqué.

4. The rule requiring the conversion of prices into Turkish Lira will not apply to receivables arising from agreements in which the agreement price or other payment obligations may no longer be denominated in foreign currency or indexed to foreign currency per the Decree and the Communiqué if the receivables in question have already been collected or are in arrears.

C. The agreement price and other payment obligations may be denominated in foreign currency or indexed to foreign currency, save for the above restrictions, in the agreements listed below:  

1. Sale and lease agreements for movable property executed between persons residing in Turkey;

2. Lease agreements for vehicles, including construction equipment, which were executed before the entry into force of the Decree;  

3. Service and employment agreements of non-Turkish citizens (even if the person in question may be considered to be a person residing in Turkey);  

4. Service agreements executed within the scope of export activity, transit trade, sales and deliveries considered as exports, and foreign exchange-earning services and activities;

5. Service agreements executed by persons residing in Turkey for activities to be performed overseas;

6. Financial leasing agreements for ships and financial leasing agreements to be executed according to Articles 17 and 17/A of Decree No. 32;

7. Construction agreements for shipbuilding, ship maintenance and repair;

8. Agreements or tenders executed by state institutions and organizations, and agreements to be executed between contractors and third parties that fall within the scope of the performance of an intergovernmental agreement in or indexed to foreign currency excluding agreements for the sale or lease of real estate and employment agreements;

9. Agreements executed by state institutions and organizations, excluding agreements for the sale or lease of real estate;  

10. Agreements to which a bank is a party and which are related to transactions carried out by the Ministry of Treasury and Finance within the scope of the Code on the Regulation of Public Finance and Debt Management, No. 4749; and

11. Without prejudice to the provisions of the Decree No. 32 on the Protection of the Value of Turkish Currency, the creation, issuance, purchase and sale in foreign currency of capital markets instruments (including foreign capital market instruments, certificates of deposit and shares in foreign investment funds) in line with the Capital Markets Law No. 6362 and related legislation, and obligations arising from such transactions;

12. Agreements, excluding agreements for the sale or lease of real estate and employment agreements, executed by commercial airline companies located in Turkey which carry passengers, freight or mail; agreements executed between companies providing technical maintenance services for air transport vehicles, engines and parts thereof on the one hand, and public or private persons who are authorized to, or who hold operation licenses entitling them to, perform ground services at airports within the scope of civil aviation legislation, companies incorporated by such companies, or partnerships in which such companies directly or indirectly hold at least a 50% ownership stake on the other hand;

13. Employment and service agreements executed by branches, representation offices, offices or liaison offices located in Turkey of persons residing outside of Turkey, or by subsidiaries located in Turkey in which a non-Turkish resident directly or indirectly holds a 50% or greater interest, or by companies located in free zones for their activities in free zones.

Other important provisions are as follows:

1. Amounts indicated in negotiable instruments to be issued within the scope of the agreements listed in Section (A) above may not be denominated in foreign currency or be  

2. Agreements denominated in or indexed to precious metals and/or commodities whose prices are determined in foreign currency on international markets and/or agreements that are indirectly indexed to foreign currency will be considered as agreements indexed to foreign currency for the purposes of the Decree, and may only be concluded if they qualify for an applicable exemption.

3. Overseas branches, representation offices, offices or liaison offices of persons residing in Turkey, as well as funds managed or operated by persons residing in Turkey and overseas subsidiaries in which persons residing in Turkey hold a 50% interest or greater or owned directly or indirectly by persons residing in Turkey are deemed to be resident in Turkey for the purposes of the Decree.

4. If the parties to a new or existing agreement who qualify for an exemption under the Communique desire by mutual agreement to execute an agreement in Turkish Lira or convert an agreement into Turkish Lira, prices in such agreement may be denominated in Turkish Lira.