Since there has been an increase in USD Dollar and Euro which are used as the most common currencies both in the international financial market and in our country, the Presidential Decision No. 85 dated 12.09.2018 (Official Gazette 13.09.2018, 30534) (“Decision”) has been published and binding over the country. With the Decree, some general restrictions have been brought and, it is left the Ministry of Treasury and Finance to regulate the exceptions regarding those restrictions.
With the same Decision and a few minor amendments subsequently made, a number of exemptions may be drawn up for foreign exchange contracts. The nature of this Decision and the contracts that can be prepared in foreign currency are explained in the content of our article.
The Decree has stated that the value of the contracts and the engagements associated with these contracts cannot be determined in foreign currency and indexed to the foreign currency where meets 3 conditions written below. These are; If the real or legal persons of the contracting parties are residence of Turkey,
- If the subject of the contracts is composed of real estate purchase and sale, vehicle and financial leasing, leasing, about all kinds of securities and real estates leasings based in Turkey or if the said contract is about labour, service or in the type of construction agreements and
- The Contract should not be stated in the exceptions regulated by the Ministry.
In this regard, our review includes all the amendments made in the aforementioned Decree and Communiqués and the Decree No. 32 on the Protection of the Value of the Turkish Currency and accordance with these amendments, contracts that are not covered by the above-mentioned 3 criteria that can be issued in foreign currency or indexed to foreign currency are listed below:
- With regard to service contracts, service contracts with individuals who are not Turkish citizens, concluded within the scope of exports, transit trade, sales and deliveries deemed as exports and earning services and operations for foreign exchange, service contracts concluded by the residents in Turkey for the overseas operations and service contracts amongst residents in Turkey regarding electronic communication, which will be commenced in Turkey but finalize in abroad or commenced in abroad but finalize in Turkey
- With regard to the exceptional circumstances of the residents in Turkey who are permitted to value the contract in foreign currency, sales contracts for movables excluding work machines and vehicles, lease contracts for movables excluding work machines and vehicles, sales contracts for software that is developed abroad regarding information technologies and service and license agreements regarding hardware and software, financial leasing contracts for ships, employment contracts with individuals who are not Turkish citizens but reside in Turkey, financial leasing contracts to be concluded within the scope of articles 17 and 17/A of the Decree No. 32 on the Protection of the Value of Turkish Currency, transactions between banks are realized by the Ministry of Treasury and Finance within the scope of the Law on Regulation of Public Finance and Debt Management dated March 28, 2002 and numbered 4749, employment and service contracts involving non-residents Turkish branches, representative agencies, offices, liaison offices, companies in which 50% or more of the shares are held either directly or indirectly by non-residents; as well as employment and service contracts of companies in free zones regarding their operations in free zones
- Except contracts regarding real estate sale, leasing and employment, it is allowed to determine the contract value in foreign currency or indexed to foreign currency in contracts amongst commercial airline companies that performs the transportation of passengers, cargoes or mails; companies offering technical maintenance services for air crafts, their engines and components; public or private legal entities which have obtained work permit or have been authorized to offer ground services at airports within the scope of the legislation of civil aviation; the shareholders that holds at least 50% of the shares of the companies that are established by these entities and partnerships
- With regard to the exceptional situations introduced for the public institutions except for the contracts regarding real estate sales and leasing contracts, all the contracts that public institutions and organizations and companies of Turkish Armed Forces Foundation are a part of, except for the contracts regarding real estate sale, leasing and employment; contractors of public institutions can conclude agreements in foreign currency or indexed to foreign currency with third parties, in case the contracts are relevant to performance of the biddings, contracts and international agreements that are executed in foreign currency or indexed to foreign currency tenders which public institutions and organizations are parties of
- With regard to the capital market instruments, it is possible to create, issue, purchase and sell the capital market instruments (including foreign capital market instruments, depositary receipts, and foreign investment fund shares) and determination of the liabilities for their transactions in foreign currency.