In order to prevent devaluation of the Turkish Lira, the Turkish administration issued a presidential decree dated 12 September 2018 (“Decree”) establishing restrictions on agreements denominated in foreign currencies or indexed to foreign currencies if such agreements are concluded between individuals and/or legal entities residing in Turkey.
According to the Decree, Turkish residents acting as party to contracts with other Turkish residents are prohibited from using foreign currency (including Turkish Lira indexed to foreign currency) in determining the contractual value and payment obligations:
a) Contracts for the purchase and sale of any movables and immovables (i.e. real estate),
b) Contracts regarding rental of any movables and immovable assets including car rentals and financial leasing contracts,
c) Leasing contracts,
d) Employment contracts,
e) Service contracts,
f) Contracts of work.
For the purpose of the Amendment, Turkish residents are all natural persons and legal entities residing or incorporated in Turkey. On this basis, companies incorporated in Turkey by foreign persons or foreign entities also fall under the prohibition even the share in such companies are fully owned by foreigners.
The Decree which came into force on 13 September 2018 provides in the case of existing contracts that the contracting parties have a 30 day period to amend the contract and to re-determine both the contract price and any other payment obligation arising from the contract in Turkish Lira.
The scope of regulations in accordance with the Amending Decree and detailed information related to stipulated provisions and conditions will be stated in additional regulations and Ministry decisions.
Please find the full Turkish text of the Amending Decree here.
Dr Gökce Uzar Schüller, Attorney at law
Frankfurt and Istanbul