CLIENT ALERT

November 2018

   

 

For further information please contact:

Gökseli Cengiz
Associate, Istanbul
g.cengiz@cergun.av.tr



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New Exceptions to the Foreign Currency Contracts Ban

On November 16th, the Ministry of Treasury and Finance issued a new Communiqué, which introduced additional exceptions to the prohibition to sign foreign currency denominated/indexed contracts (the “New Communiqué”).

Immovable Sale and Lease Contracts

  • Prior to the New Communiqué, the contract amount under the immovable sale and lease contracts could not be determined in foreign currency or foreign currency indexed. The New Communiqué sets forth certain exemptions to that prohibition and provides that the contract amount and other payment obligations arising from the relevant contract can be determined in foreign currency or foreign currency indexed if:
  • those will be executed by the persons residing/domiciled in Turkey yet not having a citizenship in Turkey,
  • the immovable lease contracts relate to the lease and operation of the rest areas certified by the Ministry of Culture and Tourism, and
  • the immovable lease contracts relate to the lease of customs-free sale stores.
  • Further, together with the New Communiqué, the contract amount under the immovable lease contracts to be executed between the (a) contractors, appointed companies or their counter-parties and (b) third parties, or to be executed within the context of projects for the performance of tenders, agreements and international agreements, which public authorities and organizations are party to and are in foreign currency or foreign currency indexed, can be determined in foreign currency or foreign currency indexed.

Contracts for Works

  • Prior to the New Communiqué; the contract amount under the contracts for works (other than shipbuilding contracts) could not be determined in foreign currency or foreign currency indexed.
  • Together with the New Communiqué, the contract amount under the contract for works which include cost items in foreign currency can be determined in foreign currency or foreign currency indexed.

Contractor Concept and the Scope of Public Authority and Organization

  • Prior to the New Communiqué, the ‘contractor’ concept was not quite clear as to whether it covers the appointed companies signing the project agreements with the public authorities, or just the sub-contractors of such project companies.
  • Together with the New Communiqué, the ‘appointed company’ concept is introduced together with the ‘contractor’ concept and the wording became clearer by covering the contracts ‘within the context of projects’ for the performance of tenders, agreements and international agreements which public authorities and organizations are party to and are in foreign currency or foreign currency indexed.

Evaluation as ‘Turkish Company’

  • Prior to the New Communiqué, the branch, representation office, office, liaison office, operated or managed funds of the persons residing/domiciled in Turkey, companies that those persons have 50% and more shareholding and companies directly or indirectly owned by those persons (and which are located in abroad) shall be considered as being resident in Turkey under the sub-paragraph (g) in Article 4 of the Decree No. 32.
  • Together with the New Communiqué, such provision shall not be applicable if the contract has been performed outside Turkey, thus the relevant persons shall not be considered as being resident in Turkey.

Commercial Papers

  • Prior to the New Communiqué, for the commercial papers to be issued within the scope of the contracts where the contract amount could not be determined in foreign currency, the amount of such commercial papers could not be determined in foreign currency either.
  • Together with the New Communiqué, commercial papers issued and brought into circulation before the entry into force of Provisional Article 8 of the Decree No. 32 are exempted from such restriction.

Conversion into Turkish Lira

  • Prior to the New Communiqué, the Turkish Lira conversion provisions would not be applicable for the collected or due receivables under the contracts where the contract amount and other payment obligations arising thereunder could not be determined in foreign currency or foreign currency indexed.
  • Together with the New Communiqué, in addition to such provision, the Turkish Lira conversion paragraph will not be applicable for the deposits paid for the immovable lease contracts and for the commercial papers circulated within the context of the performance of contracts either.
  • The provision regulating that “the contract amount shall be determined as Turkish Lira if the parties exempted under Article 8 mutually prefer to determine the contract amount as Turkish Lira for new or existing contracts”, which was causing confusion as to whether the existing contracts covered by the exceptions would also be required to be converted to Turkish Lira, has been deleted under the New Communiqué.

 

This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice. This information is protected by copyright and may not be reproduced or translated without the prior written permission of Ergün Avukatlık Bürosu.