Explanations about the Communique on Making Amendments to the Communique Regarding the Decree numbered 32 on the Protection of the Value of the Turkish Currency

After the Presidential Decree numbered 85 and dated 12.09.2018 on Making Amendments to the Decree numbered 32 on the Protection of the Value of the Turkish Currency was published in the Official Gazette dated 13.09.2018, “The Communique (No.: 2018-32/51) on Making Amendments to the Communique (Communique No.: 2008-32/34) Regarding the Decree on the Protection of the Value of the Turkish Currency” (hereinafter be referred to shortly as “the Communique”), prepared by the Ministry of Treasury and Finance in relation to the matter, was entered into force as published in the Official Gazette dated 06.10.2018.

Within the scope of “the Communique”, it is prescribed that, in the real estate sales and real estate lease agreements, in the employment contracts and in the service agreements which will be concluded by and between the persons residing or domiciled in Turkey, these persons shall not agree the contract and agreement prices and other payment obligations arising from these contracts and agreements, in a foreign currency or as indexed to foreign currency.

In the Communique, the contracts and agreements mandatory be concluded in Turkish Liras, and those included in the scope of the exception are regulated in 25 articles.

Contracts and agreements included in the scope of the Communique

1- Sales agreements whose subject matters are related to the real estates located in the Country, including free zones

The Communique is inclusive of the sales agreements signed for the real estates located in the Country, and it is necessary to revise those agreement prices in line with the provisions of the Communique.

2- Real estate lease agreements, including residential premises and roofed workplace lease agreements, whose subject matters are related to and which have been signed for the real estates located in the Country, including free zones

The Communique is inclusive of the lease agreements signed for the real estates located in the Country, and it is necessary to revise those agreement prices in line with the provisions of the Communique.

3- Employment contracts, with the exception of those that will be performed abroad

In the employment contracts signed with the staffs (Foreign national staffs and the staffs employed in the companies located in free zones or in the companies, more than 50% of which are owned by foreign capital, or in foreign-origin companies’ organizations in the status of branch, representative office, office or liaison office located in Turkey, or the contracts signed by the Turkish citizens residing in Turkey for the works that they will perform abroad) falling outside the exceptions, it is necessary to revise the amounts determined in those contracts in line with the provisions of the Communique.

4- Other than the following exceptions; service agreements, including consulting, brokerage and carriage agreements

The types of contracts and agreements, as we state in the articles 1, 2, 3 and 4 contained in the part of this newsletter where we explain the contracts and agreements not included in the scope of the Communique, are determined to be the exceptions.

With the exception of the types of contracts and agreements we state in the articles 1, 2, 3 and 4 contained in the part of the newsletter where we explain the contracts and agreements not included in the scope of the Communique; in all service agreements, including consulting, brokerage and carriage agreements, it is not possible to determine the agreement price in foreign currency or as indexed to foreign currency. The agreements included in this scope must be revised in line with the provisions of the Communique.

5- Contracts of work, with the exception of the clauses contained in the Turkish International Vessel Registry Law

6- Vehicle sales and lease agreements, provided that they have been signed after 13.09.2018

The amounts, determined in the vehicle lease and sales agreements, including those for heavy equipment, which have been signed after 13.09.2018, must be revised in line with the provisions of the Communique.

8- Real estate sales and real estate lease agreements to which public institutions and organizations and Turkish Armed Forces Foundation companies are a party

The Communique is also inclusive of the real estate sales and real estate rental-related agreements to which public institutions and organizations and Turkish Armed Forces Foundation companies are a party, and those agreement prices must be revised in line with the provisions of the Communique.

As regards the securities that will be issued within the framework of the agreements included in the scope of the Communique, it is not possible for these securities to be determined in foreign currency.

The agreements, indexed to commodities, precious metals whose prices are determined in foreign currency in international markets or indexed to foreign currency indirectly, shall be considered as an agreement indexed to foreign currency.

Within this framework, the employment contracts other than the exceptions, the service agreements, including consulting, brokerage and carriage agreements, falling outside the exceptions and the real estate lease and sales agreements, which take precious metals e.g. gold, etc. as basis in their contract or agreement price, shall also be deemed to be included in the scope of the Communique, and those agreement and contract prices must be revised in line with the provisions of the Communique. 

The branches, representative offices, offices and liaison offices which are located abroad and owned by the persons residing or domiciled in Turkey, and the funds operated or managed by these persons, and the companies in which these persons hold fifty percent or more than fifty percent of the shares or which are owned by these persons directly or indirectly shall be deemed to be domiciled in Turkey.

Pursuant to the above provision; the branches, representative offices, offices and liaison offices which are located abroad and owned by the persons residing or domiciled in Turkey, and the funds operated or managed by these persons, and the companies in which these persons hold fifty percent or more than fifty percent of the shares must also comply with the provisions of the Communique.

Contracts and agreements not included in the scope of the Communique

1- Employment contracts and service agreements to which the persons who do not have a citizenship bond with the Republic of Turkey are a party

Contracts and agreements, in which their price is determined in foreign currency or as indexed to foreign currency, may be signed with the foreign national staffs employed in Turkish and/or foreign capital companies. In this regard, it is not necessary to make an amendment to the contracts and agreements signed with the staffs called as expat.

Furthermore; the service agreements, signed with the persons who do not have a citizenship bond with the Republic of Turkey, are not included in the scope of the Communique, and it is not necessary to make an amendment to the agreements signed in this direction.

2- Service agreements concluded within the scope of export, transit trade, sales and deliveries considered to be export, services and activities in result of which foreign currency is earned  

In the agreements whose subject matters are export and/or transit trade, it is possible to determine the agreement price in foreign currency or as indexed to foreign currency.

3- Service agreements concluded within the scope of the activities that will be performed abroad by the persons residing or domiciled in Turkey

4- Service agreements that will be concluded by and between the persons residing or domiciled in Turkey, in relation to the electronic communications which start in Turkey and end abroad or which start abroad and end in Turkey

5- Contracts of work concluded for the construction, repair and maintenance of the vessels defined in the Turkish International Vessel Registry Law numbered 4490 and dated 16.12.1999 and the Law on Making Amendments to the Decree Law numbered 491, and the leasing (financial leasing) agreements related to the vessels within the scope of the same laws 

6- Leasing (financial leasing) agreements that will be concluded within the scope of the articles 17 and 17/A of the Decree numbered 32 on the Protection of the Value of the Turkish Currency

In such financial leasing agreements, it is possible to determine the agreement price in foreign currency or as indexed to foreign currency.

7- Movable sales and lease agreements that the persons residing or domiciled in Turkey will conclude between each other (except for vehicle sales, including heavy equipment)

In the agreements regulating sales and leases of movables, with the exception of heavy equipment and vehicle sales and leases, it is possible to determine the agreement price in foreign currency or as indexed to foreign currency.

8- Hardware and software-related license and service agreements and sales contracts related to the software produced outside Turkey within the scope of information technologies, which will be concluded by and between the persons residing or domiciled in Turkey

In the agreements whose subject matters are the sales of software produced abroad within the scope of information technologies and in the license and service agreements related to hardware and software, it is possible to determine the agreement price in foreign currency or as indexed to foreign currency.

9- Agreements falling outside the real estate sales and real estate leases to which public institutions and organizations and Turkish Armed Forces Foundation companies are a party

In the public institutions’ and organizations’ and Turkish Armed Forces Foundation companies’ agreements falling outside real estate sales and real estate leases, it is possible to determine the agreement price in foreign currency or as indexed to foreign currency.

10- Agreements that will be concluded by and between contractors and third parties, which agreements fall outside real estate sales agreements, real estate lease agreements and employment contracts, within the scope of execution of public tenders, agreements and international treaties agreed in foreign currency or as indexed to foreign currency, to which public institutions and organizations are a party

It is not necessary to make an amendment to the agreements of the companies that undertake a work, through tendering, from public institutions and organizations, which agreements are in force and determine the contract price in foreign currency or as indexed to foreign currency. There is no legal drawback in signing such agreements.

11- Agreements to which banks are a party, in relation to the transactions carried out by the Ministry of Treasury and Finance within the scope of “The Law on Regulating Public Finance and Debt Management”

12- Creation, issuance and trading, in foreign currency, of capital market instruments (including foreign capital market instruments and depository receipts and foreign investment fund shares), and the obligations, in foreign currency, related to the transactions, within the framework of the Capital Markets Law and the legal arrangements made on the basis of the mentioned Law

13- Employment contracts and service agreements to which branches, representative offices, offices, liaison offices which are located in Turkey and owned by the persons residing or domiciled abroad, and the companies in which these persons hold directly or indirectly 50 percent or more than 50 percent of the shares and the companies in free zones within the scope of their activities in free zones are a party 

In the employment contracts and service agreements that will be signed with third parties by the companies in free zones and the companies, more than 50% of which are owned by foreign capital, or the foreign-origin companies’ organizations in the status of branch, representative office, office or liaison office located in Turkey; it is possible to determine the agreement/contract price in foreign currency or as indexed to foreign currency.

14- Agreements and contracts, other than real estate sales agreements, real estate lease agreements and employment contracts, concluded with the persons residing or domiciled in Turkey by the commercial airline companies domiciled in Turkey and operating in transportation of passengers, freights and mails or by the companies providing technical maintenance services for means of aerial transportation, their engines and their components and parts or by the entities in the status of public or private legal entity, which are authorized or which have obtained business license in order to perform ground handling services in airports under the Civil Aviation Legislation or by their companies and enterprises that directly or indirectly hold at least 50 percent of the shares

15- Vehicle sales and lease agreements, including those for heavy equipment, concluded prior to 3.09.2018

Vehicle lease agreements are taken into the scope of the Communique; however, those, signed prior to 13.09.2018 namely the effective date of the temporary article 8 in the Decree numbered 32 on the Protection of the Value of the Turkish Currency, are excluded from the scope of the Communique.

The way necessary to be followed for the contracts and agreements included in the scope of the Communique

The contracts and agreements, for which it is not possible to agree the contract/agreement price and the other arising payment obligations in foreign currency or as indexed to foreign currency, must be redetermined by the parties in Turkish Currency within the scope of the temporary article 8 of the Decree numbered 32 on the Protection of the Value of the Turkish Currency.

In case the relevant consensus could not be reached; the amount in foreign currency or indexed to foreign currency, contained in the agreements/contracts concluded, shall be determined by converting it into Turkish Currency, taking as basis the effective selling rate of exchange announced by the Central Bank of the Republic of Turkey on 2 January 2018, and by increasing it pursuant to the CPI monthly rates of change (determined by the Turkish Statistical Institute every month), from 02.01.2018 until the date that the amount is redetermined by the parties.

The effective selling rates of exchange announced by the Central Bank of the Republic of Turkey on 02.01.2018 and the CPI rates determined by the Turkish Statistical Institution are enclosed with our newsletter.

The way necessary to be followed for the lease agreements

In the residential premises and roofed workplace lease agreements concluded prior to 13.09.2018, those amounts determined in foreign currency must be determined in Turkish Liras for 2 years pursuant to the principles specified above.

In case a consensus could not be reached in determining the agreement price in Turkish Liras for the 1st year, the price shall be determined by increasing it, taking as basis the CPI monthly rates of change determined by the Turkish Statistical Institute every month, from the date of determination by the end of the lease year that the determination has taken place.

In case a consensus is not reached for the 2nd year, the increase shall be made pursuant to the CPI monthly rates of change determined by the Turkish Statistical Institute every month, of the lease fee valid in the preceding lease year, and such amount shall be valid by the end of the 2nd year lease period.

The provisions contained in the Communique shall be executed by the Minister of Treasury and Trade; and the above articles shall not apply to the receivables, the collections of which have taken place or delayed for the contracts/agreements whose prices are prohibited to be agreed in foreign currency or as indexed to foreign currency.

Stamp tax

The Communique does not contain a separate or a different provision related to the payment of stamp tax. In the current situation, the contracts/agreements that will be concluded newly under the provisions of the Communique are subject to stamp tax pursuant to the Tax Laws.

The effective date of the Decree is 06.10.2018 and the execution of its provisions shall be provided by the Ministry of Treasury and Finance. Therefore, the statements that will be made and the studies that will be carried out in relation to the matter will be monitored. In case of recent changes, replacements or amendments, the relevant revisions will be made in the newsletters that will be forwarded to you.

Best Regards

ERDEMİR & ÖZMEN ATTORNEY PARTNERSHIP