Today there has been an amendment in Article 8 of Communiqué on Decree No. 32 on the Protection of the Value of Turkish Currency which sets out exemptions from the prohibition of determining contract price and other payables under certain agreements in or as indexed to foreign currency. Please find below a summary of final version, updated in accordance with the amended Communiqué published in the Official Gazette numbered 30597 and dated November 16, 2018:

Below arrangements cannot include contract prices and other payment obligations in or indexed to foreign currency:

• Sales and lease agreements among residents of Turkey regarding domestically located immovable

• Employment agreements among residents of Turkey, other than those that will be performed abroad and to which seamen are party

• Service contracts among residents of Turkey, including consultancy, intermediation and transportation; except for those listed below:

1. service contracts to which non-citizens are party,
2. service contracts that are made within the scope of export, transit trading, sales and deliveries that are considered as exports, as well as services and activities that gain foreign exchange,
3. service contracts that are made within the scope of activities of residents of Turkey to be carried out abroad, and
4. service contracts among residents of Turkey starting in Turkey, ending abroad; starting abroad, ending in Turkey and starting abroad, ending abroad.

Below arrangements are exempted from the above rule; i.e. may include contract prices and other payment obligations in or indexed to foreign currency:

• Immovable lease contracts and immovable sales contracts to which non-Turkish citizens residing in Turkey as well as (i) branches, representation offices, offices, liaison offices of non-residents, (ii) companies in which non-residents directly or indirectly have a fifty per cent or more shareholding or joint control and/or holds control, and (iii) companies located in free zones (within the scope of their activities) are party as the buyer or lessee.

• Immovable lease contracts regarding leasing of accommodation facilities certified by the Ministry of Culture and Tourism with an aim of operation.

• Immovable lease contracts for the lease of duty-free sales stores

• Contracts for work products (independent contractor) among residents of Turkey which involve costs in foreign currency

• Contracts among residents of Turkey concerning sales and lease of movables, except for sale and lease of vehicles (contracts re. lease of vehicles and merchandising of vehicles for the purposes of passenger transport, which were executed prior to the date on which the prohibition of determining contract prices and other payment obligations in or indexed to foreign currency was introduced)

• Sales agreements among residents of Turkey concerning software produced abroad within the scope of information technologies and license and service agreements concerning hardware and software produced abroad

• Financial leasing contracts regarding vessels (Financial leasing contracts executed regarding movable and immovable prior to the date on which the prohibition of determining contract prices and other payment obligations in or indexed to foreign currency was introduced)

• Financial leasing contracts to be entered into within the scope of Articles 17 and 17/A of the Decree No. 32

• Generation, issuance, purchase and sales of capital market instruments (including foreign capital market instruments and depository receipts and foreign investment fund shares) within the framework of Capital Markets Law and relevant regulations

• Employment agreements to which non-citizen residents are party

• Employment agreements and service contracts to which (i) branches, representation offices, offices, liaison offices of non-residents, (ii) companies in which non-residents directly or indirectly have a fifty per cent or more shareholding or joint control and/or holds control, and (iii) companies located in free zones (within the scope of their activities) are party as the employer or service recipient

Having noted the foregoing, it should also be noted that it is compulsory for contract prices except for the ones allowed under the exemptions to be re-determined by the parties in Turkish currency. In case the parties fail to reach an agreement in re-determining the same; the prices shall be determined by first calculating the Turkish currency equivalent based on Turkish Central Bank’s effective selling rate on 2/1/2018, and increasing the same on the basis of consumer price index (CPI) monthly variation rates from the date of 2/1/2018 to the date of re-determining of the prices. However, this shall not apply to deposits paid within the scope of immovable lease agreements. Further requirements also exist for contract values of immovable lease contracts executed before the effectiveness date of the new rule.

In addition to the above, there are also (i) further exemptions for certain contracts to which governmental institutions, banks, airline operators and their service providers are party, as well as (ii) clarifications regarding branches and liaison offices located abroad. Further, the amounts under negotiable instruments that will be issued within the scope of contracts subject to above restrictions may also not be agreed based on or indexed to foreign currency, save for those issued prior to the date on which the above restrictions were introduced. On the other hand, the contracts in which price is indexed to precious metals and/or commodity whose price is designated in foreign currency in international markets and/or in which price is indirectly indexed to foreign currency shall also be considered as foreign currency-indexed contracts.  However, in the contracts regarding transportation activities, indexation can be made to fuel oil prices.

Finally, it should be noted that the paragraph envisaging the right for the parties to whom an exemption is granted to request that the new contracts to be mutually arranged in Turkish currency or that the amounts in the existing contracts to be re-agreed in Turkish currency has been abolished with the latest amendment in the Communiqué.