Transaction In Turkish Lira In Contracts
In the event that the parties cannot reach an agreement, the Central Bank’s effective selling rate on January 2 will be used as the basis for converting foreign currency amounts in contracts concluded before January 2, 2018, into Turkish lira. If the parties agree, they may convert to Turkish lira at different rates. The newly determined amounts will be updated annually in line with the increase in the consumer price index (CPI) published by the Turkish Statistical Institute (TÜİK). Here are all the details of the regulation regarding the conversion from foreign currency to TL in contracts.
The four-page draft circular regulates contracts that must be made in TL and contracts that are exempt from this requirement under 23 headings. The rules to be applied in old and new contracts according to their subjects are as follows:
Residential and commercial property sales and rentals: Individuals residing in Turkey cannot agree on the contract price in foreign currency or indexed to foreign currency in real estate sales or rental contracts, including residential and commercial properties, between themselves.
Employment contracts: Individuals residing in Turkey may not enter into employment contracts denominated in foreign currency or indexed to foreign currency, except for those to be performed abroad.
Service contracts: Individuals residing in Turkey may not enter into service contracts, including consultancy and brokerage services, denominated in foreign currency or indexed to foreign currency. The following are exempt from this prohibition:
– Service contracts to which persons who do not have Turkish citizenship are parties,
– Service contracts concluded within the scope of exports, transit trade, sales and deliveries deemed as exports, and foreign currency-generating services and activities,
– Service contracts concluded within the scope of activities to be carried out abroad by persons residing in Turkey.
Work contracts: Persons residing in Turkey may not enter into work contracts other than those related to the construction of ships in foreign currency.
Movable property sales contracts: Persons residing in Turkey may enter into movable property sales and rental contracts other than those related to the sale of vehicles, including construction machinery, in foreign currency.
Leasing contracts: Financial leasing and leasing contracts related to ships may be concluded in foreign currency. The amounts related to financial
leasing contracts may be agreed upon in foreign currency.
Non-citizens residing in Turkey: For individuals residing in Turkey who do not have citizenship ties with the Republic of Turkey, the contract price and other payment obligations arising from employment contracts they enter into may be determined in foreign currency or indexed to foreign currency.
Public institutions: Public institutions and organizations, as well as companies in which these institutions and organizations have direct or indirect shareholdings in the defense industry, may enter into contracts in foreign currency, except for real estate sales and leases.
Branches of foreign companies: Contracts for work and services entered into by branches, representative offices, offices, liaison offices, companies in which persons residing abroad hold 50% or more of the shares, and companies located in free zones in Turkey may be concluded in foreign currency.
Airline companies: Domestic airline companies and individuals residing in Turkey who provide technical maintenance services to these companies may enter into contracts in foreign currency, except for real estate sales, leases, and employment contracts.
Checks and promissory notes: The amounts stated in valuable documents such as checks and promissory notes issued under contracts subject to foreign currency restrictions cannot be denominated in foreign currency or indexed to foreign currency.
Indexing to precious metals: Contracts indexed to precious metals and/or commodities whose prices are determined in foreign currency on international markets will be considered foreign currency-indexed contracts.
Branches abroad: Branches, representative offices, offices, liaison offices, funds operated or managed by persons resident in Turkey abroad will be considered as “resident in Turkey.”
Old vehicle rental contracts: Vehicle rental contracts, including those for construction machinery, that were previously concluded will continue.
If the parties cannot agree, the exchange rate as of January 2 will be used: In contracts that must be converted from foreign currency to Turkish Lira,
if the parties cannot reach an agreement on the conversion of the amounts to Turkish Lira, the amounts in contracts concluded on or before January 2, 2018, will be converted to Turkish Lira using the Central Bank’s effective selling rate (3.7776 TL) on that date.
For contracts signed after January 2, the exchange rate in effect on the date of the contract will be used. The amounts in question will apply until the contract renewal period. The amounts to be determined again during the renewal period will not exceed the amount calculated based on the monthly change rates of the consumer price index (CPI) determined by the Turkish Statistical Institute for each month.