Effective from 13 September 2018, Presidential Decision No.85 amended Decree No.32 on Protection of Value of Turkish Currency by prohibiting use of foreign currencies in certain types of contracts executed by Turkish residents.
By the virtue of newly added article 4(g) of Decree No.32, contract price and any other payment obligations arising from the contracts related to purchase and sale of movable and immovable property, rental of all types of movable and immovable property including vehicle and financial leasing, employment, service and work contracts executed between residents in Turkey shall not be agreed in foreign currency or indexed to foreign currency. Additionally, provincial article 8 of Decree No 32 called parties of contracts falling within the scope of the article 4(g) of Decree No. 32 to redetermine price of contracts and the other payment obligations in Turkish Currency within thirty days from the effective date of article 4 (g).
On October 6, 2018, Communiqué no 2018-32/51 published in the official gazette and further clarified the scope of article 4(g) by amending communiqué no 2008-32/34 regarding decree no. 32 on the protection of the value of the Turkish currency. According to communiqué, repealed article 8 of the communiqué no 2008-32/34 regarding decree no. 32 on the protection of the value of Turkish currency has been amended as per below;
Contract price and any other payment obligations cannot be agreed in foreign currency or indexed to foreign currency in the following types of contracts;
Article 1 and 2: Contracts between residents in Turkey related to the sale and rental of real estates in Turkey (including estates in free zones);
Article 3: Employment contracts between Turkish residents, excluding those performed abroad;
Article 4: Service contracts between Turkish residents including consulting, transport and brokerage contacts;
- excluding those service contracts performed by non-citizens;
- excluding those service contracts related to export, transit trade, sale and delivery in the forms of export and services and activities resulting foreign currency earnings;
- excluding those service contracts performed abroad by Turkish residents;
- excluding those service contracts related to electronic communications starting in Turkey, ending abroad or vice versa.
Article 5: Work contracts between Turkish residents excluding construction, repair and maintenance of ships under Law no. 4490 and 491;
Article 6 and 7: Contracts between residents in Turkey related to the sale and rental of vehicles (including heavy machines);
Contract price and any other payment obligations can be determined in foreign currency or indexed to foreign currency in the following types of contracts;
Article 8: Sale contracts between residents in Turkey regarding software produced abroad within the scope of information technologies and license and service contracts related to hardware and software;
Article 9: Financial Leasing contracts related to ships defined under Law no. 4490 and Decree-Law no 491;
Article 10: Financial Leasing contracts signed within the scope of articles 17 and 17/A of Decree no. 32;
Article 11: Employment contracts that non-citizens are a party;
Article 12: Contracts that state institutions and organizations and companies of Turkish Armed Forces Foundation are a party (excluding contracts related to sale and rental of real estates);
Article 13: Contracts between third parties and contractors executed within the scope of Foreign Currency or FX Indexed tenders, contracts and international agreements that state institutions and organizations are a party (excluding contracts related to sale and rental of real estates and employment contracts);
Article 14: Contracts executed by Banks in relation to transactions under Law no 4749 on Public Finance and Management of Debts;
Article 15: Without prejudice to provisions of Decree no. 32 on the protection of the value of Turkish currency and within the scope of the capital market law and relevant regulations, Capital Market Instruments including foreign capital market instruments, depository receipts, and foreign investment funds;
Article 16: Employment and service contracts executed by branches, representative offices, offices and liaison offices established by non-residents of Turkey, companies having directly or indirectly 50% or more non-resident share ownership and companies in free trade zones in relation to their activities in the free trade zone;
Article 17: Contracts executed by resident commercial airline companies providing transportation services for passengers, mail and cargo handling services; Companies providing technical maintenance services for the aerial transportation vehicles, their motors and parts; authorized companies or organizations having public and private legal personality or companies formed by those organizations or their partners having 50% or more share ownership of companies providing ground services within the scope of civil aviation legislation;
In line with article 18, rates in valuable papers associated with the referred contracts cannot be also determined in foreign currency or indexed to foreign currency. As per article 19, contracts indexed to the precious metals and/or commodities traded in International Markets and /or contracts indirectly indexed to the foreign currency shall be treated as FX indexed contracts.
According to article 20, Branches, representative offices, offices and liaison offices established by Turkish residents in foreign countries shall be treated as resident in Turkey by the virtues of article 4(g) of Decree No: 32. Investment funds owned or managed by Turkish residents in foreign markets and ownership of 50% or more shares of Foreign companies and companies directly or indirectly held by Turkish residents in foreign countries shall also be treated as resident in Turkey.
Finally, as per article 24 of Communiqué, for the conversion of the Foreign Currency or FX Indexed Values in the respective contracts, if parties of contracts may not mutually agree, effective selling rate of Turkish Central Bank as of January 2, 2018 shall be taken as a base for the conversion into Turkish Lira and by considering the monthly rate of change in the Consumer Price Index announced by the Turkish Statistics Institution price of contracts and the other payment obligations shall be determined.
Published in the Official Gazette 0n 13 September 2018, No. 30534, http://www.resmigazete.gov.tr/eskiler/2018/09/20180913-7.pdf (Turkish)
Published in the Official Gazette 0n 6 October 2018, No. 30557 http://www.resmigazete.gov.tr/eskiler/2018/10/20181006-4.htm (Turkish)
 Law No. 4490 on the Turkish International Ship Registry, published in the Official Gazette on 21 December 1999, No. 23913, Decree law on the Organization and Duties of the Undersecretariat for Maritime Affairs, published in the Official Gazette on 19 August 1993, No. 21673
 Sale and Rental contracts related to Movables can be determined in foreign currency or indexed to foreign currency. Only exemption to this rule is sale and rental contracts of vehicles (including heavy machines) As per article 22, Vehicle Rental Contracts signed before the effective date of Article 4 (g) of Decree No:32 is exempted from the provincial article 8 of Decree No.32.