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New restriction on foreign currency-denominated or indexed contracts

6 October 2018
New restriction on foreign currency-denominated or indexed contracts
6 October 2018

Turkey requires certain contracts between Turkish residents to be valued in Turkish Lira On September 13, 2018, the Turkish Presidential Decree No. 85 (the Decree No. 85) amending the Decree No. 32 on the Protection of the Value of the Turkish Currency (the Decree No. 32) was published in the Official Gazette and introduced new restrictions on certain contracts between Turkish residents, requiring the contract price and other payment obligations arising from the below contracts not to be denominated in, or indexed to, foreign currency:

• The sale and purchase of any movable and immovable property.
• Leasing of any movable and immovable property including vehicle and financial leasing.
• Employment/service contracts.
• Contracts of work, including construction contracts.

As of the 6th of October 2018, the Ministry has clarified that;
(a) This recent restriction only applies when both parties of a contract are Turkish residents, which cover, among others, Turkish companies with foreign capital and foreign individuals deemed domiciled in Turkey,
(b) Contracts that are to be redenominated in Turkish Lira are those between individuals and/or legal entities that were both Turkish residents at the time the contract was entered into,
(c) while setting forth exceptions to the requirements introduced under the Decree No. 85, foreign currency denominated revenues, costs and liabilities of the parties will be taken into account, in parallel with the provisions of the Decree No 32, which set out certain eligibility requirements for Turkish residents to be able to obtain foreign currency denominated loans.

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