Türk Ticaret Kanunu’nda Değişiklikler

Frequently Asked Questions Regarding the Amendment of the Communiqué No. 32 on the Protection of the Value of Turkish Currency (Communiqué No: 2008-32/34) dated 06.10.2018

The Ministry of Treasury and Finance has issued a statement to provide further clarification on the amendments introduced under the Communiqué no. 32 on the Protection of the Value of Turkish Currency (Communiqué no: 2008-32/34). Accordingly, they have provided answers for certain questions proposed to the Ministry which are hereinbelow.

1. Could you kindly provide an example regarding the calculations in Article 8/24 of the Communiqué?1

1 It shall be noted that the explanations and the calculations are provided as a guideline for those parties who cannot reach a mutual agreement regarding re-determination of the contract value in Turkish Lira.

As per Article 8/24 of the Communiqué, if parties to an agreement, the contract price and other payment obligations of which cannot be denominated in or indexed to foreign currency, cannot mutually agree on re-determination of the contract value in Turkish currency within the scope of the Provisional Article 8 of the Decree No. 32, then the amounts denominated in or indexed to foreign currency in the already executed contracts shall be re-determined by means of increasing the Turkish currency equivalent of such amounts calculated over the indicative selling rate of exchange of the Central Bank of Turkey applicable on 2/1/2018 on the basis of the monthly rates of change in the consumer price index (CPI) set forth for each month by the Turkish Statistical Institute starting from 2/1/2018 until the re-determination of the relevant contract value.

The amounts denominated in or indexed to foreign currency under the lease contracts for houses and roofed workplaces executed before the effective date of Provisional Article 8 of the Decree No. 32 are re-determined in Turkish currency to be applicable for a period of two years.

However, unless otherwise agreed by the parties, the rent determined in Turkish currency as per the mentioned paragraph is revised by means of applying an increase on the basis of the monthly rates of change in the consumer price index (CPI) set forth for each month by the Turkish Statistical Institute starting from date of determination until the end of the relevant rental year, and such rent shall be applicable for a period of one year starting from the rental year when the determination in Turkish currency is made.

The Turkish currency lease price of the following rental year is determined by means of increasing the rent of the previous rental year on the basis of the monthly rates of change in the consumer price index (CPI) set forth for each month by the Turkish Statistical Institute,

and the Turkish currency lease price so increased shall be applicable until the end of the two years’ period.

Example A: In case an agreement cannot be reached by the parties during the re-calculation of the prices stipulated in contracts where the contract prices cannot be denominated in or indexed to foreign currency within the scope of the Provisional Article 18 of the Decree No. 32 Regarding the Protection of the Value of the Turkish Currency, then such calculation shall be made as per the example given hereinbelow, within the framework of the first sub-paragraph of paragraph twenty-four of Article 8 of the Communique No. 2008-32/34:

The date of the contract: 18/02/2017

The date of conversion to Turkish Lira (TRY): 11/10/2018

The Contract Price in Foreign Currency: The “annual” contract price stipulated in the 5-year contract dated 18/2/2017

Central Bank of the Turkish Republic (CBRT) exchange rate: The effective selling rate of the CBRT determined on 02/01/2018, on an indicative basis

Consumer Price Index (CPI) (TÜFE)2: The aggregate of 9-months CPI variation ratio announced monthly by the Turkish Statistical Institute from 02/01/2018 until 11/10/2018

2 Consumer Price Index figures announced by Turkish Statistical Institute shall be taken into account for the purposes of CPI calculations. [(𝐶𝑃𝐼𝑆𝐸𝑃𝑇𝐸𝑀𝐵𝐸𝑅 2018𝐶𝑃𝐼𝐷𝐸𝐶𝐸𝑀𝐵𝐸𝑅 2017) − 1] shall be utilised for the purposes of calculation of the aggregate of 9-months CPI variation ratio from 02/01/2018 until 11/10/2018. In calculations to be made, while CPI ratio is applied, monthly rates will be taken into consideration and leap days will not be taken into account.

The Contract Price Converted to TRY = (Contract price * CBRT exchange rate) * (1 + CPI)

Example A: Numerical Calculation:

The date of the contract: 18/02/2017

The date of conversion to TRY: 11/10/2018

The Contract price in Foreign Currency: USD 1000

CBRT exchange rate: 3.7776 USD/TRY

CPI: 19.37 %

Contract Price Converted to TRY = (1000 * 3.7776) * (1+0.1937)

= 4,457.19 TRY

Example B: In case an agreement cannot be reached by the parties during the re-calculation of the prices stipulated in contracts where the contract prices cannot be denominated in or indexed to foreign currency within the scope of the Provisional Article 18 of the Decree No. 32 Regarding the Protection of the Value of the Turkish Currency, then such calculation regarding the “lease agreements for residences and roofed workplaces” shall be made as per the example given hereinbelow, within the framework of the second sub-paragraph of paragraph twenty-four of Article 8 of the Communique No. 2008-32/34:

The date of the contract: 18/02/2017

The date of conversion: 11/10/2018

The Contract price in Foreign Currency: The annual lease price of the 5-years agreement for residence or roofed workplace dated 18/2/2017

CBRT exchange rate: The effective selling rate of the CBRT determined on 02/01/2018, on indicative basis

CPI1: The total of 9-months CPI monthly variation ratio announced by the Turkish Statistical Institute from 02/01/2018 until 11/10/2018

The Contract Price1: Contract Price (in TRY) valid between 11/10/2018 and 18/02/2019

The Contract Price1 = (Foreign Currency Contract Price * CBRT exchange rate) * (1+CPI1)

CPI2: The total of 4-months CPI monthly variation ratio announced by Turkish Statistical Institute from 11/10/2018 until 18/02/2019

Contract Price2: The Contract Price (TRY) valid between 18/02/2019 and 18/02/2020

Contract Price2 = Contract Price1 * (1+CPI2)

CPI3: The Annual total of the monthly CPI variation ratios announced by the Turkish Statistical Institute from 18/02/2019 until 18/02/2020

Contract Price3: Contract Price (TRY) valid between the dates of 18/02/2020 and 11/10/2020

Contract Price3 = Contract Price2 * (1+CPI3)

Example B: Numerical Calculation:

Date of contract: 18/02/2017

The date of conversion to TRY: 11/10/2018

The Contract price in Foreign Currency: USD 1000

CBRT exchange rate: 3.7776 USD/TRY

CPI1: 17.99%

The Contract Price1 = (1000 * 3.7776) * (1+0.1799)

= 4,457.19 TRY

CPI2: 6% (ASSUMPTION)

The Contract Price2 = 4,457.19 * (1+0.06)

= 4,724.62 TRY

CPI3: 15% (ASSUMPTION)

The Contract Price3 = 4,724.62 * (1+0.15)

= 5,433.31 TRY

2. Before the amendment made in the Communiqué, I used to sell commercial goods denominated in or indexed to foreign currency as I had inputs of import. Can I continue selling in the same way in the domestic market after the amendment?

As the sale contracts of movable goods as denominated in or indexed to foreign currency are allowed, such sales can be made. Only the vehicle sale contracts, including construction machinery, cannot be made in or indexed to foreign currency.

3. Is it possible to make the contracts, which cannot be denominated in or indexed to foreign currency, in TRY and to issue the invoices in foreign currency?

It is not possible (the provisions of the tax legislation are reserved).

4. What does it mean “to index the price to the precious metals and/or commodities determined in foreign currency in the international markets” as stipulated in the Article 8/19 of the Communiqué?

What is meant with this statement, is the usage of precious metals and/or commodities such as gold, petroleum etc. which are indirectly indexed to foreign currency, in contracts where the contract prices and other payment liabilities arising therefrom cannot be denominated in or indexed to foreign currency, pursuant to Article 8 of the Communiqué.

5. What does the Turkish Armed Forces Foundation companies mean?

It means those companies such as ASELSAN, HAVELSAN, ROKETSAN, TUSAS, ISBIR, ASPILSAN, more than 50% of whose capital belongs to the Turkish Armed Forces Foundation, established for the purpose of strengthening the Turkish Armed Forces.

6. If the software and hardware are produced domestically, are the licenses and service agreements related to these exempt from this Communiqué amendment?

They are not exempt from the scope of the Communiqué. It is not possible to determine the prices of the license and service contracts regarding the software or hardware produced domestically in or indexed to foreign currency.

7. Are foreign real or legal persons exempt from the prohibition of the contracts made in or indexed to foreign currency?

If real persons are not citizens of the Republic of Turkey but are legally domiciled in Turkey, they cannot enter into lease or sale agreements for immovables in foreign currencies, whereas they can execute employment and service contracts.

The branches, representation offices, offices, liaison offices, or companies which are controlled, i.e. 50% or more of the shares are owned by a foreign resident that does not have a legal domicile in Turkey, may enter into employment and service contracts to be denominated in or indexed to foreign currency.

Those persons, who do not have a legal domicile in Turkey or the citizenship of the Republic of Turkey, are accepted as non-residents and exempt from Article 8 of the Communiqué.

8. Which institutions and organizations are included within the definition of public institutions and organizations?

Public institutions and organizations include institutions and administrations that are mentioned in the tables I, II, III, and IV of the Public Finance Management and Control Law (Law No. 5018), and the companies, at least 50% of whose shares are directly or indirectly owned by these institutions and administrations.

9. Are insurance contracts included within the scope of this Communiqué amendment?

Insurance contracts do not fall within the scope of the Communiqué. However, in case a payment obligation arising under an insured asset/risk falls under the scope of the Communiqué which is restricted to be denominated in or indexed to foreign currency, then the insurance contract cannot be denominated in or indexed to foreign currency.

10. What is the sanction of acting against the Communiqué?

As per the first paragraph of Article 3 of the Law No. 1567 on the Protection of the Value of Turkish Currency regarding incompliance of Communiqué, an administrative fine in the amount of TRY 3.000-25.000 (approximately TRY 6.300-55.000 (as of October 2018), when the revaluation rates are taken into consideration) shall be separately imposed on each party to the contract. In the case of repetition, these penalties are imposed in double.

11. Will there be a stamp duty exemption for the contracts converted to Turkish Liras?

This issue is related to the tax legislation and is outside the scope of foreign currency regulation3.

3 There is no general exemption on stamp tax duty arising under the contracts, prices of which are re-determined in TRY. In this respect, each re-determination needs to be reviewed on a case-by-case basis pursuant to the Stamp Tax Law.

12. What are included in the service contracts, which are considered to be within the scope of the sales and deliveries deemed as export, and foreign currency earning services and operations?

Sales and deliveries deemed as export, and foreign currency earning services and operations include; the service contracts signed within the framework of services and operations given in the third paragraph of Article 6 of the Communiqué on Tax, Duty and Fee Exemption in Export, Transit Trade, Sales and Deliveries Deemed as Exports, and Foreign Currency Earning Services and Operations (Export: 2017/4).

13. Is it allowed to make contracts for securities denominated in or indexed to foreign currencies?

Yes, it is allowed.

14. Are foreign currency loans included within this scope?

Foreign currency loans are within the scope of Articles 17 and 17/A of the Decree No. 32 on the Protection of the Value of Turkish Currency.

15. In contracts for which exemptions are provided, is there an obligation to convert the contract to Turkish Liras in case one of the parties requests such conversion but a mutual agreement cannot be reached?

If the exemption is granted to only one party of the contract, for instance as stipulated in the twelfth paragraph, and the party so exempted does not want to use the its right to continue with the contract denominated in or indexed to foreign currencies, then the contract price must be converted to Turkish Liras. However, if the exemption is provided to the contract type in general rather than to one of the parties, then the mutual agreement of both parties is required for contract price to be converted into Turkish Liras, and such request of a single party is not sufficient.

16. Is it possible for the branches, representation offices, offices, liaison bureaus, or companies in Turkey, fifty percent or more of whose shares are owned by non-resident companies, and companies existing in free zones within the scope of their operations in the free zone, to make all kinds of contracts in or indexed to foreign currencies?

Such entities can only execute employment or service contracts denominated in or indexed to foreign currency.

17. Can the payments of the football players be made in or indexed to foreign currencies?

The payments of the football players are within the scope of the employment contracts, thus as per the third paragraph of Article 8 of the Communiqué:

  • • it is possible to make the payments of those football players who are not citizens of the Republic of Turkey, denominated in or indexed to foreign currencies; and
  • • it is not possible to determine the prices of the contracts made by and between the Turkish football players and the Turkish football clubs denominated in or indexed to foreign currencies.
2018-10-26T12:41:49+00:00