Turkey | Dealing with F/X phobia in Turkish contracts: exceptions to "Conversion into try" announced
8 October 2018
Client Alert | Turkey | Banking & Finance
Decree no. 32 on the Protection of the Value of the Turkish Currency (the “Decree”) was amended on 13 September 2018 in order to restrict f/x and f/x-indexed payments for certain Turkish resident-to-resident transactions as follows: contract prices and other payment obligations arising from contracts for (i) the sale of movable/immovable property, (ii) the lease (including financial leasing) of movable (including vehicles) and immovable property, (iii) employment, (iv) service and (v) construction, cannot be denominated in or indexed to a foreign currency, except for cases to be determined by the Ministry of Treasury and Finance (the “Ministry”).
In accordance with the amendments made in Decree no. 32, all prices denominated in a foreign currency under contracts already executed (falling within the scope of the restrictions above) must be re-determined in Turkish Lira within 30 days following the introduction of the said amendment (i.e. 13 October 2018), except for cases to be determined by the Ministry. These amendments to Decree no. 32 were followed by further amendments indicated in Communiqué no. 2008-32/34. Communiqué no. 2018-32/51, which amended Communiqué no. 2008-32/34 regarding Decree no. 32 (the “Communiqué”), reiterated this restriction and provided a number of exceptional cases. This Client Alert aims to briefly summarise restrictions and exceptions provided under the Communiqué.