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Legal Alerts

The Ministry Publishes FAQs for the FX Payment Ban

Legal Alerts
Banking & Finance
Recent DevelopmentThe Ministry of Treasury and Economy (the “Ministry“) had amended the FX payment ban exemptions on November 16, 2018. The Ministry recently published its responses to the Frequently Asked Questions (FAQs) about these amendments.

What’s New?

  • For mixed agreements, all agreement types included therein must benefit from the exemption in order to denominate the agreement price and other payment obligations in FX or to be FX-indexed.
  • Different from the Turkish Code of Obligations No. 6098, a service agreement is defined as an agreement related to transactions other than delivery, transactions deemed as delivery and import of goods.
  • If any portion of the costs that a contractor assumes is in FX, the construction agreement price can be denominated in FX or be FX-indexed.
  • Between September 13, 2018 and November 16, 2018 (the “Interim Period“), pursuant to the then applicable legislation, certain agreements were within the scope of the FX payment ban. However, the amendments dated November 16, 2018 exempted some of these agreements from the FX payment ban. In this context, the payment obligations under these agreements converted to Turkish lira within the Interim Period can be redenominated in FX or FX-indexed only upon the agreement of the parties even if the relevant agreement is exempted after November 16, 2018.
  • The Ministry clarified that the exemption to denominate the payment obligations in FX or be FX-indexed for agreements regarding the form, issue, purchase and sale of securities does not allow Turkish issuers to issue FX denominated domestic bonds.
  • Agreements for services provided in Turkey cannot benefit from the exemption even if they are within the scope of FX earning services and activities.
  • Within the scope of the exemption provided for hardware produced abroad, hardware was defined as mechanic or electronic components that make up the physical structure of a computer. Therefore, machines that function independently such as photocopiers and check readers will not benefit from the exemption because they are individual electronic devices and not hardware. However, the agreement prices and other payment obligations can be denominated in FX or be FX-indexed provided that the relevant agreement can benefit from any other exemption.
  • Transport and shipping services agreements will benefit from the exemption if their execution begins in Turkey and ends abroad, or vice versa; or begins and ends abroad.
  • The exemption provided for real estate lease agreements executed for the purpose of operating tourism facilities certified by the Ministry of Culture and Tourism includes the lease of commercial areas (other than rooms for accommodation purposes), such as baths, pools, spas, hairdressers and markets, in these facilities for operating purposes.
  • In order for the Ministry to apply sanctions for incompliance with the FX payment ban, denunciations made to the Ministry should include concrete information and documents certifying the incompliance. Otherwise, the Ministry will not take any action.