Amendment on Decree No. 32 on the Protection of the Value of Turkish Currency

Certain amendments were made to Decree no.32 on the Protection of the Value of Turkish Currency (“the Decree”) with the decision numbered 2018/11185 of the Council of Ministers by introducing new provisions regarding the utilization of foreign exchange loans, to be effective as of 2/5/2018.

The most significant amendment was made in Article 17 of the Decree regarding loans used from abroad, by making a distinction between Turkish residents withoutforeign exchange earnings and Turkish residents with foreign exchange earnings.

   (A) In terms of Turkish residents without foreign exchange earnings

The added provisions of Article 17 of the Decree state that residents in Turkey who do not have foreign exchange earnings are not allowed touse loans from abroad unless the relevant loan falls within the scope of the following exceptions:

  • Loans to be used by state institutions and organizations, banks and leasing companies, factoring companies and financing companiesresident in Turkey,
  • Loans to be used by Turkish residents with loan balances equal to or more than 15 million USD at the time of usage,
  • Loans to be used by Turkish residents responsible of conducting projects within public-private partnership model,
  • Loans to be used for the financing of machines and devices within the scope of the customs tariff statistics position of the VAT decision annex (I) list’s 17th row, and the loans in accordance to the incentive certificates,
  • Loans to be used by tender winning Turkish residents regarding national tenders announced internationally or Turkish residents undertaking defense industry projects approved by Undersecretariat for Defense Industries,
  • Loans to be used in a manner not exceeding the sum of evidencedpossible foreign exchange earnings, by Turkish residents not having foreign exchange earnings during the last three financial years provided that export, transit trade, sales and deliveries deemed as exports, relations with foreign exchange earning services and activities and potential foreign exchange earnings are evidenced, and
  • Loans to be used in accordance with the principles to be determined by the Ministry.

   (B) In terms of Turkish residents with foreign exchange earnings

Turkish residents having foreign exchange earningsare allowed to use foreign exchange loans. However, in case loan balance is under 15 million USD at the time of usage, thesum of theloan amount to be used and the existing loan balance cannot exceed the sum of foreign exchange earnings of the last three financial years. Intermediary banks are responsible for checking the compliance with the rules stated herein.

In case it is later determined that loan balance being used through banks, financial leasing companies, factoring companies and foreign branches of financing companies (including offshore branches of banks but excluding the free zone braches)exceeds the sum of foreign exchange earnings of the last three financial years; the exceeding part shall be recalled or converted into Turkish lira loan.

The restriction explained above in this paragraph is not applicable to the loans to be used by Turkish residents having foreign exchange earnings, which falls in the scope of the exemptions listed above in paragraph A.

   (C) Loans used from Turkey

According to newly added Article 17/A, Turkish residents are allowed to use commodity loans in accordance with export and import regimes. Furthermore, banks and financial leasing companies, factoring companies and financing companies resident in Turkey may grant Turkish residents foreign exchangeloans within the scope of the terms indicated in this article. The conditions and exemptions of such foreign exchange loans are set forth parallel to the conditions and exemptions stated above in paragraph A and B, in a way foreseeing a distinction betweenTurkish residents without foreign exchange earnings and Turkish residents with foreign exchange earnings.

    (D) Provisional Clauses

Pursuant to the newly added provisional Articles 5 and 6, foreign exchange loans used from Turkey or abroad by Turkish residents with loan balances under 15 million USD and the loans indexed to foreign exchange which remain open on the enforcement date of the Decree, 2/5/2018, excluding the ones falling within the scope of the exemption provisions of the Decree, shall not be renewed as foreign exchangeloans or loans indexed to foreign exchange.

Finally, provisional Article 7 states that foreign exchangeloans and loans indexed to foreign exchange used before 2/5/2018shall be also included inloan balance calculations.

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