The Scope of The Ban on Payments with Foreign Currency Has Been Narrowed

With the Communiqué on the Amendment of the Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency (Communiqué No: 2008-32/34) (“Communiqué”) dated 28 February 2024 (“Amendment Communiqué”), it is stated that certain contracts that are prohibited from being paid in foreign currency in the past may be made in foreign currency freely now. You can review the changes below.

1. Ban on Payments with Foreign Currency Has Been Relaxed

The last sentence of the ninth paragraph of Article 8 of the Communiqué has been amended to read as follows: “However, the payment obligations other than those specified below in relation to such contracts must be made and accepted in Turkish currency.” The following clauses have been added to the same paragraph.

1. Payment obligations arising from negotiable instruments denominated in foreign currency and issued prior to the effective date of the amendment of the Communiqué dated April 19, 2022, within the scope of performing movable sales contracts entered into before April 19, 2022: The Ministry of Treasury and Finance (“the Ministry”) has provided an exception here only for sales contracts established before April 19, 2022, and for negotiable instruments that were in circulation before the amendment to the Regulation dated April 19, 2022. If these two conditions are not met, the ban on payments with foreign currency may be considered to remain in effect.
2. Payment obligations arising from invoices issued before April 19, 2022: The Ministry has once again considered the date of April 19, 2022. If the invoice for payment in foreign currency is issued after this date, the ban will continue to apply.
3. Precious metals and precious stones trading transactions carried out in foreign currency on Borsa İstanbul A.Ş. Precious Metals and Precious Stones Market, and the payment obligations within the scope of settling these transactions: Payments in foreign currency are allowed for transactions conducted in the market of precious metals and stones.
4. Payment obligations within the scope of the Communiqué on the Status of International Trading Companies and the Communiqué on the Status of Sectoral Foreign Trade Companies; payment obligations within the scope of movable sales contracts for exports through International Trading Companies or Sectoral Foreign Trade Companies under an intermediated export contract; and exports through companies with the status of Export Consortium under the Decision on Export Subsidies No. 5973 and E-Export Consortium under the Decision on E-Export Subsidies No. 5986 under an intermediated export contract: The Ministry stated in its announcement dated March 1, 2024, that it has exempted these contracts from the scope of the ban, taking into account the demands from the sector and aiming to address the issues in practice.
5. Payment obligations within the scope of movable sales contracts for the delivery of goods subject to the transit and customs warehouse regimes in Customs Law No. 4458, including the sale and delivery of the bunker fuel subject to a customs declaration, and the provisions of temporary storage and the free zone: The Ministry stated in its announcement dated March 1, 2024, that it has exempted these contracts from the scope of the ban, taking into account the demands from the sector and aiming to address the issues in practice.
6. Payment obligations regarding the delivery of goods subject to the movable sales contracts made within the scope of foreign trade transactions with the companies operating in the free zone.
   According to the Amending Communiqué, the exceptions specified in subparagraphs (a), (b) and (c) above will be effective as of April 21, 2022, and those specified in subparagraphs (d), (e) and (f) will be effective as of February 28, 2024: The Ministry stated in its announcement dated March 1, 2024, that it has exempted these contracts from the scope of the ban, taking into account the demands from the sector and aiming to address the issues in practice.

The provisions stated in clauses a, b, and c shall come into effect as of April 21, 2022, while the other clauses shall come into effect as of the publication date, February 28, 2024.

• Evaluation and Conclusion

With the Amendment Communiqué, it is observed that the ban on payments with foreign currency has been relaxed in sectors where payments in foreign currency are frequently made. The changes primarily target sales contracts. Payment obligations in contracts that meet the current criteria are now allowed to be fulfilled in foreign currency or indexed to foreign currency. Some of the regulations only allow for payments in foreign currency for past obligations. Therefore, the date of April 19, 2022, is crucial, and it is important to keep in mind that the ban on payments with foreign currency continues for transactions after this date in the relevant exceptions.