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Turkey issues updated guidance on requirement to use Turkish lira for contracts involving Turkish residents

Executive summary

Turkey has issued guidance that the recently introduced law requiring Turkish contracts to be denominated in Turkish lira does not apply to employment contracts for non-Turkish citizens.

Background

Turkey  recently passed a law requiring that any contract between Turkish resident individuals or legal entities must involve Turkish lira as consideration, and cannot use or index to any non-Turkish currency. This covers multiple contracts and payment obligations, including employment contracts, leases and contracts for the sale of both movable and immovable property.

These changes entered into force on 13 September 2018, and the law further required that all existing contracts be remediated within 30 days of this date.

In this regard, the Ministry of Finance and Treasury provided certain exemptions in which this limitation will not be applied. Accordingly, for the employment contracts concluded by and amongst residents in Turkey, who are not citizens of the Republic of Turkey, the contract value and contractual payment obligations arising from these contracts can still be determined in a foreign currency or indexed to a foreign currency.

Next steps

The law provides 30 days from 13 September to amend any contracts with Turkish residents which are not denominated in Turkish lira or are otherwise linked to a non-Turkish currency, a deadline which has now passed. In the case of assignees who hold a residence permit in Turkey, who are not Turkish citizens, it is still possible for contracts to use or index to a non-Turkish currency. 

EYG no. 04719-183Gbl

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