Communique on lira protection amended

Dunya Executive - - BUSINESS BY LAW - MORAL & PARTNERS

More amendments have been added to the presidential decree on the Protection of the Value of Turkish Currency. Effective as of October 6, 2018, the principles of the amendments introduced by the Amending Communiqué are the following:

Types of Agreements Which Cannot be Executed in Foreign Currency or as Indexed to Foreign Currency:

The sales value and the other contractual financial obligations in the agreements executed by and between real and/or legal entities residing in Turkey on the sales of the residential premises and covered workplaces cannot be determined in foreign currency or as indexed to foreign currency for real properties located within the boundaries of Turkey, including real properties located in free zones.

The rental value and the other contractual financial obligations in the agreements executed by and between the real and/or legal entities residing in Turkey on the lease of the residential premises and roofed workplaces cannot be determined in foreign currency or as indexed to foreign currency for the real properties located within the boundaries of Turkey, including real properties located in the free zones.

The agreement value and the other contractual financial obligations in employment agreements executed by and between real and/ or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, excluding the agreements to be executed abroad.

The agreement value and other contractual financial obligations in service agreements executed by and between real and/or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, including consulting, carriage and brokerage agreements.

The agreement value and the other contractual financial obligations in construction agreements executed by and between real and/ or legal entities residing in Turkey cannot be determined in foreign currency or as indexed to foreign currency, excluding building, repair and maintenance of vessels defined in the Turkish International Vessel Registry Law dated December 16, 1999.

Who qual f es as a res dent n Turkey?

Pursuant to the Amending Communiqué, the branches, representation or liaison offices of Turkish residents located abroad, the funds which they operate or manage, companies of which they hold the 50 percent or more of shares and companies which they directly or indirectly own shall be deemed residents of Turkey.

Determ n ng of the exchange rate of the Turk sh l ra

Within the scope of the amendments, in the event the parties cannot mutually agree on the exchange rates to be applied to the agreement values or other contractual financial obligations, either in foreign currency or as indexed to foreign currency, the rate shall be determined by applying the monthly consumer price index rate (“CPI”) on the date of redetermination set by the Turkish Statistical Institute (“TSI”) for each month to the amount exchanged in Turkish currency cal- culated based on the indicative effective selling rate on January 2, 2018 announced by the Central Bank of the Turkish Republic.

Rental values of res dent al prem ses and covered workplaces

Agreement values which are determined in foreign currency or as indexed to foreign currency regarding rental agreements of residential premises and roofed workplaces which are signed before September 13, 2018 - the publication date of provisional article 8 - shall be determined in Turkish currency for two a year period according to principles stipulated above.

However, in the event the parties cannot mutually agree to determine the rental value, it is stipulated that the rental value shall be increased based on the monthly changing rates of the CPI that are determined by the TSI for each month from the date of determination until the end of such rental year.

In the event the parties cannot mutually agree to determine a rental amount in TRY regarding the upcoming rental year, the rental amount shall be determined by increasing the previous rental amount on the basis of the monthly CPI rate and such rental amount shall be valid until the end of a two year period.

In addition to that, the exchange of agreement values regarding rental agreements of residential premises and roofed workplaces shall not be implemented to collected or deferred to debt.

Other Prov s ons

The Amending Communiqué indicates that the value of securities issued within the scope of the agreements indicated above which cannot be determined in foreign currency or as indexed to foreign currency shall not be determined in foreign currency or as indexed to foreign currency.

Agreements indexed to precious metals where values are determined as foreign currency in international markets and/or indexed to commodity and/or indexed to foreign currency indirectly shall be considered as an agreement indexed to foreign currency.

It is not required to determine the agreement values and other contractual financial obligations in Turkish currency of rental agreements for vehicles, including construction vehicles, and other agreements excluded from the amendments introduced with the Amending Communiqué signed before September 13, 2018, the publication date of the Presidential Decree No. 85.

However, it is required to determine the agreement values and other contractual financial obligations in Turkish currency of agreements specifically indicated in the Amending Communiqué and other agreements excluding the agreements stated in the previous paragraph.

In the event that the parties who are granted exemption request to make their new agreements in Turkish currency or request to a redetermination of their present agreement values in Turkish currency which have been executed in foreign currency or indexed to foreign currency, the agreement values shall be determined in Turkish currency.

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