Presidential Decrees (No 32 and 85) stipulated that some transactions and contracts made between real persons or the legal entities settled in Turkey should be based on Turkish Lira. Also, the current contracts agreed on foreign currency would be converted into Turkish Lira within 30 days as of 13 September 2018.
However, the term "settled in Turkey" has caused some confusion. Because many of foreign national employees working by work permits in Turkey are paid on foreign currency basis.
Now the Communiqué (2018-32/51) issued in Official Gazette numbered 30557, dated 6 October 2018 has cleared away the confusions.
Employment contracts concluded with the persons, who are resident in Turkey but do not have citizen-ship bond with the Republic of Turkey, can be arranged as foreign currency or indexed to foreign currency.
The main points as regard to employment and service contracts are as follow.
- Turkish settled companies can conclude employment and service contracts with foreign employees (working with work permit) based on foreign currency
- Foreigners working as consultant (by consultancy or montage contracts up to 3 months) can be paid in foreign currency.
- Branches of foreign based companies, liaison offices, and foreign companies directly has the partnership with 50% or over shares, as well as the ones in free trade zones may arrange their employment and service contracts as foreign currency.
- Service contracts related to activities performed abroad by Turkish settled companies are also exempt from obligation of using Turkish Lira.
- Transactions and contracts made with foreign based real persons or legal entities can be agreed in foreign currencies.
- Also, foreign currency earning bodies can be exempted under certain conditions.
CONTRACTS NOT IN THE SCOPE OF EXEMPTION WILL BE CONVERTED TO TRY
- Current contracts agreed on foreign currency (and not in the scope of exemption specified in above said Communiqué) will be converted into Turkish Liras within 30 days from 13 September 2018.
- Contracts made between Turkish nationals and Turkey settlet companies on foreign currency basis shall be converted to TRY.
- At first step parties may agree on the contract price between themselves.
- In case the parties cannot agreed on the TRY price, 2 January 208 effective exchange rate of Turkish Central Bank (USD: 3,77) will be taken as a base in the contracts concluded before that date. For the new contracts, monthly increases in producer price index (PPI/TÜFE) between 2 January and the date of new contracts will be reflected to price.
- In case of disagreement parties will appply to arbitration.