On January 25 2018, a Cabinet Decree and a communiqué
regulating foreign currency loans were released in the Official
Gazette.
The new Cabinet Decree amended the Cabinet Decree on the
Protection of the Value of Turkish Lira. The communiqué
provided implementation rules for foreign currency loans.
Under the new regulation, with effect from May 2 2018, the
use of foreign currency loans from abroad will fall under the
conditions of foreign exchange income. Accordingly, Turkish
legal entities that have no foreign exchange income will be
prohibited from taking out loans from residents whether from
abroad or from within Turkey.
Foreign exchange income means 'income from exports, transit
trading and export sales and delivery income, including the
income from services and operations bringing foreign currency
from abroad'.
However, it is our understanding that income is not
considered as fulfilling the above criteria in cases where a
transaction is paid for with foreign currency by parties in
Turkey.
It is also understood that existing loans to be used before
May 2 2018 will not be subject to this restriction and the use
of the foreign currency loan will be permitted.
Exemptions to restriction on foreign currency
loans
In the following cases, the conditions relating to foreign
exchange income will not need to be fulfilled:
- Foreign currency loans borrowed by public institutions
and organisations, banks, or factoring and leasing companies
resident in Turkey;
- Foreign currency loans borrowed by Turkish resident
parties with an existing outstanding loan balance of more
than $15 million at the time of taking out the; new foreign
currency-denominated loan
- Foreign currency loans of residents in Turkey who are
authorised to obtain credit by means of an investment
incentive certificate;
- Foreign currency loans to be used for the financing of
certain machinery and equipment;
- Foreign currency loans of residents in Turkey for
projects approved by the Undersecretary of the Defence
Industry;
- Foreign currency loans of residents in Turkey for
projects carried out based on the public-private partnership
model; and
- Foreign currency loans of residents in Turkey who have
had no foreign currency income for the previous three years
provided that the loans are not more than their potential
foreign currency income.
Loans used before the effective date of the Cabinet
Decree
Foreign currency loans with a balance of less than $15
million obtained by residents from Turkey or abroad as of May 2
2018, except for the above-mentioned exceptions, will under no
circumstances be renewed as foreign currency loans. However, it
will be possible to renew such loans in Turkish lira.
How does this restriction apply to natural
persons?
Natural persons resident in Turkey will not be able to
obtain foreign currency loans either from within Turkey or
abroad. This will apply irrespective of whether these persons
are merchants or self-employed persons or whether they have
foreign exchange income.
Outlook
It should be noted that there has been no restriction on
obtaining a loan from abroad in Turkish lira. This restriction
has been introduced to lower Turkey's external deficit and to
reduce the risk from large numbers of foreign exchange loans in
Turkey's private industries.
We believe this restriction will be temporary and that it
will be revisited by the Turkish government in the future when
it believes the Turkish economy has less foreign
exchange-oriented risks.
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| Dr Burçin Gözlüklü |
Ramazan Biçer |
Dr Burçin Gözlüklü
Centrum Consulting
managing partner
Email: burcin.gozluklu@centrumauditing.com
Phone: + 90 216 504 20 66
Ramazan Biçer
Centrum Consulting
partner
Email: ramazan.bicer@centrumauditing.com
Phone: + 90 216 504 20 66