New Restrictions on Foreign Currency Loans

“Revision (numbered 2018/11185) on Decree no: 32 of Protection of the Value of Turkish Currency” and the communiqué (numbered 2018-32/46) regarding the revision in the communique (numbered 2008-32/34) related to “the Decree no:32 of Protection of the Value of Turkish Currency” is published in Trade Register Gazette numbered 30312.

The above mentioned communiqué numbered 2018-32/46, which will go into effect in May 2018, imposes restrictions on foreign currency loans borrowed by juridical persons domiciled in Turkey.

Following the implementation of this revision;

  • Companies without any foreign currency earnings will not be able to use forex loans unless they comply with certain exceptions,
  • Companies with foreign currency earnings will be able to use forex loans as long as the total balance of their current forex loans and forex loans they would like to borrow does not exceed the company’s total foreign currency earnings for the last three years.

The said exceptions are as follows:

  • Companies whose current forex loan balance exceeds USD 15.000.000 are not engaged with the above mentioned communiqué regardless they have foreign currency earnings or not.
  • State institutions and organizations, banks, financial leasing companies, factoring companies are free to use forex loans.
  • Companies that have not had any foreign currrency earnings for the last three years are able to use forex loans to be limited with their committed foreign currency earnings in case it is documented.

In addition to that, with the guideline regarding “Procedures ad Principles for Central Bank’s tracking the transactions affecting foreign currency position” published in the Official Gazette numbered 30335; “companies with USD 15.000.000 or more forex loans on the last work day of the calendar year, have to fill the “data form” in accordance with the explanation form and declare to the Central Bank of Turkey in the following calendar year.

USD equivalent of these loans will be calculated based on the forex buying rate announced in the official gazette on the last work day of the related period.

In case total forex loan of the company which is liable to declare is below the limit set by the bank, company’s declaration liability expires.

The data prepared in accordance with financial reporting frame is declared to the bank by using the above mentioned data form.

Declarations for the periods ended 31 March, 30 June and 30 September will be made until the last work day of the 1st following month and for the period ended on 31 December will be made on last work day of the 3rd following month.

Companies with declaration liability has to draw up an audit contract in 60 days starting from the liability is valid. Auditing and controlling the consistency of the annual figures with quarterly declared figures will be executed by the auditor in accordance with Public Oversight Accounting and Auditing Standards until 31 May (in the following year).

In the light of the aforementioned information;

  • Related companies considering to finance their subsidiaries in Turkey have to draw up the loan contracts in Turkish Lira and following money transfers have to be made in Turkish Lira.

Any money transfers other than lending loans which take place to finance the subsidiary (e.g. making payments to 3rd parties on behalf of the subsidiary) will be booked as Turkish Lira equivalent payables and the payment to the related party will be made accordingly in Turkish Lira.

Nagihan Boz, Manager

Accounting and Compliance Reporting Services