Nov-Dec 2018

THE EFFECTS OF THE ‘BAN ON FOREIGN CURRENCY CONTRACTS’ COMMUNIQUE ON THE SERVICE AND EMPLOYMENT CONTRACTS

The Amendment Of The Communique (Numbered: 2008-32/34) on the Protection Of The Value Of Turkish Currency (Decision No 32) published in the Turkish Official Gazette dated 16.11.2018 by the Ministry of Finance and Treasury. In this communique, contracts that are excluded from the scope have been rearranged and some unclear issues have been clarified by the ministry. However, even in the current situation, some controversial issues have not been fully clarified and new regulations are expected by the Ministry.

In paragraph (g) of the 4th article of the communique, employment and service contracts are counted as part of the ban on foreign currency. In spite of that, contracts that may be concluded in or indexed to foreign currency have listed in article (8). Even if the related contract is in scope of the prohibition, it is possible to determine the price of the contract in foreign currency or indexed in foreign currency, if any of these contracts mentioned in article 8.

Conclude a contract of employment or service through foreign exchange is possible in the following cases;

• Employment contracts concluded by the persons that do not have a Turkish citizenship;
• Employment contracts that will be performed abroad and / or performed by the crewman - (the crewman's position as being subject to the exemption is explicitly designated);
• Service contracts concluded by the persons that do not have a Turkish citizenship;
• Service contracts, executed within the context of export, transit trade, sales and deliveries deemed as export and foreign currency gaining services and activities;
• Service contracts concluded within the context of the activities to be conducted abroad;
• Service contracts that start in Turkey and end abroad or vice versa or that start and end in abroad -(prior to the Second Amendment Communique the scope of this exemption was limited to the services concerning the electronic communication only);
• Employment and service contracts, where either of (i) the branches, representative offices and liaison offices -located in Turkey- of the persons residing abroad, (ii) the entities -located in Turkey- participated directly or indirectly by the persons residing abroad, with a minimum shareholding of 50%, (iii) the entities the joint control and/or control of which is held by persons residing abroad and (iv) the companies located in the free zone, concerning their activities within the context of free zone

Unlike the communique dated 6.10.2018;

• Service contracts that starting from abroad and ending at abroad may be conclude in foreign currency or indexed to foreign currency, have been added to article
• It has been determined that license and service contracts related to hardware and software produced abroad can be rearranged in foreign currency or indexed in foreign currency.
• It has been clarified that employment contracts be concluded with crewman may be made in foreign currency or indexed in foreign currency.
• It has been prescribed that the employment and service contracts of the companies which are located in Turkey and which are controlled by the persons resident abroad may be concluded in foreign currencies or indexed to foreign currencies.

As a result, the sector is having difficulty in taking action because the scope of the foreign currency prohibition is still not fully clarified. It seems likely that the Ministry will make new arrangements with a communique in the forthcoming period. The necessary arrangements should be enacted without waiting for the judicial decisions to be interpreted.

Legal Intern Berkan ŞEKER