Decisions Concerning Free Zones

"Decision No. 2017/10051 on Payments That May Be Made in Turkish Lira in Free Zones" was published in Official Gazette No. 30063 dated 11/05/2017.

Article 9 of "Free Zones Law No. 3218" (the Law) provides as follows:

"Foreign exchange and services: Article 9 - All payments relating to activities in free zones shall be made in foreign currency. The Council of Ministers may also decide that payments be made in Turkish lira. ..."

Pursuant to the authority granted by this article of the Law, Decision No. 2017/10051 dated 13.03.2017 on "Payments That May Be Made in Turkish Lira in Free Zones" was published by the Council of Ministers in Official Gazette No. 30063 dated 11.05.2017. This decision, which is understood to have been adopted in order to encourage payments in Turkish lira, states that:

1. payments relating to trade between free zones and other countries may be made in Turkish lira (TL) as well as in foreign currency, while all other payments shall be made only in TL;

2. rents, licences, permits and documents, together with the tariffs and charges relating to the services and activities provided by operators, shall be set and paid in TL, and the procedures for setting tariffs in TL shall be completed within 3 months from the date on which this Decision entered into force (11.05.2017);

3. the procedures and principles concerning transactions to be carried out in TL in free zones shall be determined by the Ministry of Economy.

These points were set out in the decision.

In addition, with the publication of this decision, the "Decision on Payments That May Be Made in Turkish Lira in Free Zones" dated 16.08.1985 was repealed. The repealed decision provided that all payments relating to activities in free zones would be made in the foreign currency specified in Law No. 3218 dated 6.6.1985; however, the cost of goods and services during investment in the zone, together with workers' wages and rents, could be paid in Turkish lira, and that all payments to employees of the Zone Directorate and of other public institutions and organisations in these zones would be made in Turkish lira. The definition of foreign currency referred to in that decision was set out in Law No. 3218 as "currencies deemed convertible by the Central Bank of the Republic of Turkiye, or accounts and documents of any kind that provide for payment".

Accordingly, although the procedures and principles relating to the practice that changed as of 11.05.2017 are to be clarified by the Ministry of Economy, as of 11.05.2017, the date on which the decision entered into force, the following is understood:

1. the obligation to make payments relating to trade between free zones and other countries solely in foreign currency has been removed, and payments in respect of such trade activities may also be made in TL as well as in foreign currency;

2. it has been decided that all payments other than those relating to trade between free zones and other countries shall also be in TL;

3. although free zones are deemed to lie outside the Turkish Customs Territory for the purposes of applying foreign exchange legislation, since Turkiye cannot be regarded as falling within the "other countries" referred to in the decision, payments relating to transactions between Turkiye and free zones must be in TL; in other words, TL must be used in all transfer transactions from Turkiye to free zones and from free zones to Turkiye, and to this end it would be appropriate for the banks intermediating these transactions to open TL accounts for companies and for the transactions to be carried out through these accounts;

4. for transactions commenced before the date of publication of the decision (letters of credit, bills of exchange, invoices and so on), the transactions may be carried out in the foreign currency to which the transaction relates.

UPDATE: In its letter No. 56300 dated 22.05.2017, sent to the free zone directorates within the scope of the decision, the Directorate General of Free Zones, Overseas Investment and Services of the Ministry of Economy stated that, in commercial transactions carried out between free zones and Turkiye, between free zones and within a free zone, payments under invoices issued before the Council of Ministers Decision (before 11.05.2017) must also be made in TL on their payment dates.

Yours faithfully,

ANNEX TO COUNCIL OF MINISTERS DECISION NO. 2017/10051 DATED 13.03.2017 - DECISION ON PAYMENTS THAT MAY BE MADE IN TURKISH LIRA IN FREE ZONES

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