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• Difficulties faced by fully amenable taxpayers when the introduction of the requirement for setting the contract
providing the documentation required for avoidance value and other payment obligations arising from these
of double taxation in Turkey the way demanded by the contracts in Turkish Liras; Turkish residents will have to
lawmaker and within the specified legal period. amend the concerning contracts through modifications,
additional protocol and addendum in Turkish Liras. The
• For limited taxpayers, the complex structure of taxation requirement of changing the contracts rises the questions as
of compensations made following the assignment that which exchange rate will be used, whether any stamp tax will
requires expertise and difficulties faced during the refund be applied or not. The Article 14 of Stamp Tax Law contains
of the tax paid unduly in certain cases. a provision as “In case of modification of contracts of a given
amount, the amount of the increase shall be liable to duty
• The detection of the authorized tax office during the at the same rate. As per the first clause, for the contracts
declaration process and the difficulties in the acceptance subject to tax with maximum amount, without any change
of that process by that authority regardless of the liability. in other provisions, this term will not apply concerning the
increased value if the value rises only. In case of transfer
the duty to be collected shall one quarter of the duty on
Assessment on the requirement original contract”. Within that context, additional stamp
tax will have to be calculated over the increased cost. The
of redefining forex contracts in taxpayer will have to undertake an unpredictable stamp tax
TL with regard to stamp tax burden subsequently for this situation resulting from the
arrangement performed unavoidably.

A new regulation has been made by adding the sub-clause The arrangement related to redefining the contracts
(g) to the Article 4 of the Decision No. 32 regarding the concluded in foreign currency in Turkish Liras is mainly a
Protection of the Value of the Turkish Currency through non-tax regulation targeting the negative developments
the Decision No. 85 published in the Official Gazette dated and fragility in the economy. Besides, as long as the Stamp
13 September 2018. With this amendment, to be effective Tax Law and attached tables are not amended, it has a
from 13 September 2018, it was indicated that contract potential to create additional tax and work load regarding the
value and the other payment obligations arising from these contracts executed previously.
contracts concerning the purchase sale of movables and
immovable, leasing of all sorts of movables and immovable
including vehicles and financial leasing, service and work
contracts executed by and between Turkish residents cannot
be determined in foreign currency or indexed to foreign
currency except the cases identified by the Ministry.

Also, pursuant to the provisional Article 8 added to the
Decision no.32 through the same Decision, the requirement
of redefining values set in foreign currency on running
contracts previously concluded that are stated in the
concerning sub-clause in Turkish currency by the parties
within 30 days as of 13 September 2018 was indicated,
excluding the cases identified by the Ministry.

The aforementioned regulation has been put into practice
for the purposes of supporting particularly the retailers
positioned as tenants, to preserve the value of the
Turkish Lira and to provide predictability by targeting the
fluctuations in exchange rates over the recent period.

However, redefining values set within the contracts in
foreign currency or indexed to foreign currency brings
about several problems. Therefore, first of all the Treasury
and Finance Ministry has issued a press announcement
dated 17 September 2018 concerning the Decision and
then clarifications were made by outlining the details about
contracts that are permitted and unpermitted to be executed
in foreign currency or indexed to foreign currency through
the Communique no.2018-32/51 dated 6 October published
in the Official Gazette.

However the current state of the regulation may lead to
various debates on the basic principles of taxation. Following
Explanations in this article reflect the writer's personal view on the matter. EY and/or Kuzey YMM ve Bağımsız Denetim A.Ş. disclaim any responsibility
in respect of the information and explanations in the article. Please be advised to first receive professional assistance from the related experts before
initiating an application regarding a specific matter, since the legislation is changed frequently and is open to different interpretations.
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