The use of foreign currencies in commercial contracts within Turkey has been a subject of significant legal regulation, especially following economic fluctuations and policy changes. Understanding the legal framework governing these contracts is essential for businesses, particularly those involving international transactions. A Turkish Law Firm with English speaking lawyers in Turkey can provide invaluable assistance in navigating these complex regulations, ensuring compliance and safeguarding your commercial interests.
Overview of Decree No. 32 and Its Impact
Decree No. 32 on the Protection of the Value of Turkish Currency, initially enacted in 1989, serves as the cornerstone of Turkey's foreign exchange regulations. Over the years, this decree has undergone several amendments to adapt to the evolving economic landscape. Notably, the Presidential Decree No. 85, dated September 12, 2018, introduced significant restrictions on the use of foreign currencies in contracts between Turkish residents. These measures aimed to stabilize the national currency and mitigate the effects of currency fluctuations on the economy. Businesses must be acutely aware of these regulations to avoid legal pitfalls and ensure the enforceability of their contracts.
Permissible Use of Foreign Currency in Specific Contracts
Despite the general prohibition, certain contracts are exempted from the restrictions imposed by Decree No. 32. For instance, contracts involving parties where at least one is a non-resident of Turkey are typically allowed to be denominated in foreign currencies. Additionally, specific types of contracts, such as those related to export activities, transit trade, and services performed abroad, are permitted to use foreign currencies. Understanding these exceptions is crucial for businesses engaged in international trade. Consulting with an English speaking lawyer in Turkey can help determine the applicability of these exceptions to your specific contractual arrangements.
Recent Amendments and Their Implications
In response to practical challenges and feedback from the business community, the Turkish government has introduced amendments to the existing regulations. Notably, the Communiqué No. 2025-32/72, published in the Official Gazette on March 6, 2025, reinstated the possibility of making payments in foreign currency for certain movable sale contracts, excluding vehicle sales. This amendment aims to alleviate the operational difficulties faced by businesses and provide greater flexibility in commercial transactions. Staying informed about such legislative changes is vital for ensuring compliance and optimizing contractual strategies. Engaging a Turkish Law Firm with expertise in commercial law can provide the necessary guidance and support in this regard.
Exceptions Based on Residency and Contracting Parties
Turkish foreign currency regulations distinguish between residents and non-residents as defined by the Central Bank of the Republic of Turkey. Contracts between two Turkish resident parties are generally required to be denominated in Turkish Lira (TRY), unless they fall within one of the predefined exemptions. However, when at least one party to the contract is a non-resident, such as a foreign company or a foreign individual, the restriction does not apply. This exception is particularly relevant for foreign investors, multinational corporations, and expatriates engaged in commercial or consultancy agreements in Turkey. For example, a consultancy agreement between a UK-based firm and a Turkish service provider may legally be executed in EUR or USD. Legal analysis by a Turkish Law Firm ensures that the residency status is properly assessed, and the correct documentation is included to support the use of foreign currency. Learn more about foreign party contracts in our guide: How to Hire a Lawyer in Turkey.
Legal Risks and Compliance Measures for Businesses
Non-compliance with the foreign currency legislation in Turkey can result in contract invalidity, administrative fines, and even civil litigation. Contracts that are denominated or paid in foreign currency, in breach of the law, may be considered null and void in Turkish courts. This not only jeopardizes the enforceability of the contract but also exposes the parties to significant financial risks. It is therefore imperative for companies operating in Turkey to perform a full legal review of all commercial agreements. This is especially crucial in sectors like construction, IT services, international trade, and real estate. Working with an English speaking lawyer in Turkey allows businesses to identify and manage legal exposure proactively. For example, in a recent case handled by our firm, a tech startup in Istanbul entered into a foreign-denominated software licensing agreement without checking residency status—this led to a court dispute and payment delays. Don’t let compliance be an afterthought. Read more in our related article: Intellectual Property Law in Turkey.
Role of Turkish Law Firms in Navigating Currency Regulations
Given the legal complexity and the pace of regulatory updates, companies are increasingly turning to experienced Turkish Law Firms for reliable guidance. A law firm not only interprets the legislation correctly but also helps draft bulletproof commercial agreements that align with both Turkish and international standards. This includes selecting legally permissible currencies, inserting fallback clauses in case of policy changes, and managing regulatory correspondence. Foreign clients, in particular, benefit from working with English speaking lawyers in Turkey who understand both local law and cross-border commercial logic. Our team at ER&GUN&ER has represented numerous international clients in structuring legally sound agreements for real estate transactions, service exports, and foreign direct investments. Interested in these areas? You can explore our insights further in the article: How to Buy Agricultural Land in Turkey.
Foreign Currency Clauses in Real Estate and Leasing Contracts
One of the most controversial areas of foreign currency use in Turkey has been the real estate sector. As per Decree No. 32 and its updates, real estate purchase and rental agreements between Turkish residents must be denominated in Turkish Lira. This includes residential and commercial leases, as well as property sale contracts. However, exceptions exist for contracts involving foreign individuals or foreign legal entities. This nuance is critical for expatriates, foreign embassies, or international companies leasing office space in Istanbul or Ankara. In practice, many lease contracts are signed in TRY but pegged to a foreign currency for value protection, which must be handled carefully to remain within legal bounds. You can read more in our related piece: How to Buy Real Estate in Turkey.
Foreign Currency in Employment and Freelance Agreements
Under Turkish labor law, salaries and compensation for Turkish residents must be paid in TRY. This rule also applies to freelance agreements, consultancy services, and independent contractor contracts. Nevertheless, there are specific exceptions for foreign employees or cross-border service providers who reside outside of Turkey. These professionals can be paid in foreign currencies, provided that the contract includes all legally required disclosures. An English speaking lawyer in Turkey can assist in structuring these agreements, ensuring that both tax and labor laws are respected. This is particularly important for startups, international NGOs, and export-focused SMEs hiring remote talent. Explore the topic in detail here: Work Permits for Foreigners in Turkey.
Best Practices for Currency Risk Mitigation in Contracts
Even when legally permitted, using foreign currencies in commercial contracts in Turkey carries inherent currency exchange risks. To mitigate this, businesses often include conversion clauses, dual-currency invoicing, or forward contract terms. These provisions help maintain pricing stability and protect both parties from Lira devaluation. Additionally, including arbitration clauses and jurisdiction provisions can offer dispute resolution certainty. A skilled Turkish Law Firm will help you draft comprehensive agreements that balance legal compliance with financial risk management. Visit our article on International Arbitration in Turkey to understand how to protect your commercial rights globally.
Frequently Asked Questions (FAQs)
- Can Turkish companies use USD or EUR in domestic contracts? Only under specific exemptions. Most domestic contracts must be in TRY unless parties meet exemption criteria.
- Are foreign investors allowed to sign contracts in foreign currencies? Yes. If one party is a non-resident, foreign currencies are generally permitted.
- Is it legal to peg TRY contracts to the USD or Euro? Pegging is legally risky. It must be structured carefully and may not replace the base currency denomination.
- How are international consultancy fees paid in Turkey? If the consultant resides abroad, payments can be made in foreign currency. Proper documentation is essential.
- What happens if a contract violates the foreign currency law? It may be deemed unenforceable in Turkish courts and can attract regulatory penalties.
- Can I pay rent in USD in Turkey? Only if the landlord is a foreign resident or the property is used by a foreign mission/company.
- How can I prove my foreign residency status? Via passport, residence permit, or corporate registration abroad. A lawyer should attach these to the contract.
- Should I work with a Turkish Law Firm? Absolutely. Currency regulation is complex and ever-changing. A Turkish Law Firm ensures full legal protection and contract enforceability.
Contact Our Turkish Law Firm
If your company engages in cross-border trade, hires foreign consultants, or signs contracts with overseas partners, ensuring your contracts meet Turkey's currency regulations is critical. At ER&GUN&ER Law Firm, our team of English speaking lawyers in Turkey provides strategic guidance and contract drafting services tailored to your business model. Whether you are a foreign investor, an export business, or an international startup, we’ll help you remain compliant, protected, and ready to scale.