The Turkish Cabinet released a decree on January 25 2018 to
restrict foreign exchange loans. Thus, as of May 2 2018, the
use of foreign currency loans from abroad has fallen under the
conditions of foreign exchange income.
Accordingly, those who have no foreign exchange income will
not be able to use loans from residents whether abroad or in
As we discussed in a previous article, the Turkish
government has been revisiting FX loan restrictions,
introducing new exceptions for FX loans from abroad.
What are the new exceptions?
The Central Bank of Turkey has recently amended the circular
on the movement of capital and provided a new exception
regarding the FX loans of Turkish subsidiaries of foreign
Fully owned Turkish subsidiaries of foreign companies will
be able to obtain FX loans from other group companies resident
abroad without being subject to the FX borrowing
In this regard, direct or indirect control of Turkish
subsidiaries will not change the outcome, and such Turkish
companies will be able to receive FX loans from their parent
companies or sister companies.
However, they must provide the company's share ownership
documents to the intermediaries (e.g. banks) as the
transactions are concluded.
Conditions required for group companies to benefit from the
FX loan exception
To benefit from this new exception, the following conditions
must be met:
- The borrowing party must be a Turkish
subsidiary of a foreign company;
- The Turkish subsidiary must be directly or
indirectly 100% controlled;
- Full ownership can be proved by providing
certain required documents (e.g. trade registry records);
- The requested documents must be submitted
to the intermediary financial institution.
Other exceptions introduced
Public institutions, in line with their obligations
determined by an international agreement, will be able to
extend FX loans to their affiliates in Turkey.
For example, if a public institution obtains an FX loan from
an international organisation (e.g. World Bank) and the
agreement allows, then that institution will be able extend FX
loans to the affiliates without FX restrictions.
However, if there is a loan limit set out in the
international agreement, the amount of FX loan to be made
available by the public institutions to their affiliates cannot
exceed the loan limit determined in the agreement.
Under the existing legislation, FX loans with a balance of
more than $15 million granted to residents in Turkey have no
restrictions and Turkish companies can freely obtain such
If the amount of FX loan is less than $15 million, certain
restrictions apply. If none of the exceptions are applicable, a
Turkish company will not be able obtain an FX loan from abroad
unless it has sufficient FX income.
However, this rule has been abolished for companies solely
owned by foreign companies under the new amendment, and FX
loans from group companies resident abroad will be regarded as
being within the exceptions.
Thus, fully owned Turkish subsidiaries of foreign companies
will be able to obtain FX loans without being subject to
Burçin Gözlüklü (firstname.lastname@example.org)
and Ramazan Biçer (email@example.com)
Tel: +90 216 504 20 66