Recent Development
The Ministry of Treasury and Finance (“Ministry”) published a press release regarding agreements denominated in foreign currencies or indexed to foreign currencies. The press release includes answers to frequently asked questions (“FAQs”). The press release clarified the currency conversion process for employment agreements.
The FAQs provide a sample calculation for the conversion of foreign currency payments into Turkish lira for agreements that fall within the scope of the FX payment ban. The FAQs also provide explanations on how foreign real and legal persons can execute employment agreements denominated in foreign currencies or indexed to foreign currencies. (The FAQs are available at the following link, in Turkish: https://hazine.gov.tr/sikca-sorulan-sorular-dovize-endeksli-sozlesmeler?type=icon)
The FX payment ban will not apply to the following employment agreements:
- Employment agreements where the employee is not a Turkish citizen, but is a Turkish resident;
- Employment agreements executed by (i) non-Turkish resident persons’ Turkish branches, representative offices, and liaison offices; and (ii) Turkish companies in which a non-Turkish resident person directly or indirectly holds 50% or more of the share capital;
- Employment agreements where the employee is not a Turkish citizen and not a Turkish resident;
- Employment agreements executed by the companies in free zones within the scope of their free zone activities; and
- Employment agreements performed abroad.
The FAQs also explain that salaries of non-Turkish citizen soccer players can be paid in foreign currencies or indexed to foreign currencies; however, in cases where the employment agreement is executed between a Turkish citizen soccer player and a Turkish resident soccer club, the salary cannot be paid in foreign currencies or indexed to foreign currencies.
Foreign-capitalized organizations are exempt from the prohibition to determine payment obligations in employment agreements in foreign currencies or indexed to foreign currencies. In employment agreements between these organizations and employees that do not benefit from any exemptions, the organizations may request the employment agreement’s payment obligation be converted into Turkish lira. Because the employee is not exempt from the prohibition, the organization’s request is obligatory.
Conclusion
The Ministry of Treasury and Finance’s press release and FAQs eliminate some hesitations regarding the conversion of foreign currency payments into Turkish lira in employment agreements.
