The Capital Movements Circular published by the Central Bank of Turkey dated 02.05.2018 ("Circular"), amended by the resolution of Turkish Republic Prime Ministry Undersecretariat of Treasury dated 29.06.2018 and numbered 17758.
One of the significant changes foreseen under the amended Circular is the expansion in the scope of the exemptions of the foreign currency loans to be used from abroad or within Turkey, regardless of the condition of foreign exchange income.
Pursuant to the updated Circular, the foreign currency loans to be utilized from abroad or domestically by Turkish resident legal entities in order to finance the investments related with renewable energy resources covered by purchase guarantee, will be considered as exception.
In addition, the foreign currency loans to be utilized by the Turkish resident group companies which are fully owned (directly or indirectly) by foreign-capital multinational companies from other group companies resident abroad will be considered as exception as well. However in these cases, the relevant documents indicating that the foreign-capital multinational company is the ultimate shareholder (directly or indirectly) of the Turkish resident company shall be provided to the intermediary bank together with the loan agreement.
On the other hand, pursuant to the updated Circular, the Turkish resident banks can provide non-cash foreign currency indexed loans to Turkish residents for commercial or professional purposes. Accordingly the amendment clarified that the banks can issue foreign currency denominated letter of guarantees whereby the applicant and beneficiary are Turkish residents.
Further, pursuant to the amendment, the public institutions and organizations can provide foreign currency loans to their subsidiaries through the intermediary banks due to their obligations specified under international agreements. However, documents showing that the institution utilizing the foreign currency loan is a subsidiary of the relevant public institution or organization shall be provided to the intermediary bank. If the relevant international agreement particularly regulates an upper limit for the amount of loan to be provided by public institutions to their subsidiaries, the parties cannot exceed the specified amount. The amended Circular also foresees that the repayment of principal, interest and other payments of these loans will be made via banks.
Please find the updated text of the Circular including the amendments here.
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