Central Bank of the Republic of Turkey (“CBRT”) adopted a new provision numbered 16/A titled as “Credit Balance Calculation” under the Capital Movements Circular (“Circular”) dated 2 May 2018. With this provision, it is clearly stated that the loan balance calculation will cover the FX loans utilized by Turkish residents in Turkey or abroad, which are found out to be in violation of the legislation. Besides, with this new provision, it is clarified that, if the loan balance found after including the balance of the FX loans utilized in violation of the legislation exceeds 15 million USD, the balance of the unlawfully utilized FX loan in excess of 15 million USD will be excluded from the FX loan balance calculation. This new provision resolved the ambiguity on loan balance calculation.
As you may know, Turkish residents that do not generate FX income are prohibited from utilizing FX loans in Turkey or abroad as per Article 17 and 17/A of Decree No. 32 on Protection of the Value of Turkish Currency (“Decree”) setting forth the principles of FX loan utilisation. In this respect, Turkish residents who have an intention to utilize FX loans, are required to have FX income to declare to the relevant authorities, save for the exceptions listed under the Decree and the Circular (Decree Art. 17/3 and Art. 17/A/3; Circular Art. 21 and Art. 40). According to the Decree and Circular, i) if the loan balance of the Turkish resident who wishes to use FX loans, as of the loan utilization date, is below 15 million USD, such person may utilize FX loans provided that the sum of the loan amount to be utilized and the current loan balance of such resident does not exceed its FX income generated for the last 3 (three) financial years, ii) if the loan balance is above 15 million USD, such president is in the scope of the exceptions and may use FX loans without being subject to any restriction. In a nutshell, this provision on loan balance calculation is highly crucial given that loan balance is a significant indicator in determining the amount of the FX loans that’s such Turkish resident may use.
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 Turkish resident real persons are prohibited from utilizing FX loans in Turkey or abroad (Decree, Art. 17/6 and 17/A/6).