As a result of an executive order by the Turkish President residents in Turkey are now prohibited from agreeing to the value of monetary obligations in a foreign currency (or indexed to a foreign currency) in certain types of contracts, including employment contracts. This Executive Order is issued inside of a wide net of new regulations the Turkish Government issued to protect the Value Of Turkish Lira.
The Executive Order caused some confusion as per to its implementation. In the field of employment law, these questions were mostly raised by Turkish subsidiaries of international companies in relation to whether expatriates fell within the scope of the decree and, if so, how their salaries could be paid going forward. Since the decree uses the term “Turkish residents,” the general understanding was that it would also apply to foreign employees, while they are “resident” in Turkey. However, subsequent secondary legislation (Communiqué no 2018-32/51) was published on October 6, 2018, and clarified this point.
Pursuant to the communiqué, Turkish residents who are not Turkish citizens are allowed to determine the value and financial obligations in their employment contracts in foreign currency or indexed to foreign currency. I
The communiqué also specifies that the foreign branches, offices, agencies, and liaison offices of Turkish companies based outside of Turkey are exempt from the decree, as are foreign companies operating in Turkey as long as at least 50 percent of the shares are owned (directly or indirectly) by a party that is not resident in Turkey. Thus, these companies are still allowed to determine the value of financial obligations in their employment and service contracts in foreign currency or indexed to foreign currency.
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