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Change in the CBRT Capital Movements Circular

As it is known, Turkish authorities require Turkish legal entities to have sufficient FX income to utilize FX loans in Turkey or abroad unless such resident falls into certain exceptions listed under the respective legislation. For this, each entity, whose current loan balance is below 15 million USD, may use FX loans provided that the sum of its current loan balance and the loan to be utilized does not exceed its FX income generated for the last 3 (three) financial years. For monitoring and controlling purposes, such FX income is required to be declared to Banks Association of Turkey - Risk Center by the banks and financial institution extending the loan or intermediating to such loan extension.

In relation to the above-mentioned FX income declaration, Central Bank of the Republic of Turkey (“CBRT”) adopted a new sub-clause (Art. 16/7) under Article 16 (FX Income Declaration) of the Capital Movements Circular (“Circular”) dated 2 May 2018. With this new sub-clause, FX income that is generated within the existing financial year may also be included to the FX income calculation, provided that the legal entity utilizing FX loan requests the afore-mentioned in writing and such income is documented via FX income declaration forms and such other reports proving the existence of the FX income in accordance with Art. 16/1 of the Circular. In such case, previous FX income declaration that corresponds to the 3rd financial year of the legal entity will not be taken into consideration in FX income declaration.

This new rule has given a comfort zone to the FX loan borrowers in terms of meeting their FX income requirement that will directly have an impact on the amount of their FX borrowings.

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