Prohibition on Making Contracts in Foreign Currency in Türkiye

Under Turkish law, a significant regulation prohibits the use of foreign currency in many types of contracts. This rule applies broadly to agreements between individuals or companies residing in Türkiye and has been in force since Presidential Decree No. 85 issued in 2018.

While the public generally associates this rule with lease agreements, it is crucial to understand that the restriction applies to nearly all types of contracts unless explicitly exempted by law.

General Rule: Turkish Lira Must Be Used

As a general principle, all payments and contract values in agreements made between residents in Türkiye must be denominated in Turkish Lira. This includes:

• Lease agreements for residential or commercial property

• Employment contracts

• Service contracts

• Franchise agreements

• Sales contracts involving movable or immovable goods

• Any other type of agreement that stipulates payment obligations

This legal rule ensures the protection and stability of the Turkish Lira by limiting the use of foreign currencies in the domestic market.

Key Exceptions to the Rule

There are a few narrow exceptions where foreign currencies may still be used in contracts, including:

• Contracts signed with foreign embassies or consulates

• International transportation or export-related agreements

• Certain contracts where at least one party is a non-resident

• Agreements involving public-private partnerships or international organizations

• Employment contracts with foreign nationals

However, even in these exceptions, strict interpretation and proof of exemption are required. Therefore, before attempting to draft a contract in foreign currency, parties must consult with a legal professional to avoid legal invalidity or administrative fines.

Lease Contracts and the Currency Restriction

Lease contracts are the most commonly discussed area affected by the prohibition. Especially for foreigners renting property in Türkiye, it is essential to know that the lease amount must be specified and paid in Turkish Lira—even if both parties prefer a foreign currency like US dollars or Euros.

Landlords and tenants sometimes attempt to circumvent this by mentioning the equivalent amount in foreign currency and indexing future rent increases based on a fixed exchange rate.

However, such practices are not legally enforceable unless fully compliant with the law and relevant regulations, such as the annual rent increase limits under the Turkish Code of Obligations.

Impact on Foreigners Living or Investing in Türkiye

Foreigners who are planning to rent a property, hire services, or enter into any commercial arrangement in Türkiye should be aware that all agreements must be made in Turkish Lira if the transaction takes place within the country and both parties are considered residents (whether real or legal persons).

Many foreigners mistakenly believe that a contract can be made in USD or EUR simply because the payer prefers it. In practice, this may lead to invalid agreements or administrative penalties.

Moreover, courts and enforcement offices will not recognize foreign currency obligations in such contracts if they are not legally valid.

Conclusion: Seek Legal Advice Before Signing Any Contract in Türkiye

The ban on using foreign currencies in contracts is more comprehensive than it may initially appear. It is not limited to rental contracts but affects all forms of agreements between Türkiye residents.

To avoid unenforceable contracts and legal risks, it is essential to draft contracts carefully in accordance with the current laws.

At Bayraktar Attorneys, we assist both individuals and companies—foreign and local—in reviewing or drafting legally compliant agreements. If you are planning to rent, lease, purchase, or engage in any contractual relationship in Türkiye, feel free to contact us for expert legal support.Legal Background

In Türkiye, a significant regulatory development was introduced through Presidential Decree No. 32, which brought restrictions on using foreign currency in various types of contracts.

As of September 13, 2018, the Turkish government implemented a ban preventing residents in Türkiye from setting prices or payment obligations in foreign currency or indexing them to foreign currency for specific types of agreements.

These include contracts related to leasing, employment, service, and construction.

This regulation aims to protect the Turkish Lira and ensure economic stability. It is primarily directed at transactions between individuals and entities residing within Türkiye. Contracts between non-residents or those involving properties located outside Türkiye are generally not affected by this restriction.

Who Is Affected by the Ban?

The ban covers both individuals and legal entities that are considered residents in Türkiye. Residency status does not depend on citizenship, but rather on whether a person or company is legally based or established in Türkiye.

This means that even a foreign citizen living in Türkiye is subject to the ban, while a Turkish citizen living abroad may not be.

Non-resident individuals or entities are exempt from this rule and may freely execute lease agreements or other contracts in foreign currency. The restriction only applies when both parties to the contract are considered residents and the subject of the contract is located in Türkiye.

Scope of the Restriction for Lease Agreements

The regulation is particularly important in the real estate sector. Lease agreements for immovable property—whether residential, commercial, or industrial—within Türkiye are subject to this rule if both the landlord and tenant are residents of Türkiye.

In such cases, it is not permitted to determine the rent in foreign currency or to index it to a foreign currency.

However, there are exemptions. For example, if one of the parties is a non-resident or if the property is located outside Türkiye, then the lease agreement may be executed in foreign currency.

Similarly, certain government-approved contracts involving international companies, export-related services, or free-zone operations may also qualify for exemption.

Mandatory Conversion of Existing Contracts

For lease agreements that were already in force before the regulation took effect in 2018, a mandatory conversion process was introduced. These contracts had to be revised and converted to Turkish Lira within 30 days of the regulation's publication.

The law did not allow for foreign currency or foreign currency-indexed values to remain in such contracts unless a valid exemption applied.

Legal Consequences of Violation

Failure to comply with this regulation can lead to legal and financial consequences. Contracts that do not align with the Turkish Lira pricing requirement may be deemed invalid, and courts may refuse to enforce them.

Furthermore, parties found violating the regulation may be subject to administrative fines. It is essential to note that even if a contract is not automatically void, it may be unenforceable in its original form if challenged in court.

Explanation of Currency Use in Lease Contracts

To summarize, if a lease agreement is made between two parties residing in Türkiye and concerns a property located within Türkiye, then the rent must be in Turkish Lira.

The use of foreign currency or indexing to foreign currency is not permitted. However, if at least one party is a non-resident or if the property is located abroad, the restriction does not apply. There are also narrow exemptions for certain special-purpose contracts which must be evaluated on a case-by-case basis.

Practical Advice for Foreign Landlords and Tenants

Many foreign nationals who own property in Türkiye or intend to rent property often ask whether they can make agreements in USD, Euro, or another foreign currency.

If they are not officially residing in Türkiye, they may be able to use foreign currency in contracts. However, those who hold a Turkish residence permit or live in Türkiye long-term are considered residents and must comply with the Turkish Lira requirement.

How We Can Help

At Bayraktar Attorneys, we offer professional legal support to both foreign investors and local residents who wish to lease or rent property in Türkiye. Our services include:

• Assessing whether your contract qualifies for exemption from the foreign currency ban

• Preparing lease agreements that comply with Turkish legislation

• Converting pre-existing contracts into Turkish Lira

• Representing clients in disputes arising from invalid or non-compliant lease agreements

If you are unsure whether the foreign currency prohibition applies to your situation or need assistance drafting or revising a lease contract, feel free to contact our legal team for tailored advice.