Chapter

TURKEY

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of January 31, 2004)
Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: March 22, 1990.
Exchange Arrangement
CurrencyThe currency of Turkey is the Turkish lira.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the Turkish lira is determined on the basis of supply and demand in the foreign exchange market, although the Central Bank of Turkey (CBT) reserves the right to intervene in the foreign exchange market in case of excessive volatility in either direction in the foreign exchange rates.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketBanks may engage in forward transactions within the framework of open position limits set according to the regulation on total net foreign exchange positions/own funds ratio and the regulations on capital adequacy. There is no limit on forward transactions of precious metal brokerage institutions.
Official cover of forward operationsThe CBT may carry out swap and forward transactions with respect to its reserve position in light of the exchange rate policy.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsYes.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
Clearing agreementsCertain commercial transactions with Poland are made through special accounts denominated in dollars.
Barter agreements and open accountsYes.
Administration of controlThe Undersecretariat of the Treasury and the CBT administer exchange controls. The Banking Regulatory and Supervisory Agency (BRSA) regulates and supervises banks’ open foreign exchange positions and the CBT monitors banks’ foreign exchange positions.
International security restrictions
In accordance with UN sanctionsYes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeDomestic purchases and sales of unprocessed gold imported by the CBT and by intermediary institutions dealing in precious metals may be conducted only at the Istanbul Gold Exchange (IGE). The purchase and sale of precious metals and stones or articles therefrom may be conducted freely within the country.
Controls on external tradeIn accordance with the Foreign Trade Regime, exports and imports of precious metals and stones or articles containing them may be conducted freely. Only the CBT and intermediary institutions dealing in precious metals that are members of the IGE may import unprocessed gold without being subject to the provisions of the Foreign Trade Regime, but the latter must surrender the gold to the IGE within three days. Selling operations of imported gold should initially take place in the IGE.
Banks may open gold deposit accounts for natural and juridical entities residing in Turkey and abroad. The account holders should surrender processed gold to banks in order to open gold deposit accounts.
Within the framework of the banking regulations, banks that are members of the IGE may extend gold credits to customers. The buying and selling prices of gold are freely determined by banks. Intermediary institutions dealing in precious metals may obtain gold credits from abroad for their own account and/or for the accounts of their customers. However, gold obtained as a credit should be transferred to the IGE within three days.
Travelers may bring into and take out of the country ornamental articles made from precious metals and stones with a value not exceeding the equivalent of $15,000. The export of ornamental articles exceeding this value is dependent on their declaration upon arrival or proof that they have been purchased in Turkey.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers may freely take abroad up to the equivalent of $5,000.
Foreign currencyTravelers may freely take out of the country up to the equivalent of $5,000. To take out more than this amount, nonresidents must declare banknotes upon arrival, and residents must present a document confirming that the foreign banknotes were purchased from bank or special finance institutions for invisible transactions.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyNo.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Negative listImports of certain items are prohibited for environmental, security, health, or public morality reasons, or in accordance with international obligations. These items include certain carcinogenic coloring substances, chemicals used in the production of chemical weapons or other arms and ammunition, counterfeit labels, gambling instruments, narcotics, and ozone-depleting substances. Import licenses, which are issued by the relevant authorities, are required for a limited group of items, including telecommunications and transmission equipment, some machinery, some motor vehicles, some chemicals, and a number of items related to civil aircraft. Imports of old, used, renovated, faulty, or obsolete goods are subject to permission from the Undersecretariat of Foreign Trade, but certain goods that are not older than 10 years may be imported freely.
Licenses with quotasQuotas are implemented as a requirement for the harmonization of Turkey’s import policy with that of the EU. Turkey has adopted the EU’s quota policy on imports of textiles and clothing products. Currently, textiles and clothing imports from 19 countries are subject to quotas. Turkey has also introduced quotas on imports of certain products originating in China, including footwear; ceramic, china, or porcelain tableware and kitchenware; and toys.
Import taxes and/or tariffsTurkey applies the EU’s GSP and the GSP rates that are indicated in List II of the Import Regime. Effective January 1, 2004, the customs tariff rates for least-developed countries have been reduced to zero for industrial products numbered 25–97 in the customs tariffs (excluding arms in chapter 93). Effective January 1, 2004, for the developing countries, in addition to the already existing 2,884 items, an additional 2,936 items (excluding some sectors such as textiles, iron and steel, and automotive parts) are aligned with the EU’s GSP (GSP coverage had previously been extended to 2,884 product categories from 2,456 product categories on January 1, 2003).
As of January 2004, the simple average tariff rate for imports of industrial products is 4.2%; this rate is zero for products imported from EU and EFTA countries. The simple average tariff rate for imports of agricultural products is 55.7%, while that for imports from EU and EFTA countries is 54.7%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirementsForeign exchange receipts must be surrendered within 180 days following the date of shipment to banks or special financial institutions. Exporters may retain foreign exchange receipts from abroad up to the equivalent of $50,000. If at least 70% of the foreign exchange receipts are surrendered within 90 days following the date of shipment, exporters are entitled to retain the remaining 30%, which they may deposit in foreign exchange accounts with commercial banks, keep abroad, or dispose of freely.
Financing requirementsNo.
Documentation requirementsNo.
Preshipment inspectionPreshipment inspections are carried out only if requested by the importing country.
Export licenses
Without quotasAll goods, other than those whose exportation is prohibited by law, decrees, or international agreements, may be exported freely within the framework of the Export Regime Decree. However, within the framework of WTO rules, restrictions and prohibitions on exports may be imposed in case of market turmoil; scarcity of the goods to be exported; public safety, morals, and health; or environmental concerns (this also applies to several varieties of flora and fauna). Restrictions and prohibitions also apply to exports of articles bearing artistic, historical, or archaeological value.
Export taxesNuts and unprocessed leather are subject to export taxes. The taxes are levied in the form of deductions payable to the Support and Price Stabilization Fund at the rate of the equivalents of $0.04 and $0.08, and $0.50% per kilogram for unshelled and shelled hazelnuts, and unprocessed leather, respectively.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersYes.
Credit card use abroad
Quantitative limitsCredit cards may be used on a revolving basis up to the equivalent of $10,000. Balances exceeding this limit must be settled within 30 days.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsPurchases and sales of domestic securities and other instruments by nonresidents and of foreign securities by residents may be effected freely. However, all transactions in securities must be carried out through banks and intermediary institutions authorized according to capital market legislation, and all related transfers must be performed through banks and special financial institutions. Capital market instruments to be issued or offered to the public by resident legal persons other than public institutions may be freely sold abroad subject to the condition that they be registered with the Capital Markets Board (CMB). The sale and issue of foreign securities and other instruments by nonresidents must be registered with the CMB.
On capital market securities
Shares or other securities of a participating nature
Sale or issue locally by nonresidentsThe sale or issue of these instruments is subject to CMB registration.
Sale or issue abroad by residentsThe sale or issue of these instruments is subject to CMB registration.
Bonds or other debt securities
Sale or issue locally by nonresidentsThe sale or issue of these instruments is subject to CMB registration.
Sale or issue abroad by residentsThe sale or issue of these instruments is subject to CMB registration.
On money market instruments
Sale or issue locally by nonresidentsYes.
On collective investment securities
Sale or issue locally by nonresidentsThe sale or issue of these instruments is subject to CMB registration.
Sale or issue abroad by residentsThe sale or issue of these instruments is subject to CMB registration.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Commercial credits
By residents to nonresidentsThe maturity of commodity credits may not exceed two years for nondurable goods and five years for other goods.
To residents from nonresidentsResidents may obtain freely credits from abroad, provided that they use such credits through banks or special financial institutions. The maximum maturity of prefinancing credits is 18 months, except in the case of shipbuilding, where it is 24 months.
Financial credits
To residents from nonresidentsCredits with a maturity of more than one year that are obtained by the public sector or guaranteed by the Treasury must be registered in the External Financing Information System maintained by the Undersecretariat of the Treasury. All other credits are monitored by the CBT for statistical purposes.
Controls on direct investment
Outward direct investmentResidents may freely export capital in cash up to $5 million or its equivalent in other foreign currencies through banks or special financial institutions, and capital in kind within the framework of the provisions of the customs legislation for the purpose of direct investment. Permission for direct investments that require the transfer of capital in kind or in cash exceeding the equivalent of $5 million is granted by the Undersecretariat of the Treasury.
Inward direct investmentEffective June 5, 2003, under the Foreign Direct Investment Law (Law No. 4875), foreign investors are free to make foreign direct investments and are subject to the same treatment as domestic investors. Previously, prior approval was required for these transactions, and the minimum amount of capital that could be brought in by foreign investors was the equivalent of $50,000.
Controls on liquidation of direct investmentProceeds may be transferred abroad freely but must be reported to the CBT.
Controls on real estate transactions
Purchase locally by nonresidentsEffective June 5, 2003, under the Foreign Direct Investment Law, foreign companies may freely acquire real estate or limited rights to property through a legal entity in Turkey established by or with participation of foreign investors, provided such acquisitions are permitted for Turkish citizens.
Nonresidents may not acquire real estate in military or security areas. The acquisition of real estate by nonresidents in villages is prohibited. Exceptions to this restriction may be granted by the Council of Ministers for activities in the tourism and petroleum sectors. Real estate in villages acquired by nonresidents through inheritance must be liquidated. Outside the boundaries of villages, foreign natural persons may acquire real estate on the condition of reciprocity. However, the acquisition of land exceeding 30 hectares requires the permission of the Council of Ministers. Foreign juridical persons established in Turkey may acquire real estate to conduct their business and economic activities. However, the real estate may not be used to carry out realty activities.
Controls on personal capital transactionsPersonal capital in cash form may be freely transferred into and out of the country, in accordance with exchange legislation. Inward and outward personal capital transfers in kind may be effected in accordance with customs and exchange legislation.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Lending to nonresidents (financial or commercial credits)Resident banks may extend credits to nonresidents in foreign exchange up to the total amount of the foreign exchange credits they have obtained and the balances in their foreign exchange deposit accounts. Such credits may also be extended in Turkish lira.
Lending locally in foreign exchangeResident banks may not extend credits in foreign exchange to residents except to those who are exporters; investors; Turkish entrepreneurs working abroad; residents who are conducting business related to international tenders held in Turkey; and residents who are conducting business related to defense industry projects that have been approved by the Undersecretariat of the Defense Industry.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsBanks and special finance institutions must maintain required reserves at the CBT for deposit and other liabilities. The required reserve ratio for liabilities in domestic currency is 6%; in foreign currencies, 11%. Required reserves must be held in special accounts with the CBT, but 3 percentage points of the reserve requirement rates for domestic and foreign currencies may be maintained on a twoweek average basis. The required reserves maintained in domestic currency and foreign exchange are remunerated.
Liquid asset requirementsLiquidity requirements are based on the liabilities used for the calculation of required reserves. The liquidity requirement ratio for liabilities in domestic currency is 4% and that for liabilities in foreign exchange is 1%. The period for calculating liabilities is two weeks.
Investment regulations
Abroad by banksThe opening of branches or representative offices abroad by banks founded in Turkey is subject to the permission of the BRSA. Likewise, the opening of a company abroad by banks, or banks’ participation in a previously established company abroad, requires the permission of the BRSA. Banks that fail to meet the standard ratios according to the Banks Act may not acquire new shares in partnerships.
In banks by nonresidentsAny acquisition of shares whereby the capital shares held by one person exceed 10%, 20%,33%, or 50% of the capital of the bank, and any transfer of shares whereby the capital shares held by one person fall below these limits are subject to prior permission of the BRSA. Transactions that result in reducing the number of shareholders to less than five, or in shares being assigned without permission, may not be registered. These rules are valid for the acquisition of voting rights and pledging of shares. The assignment of preferential shares requires BRSA approval, irrespective of the above limits. In the application of these regulations, no distinction is drawn between residents and nonresidents.
Open foreign exchange position limitsAll foreign exchangeindexed assets and liabilities have to be taken into account fully as foreign assets and foreign liabilities. Banks are required to maintain a balance in their foreign exchange assets and liabilities and maintain foreign exchange positions that are in line with their own funds. The ratio between net foreign exchange position and own funds must be ±20% (if the ratio exceeds this limit, the BRSA will require the bank to comply with a ±20% level within six months). This limit is the same as that stipulated by the previous regulation, except that net foreign exchange position is now compared to own funds instead of the capital base. The definition of own funds is provided in the Directive on Establishment and Operations of Banks, and covers the sum core capital and supplementary capital from which some items are deducted. The same definition is used in the capital adequacy ratio. The provisions of these regulations are also applied to special financial institutions.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsFor insurance companies, limitations on investment instruments apply to residents and nonresidents without distinction. For pension companies, a maximum of 15% of pension contributions may be held in foreign currency-denominated securities.
Limits (max.) on investment portfolio held abroadFor insurance companies, limitations on investment instruments apply to residents and nonresidents without distinction. For pension companies, a maximum of 15% of pension contributions may be held in foreign currency-denominated securities.
Limits (min.) on investment portfolio held locallyAssets must be held in domestic banks—including foreignowned banks—as blocked securities. For pension funds, at least 30% of their portfolios must be in domestic instruments.
For life insurance companies, limits apply as stipulated in the Insurance Supervisory Law.
Other controls imposed by securities lawsNo.
Changes During 2003
Imports and import paymentsJanuary 1. The coverage of GSP for least developed countries was increased to 2,884 product categories from 2,456.
Capital transactions
Controls on direct investmentJune 5. The Foreign Direct Investment Law (Law No. 4875) came into effect, making treatment of direct investments by nonresidents the same as investment by residents.
Controls on real estate transactionsJune 5. Under the Foreign Direct Investment Law, foreign companies were allowed to acquire real estate or limited rights to property through a legal entity in Turkey established by or with participation of foreign investors, provided such acquisitions are permitted for Turkish citizens.
Changes During 2004
Imports and import paymentsJanuary 1. The customs tariff rates for developing countries were reduced to zero for industrial products numbered 25–97 in the customs tariffs, and the coverage of GSP was extended to an additional 2,936 items.

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