Through the Communiqué (No /52) on the Amendment of the Communiqué (No

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1 Tax Bulletin 2018/6 Communiqué on Limitations Regarding Contracts in Foreign Currency or Indexed to Foreign Currency Published on the Official Gazette Abstract The Communiqué (No /52) regarding Amendment of the Communiqué on the Decree No. 32 on the Protection of the Value of Turkish Currency (Communiqué No /34) was published on the Official Gazette dated and numbered Accordingly, regulations on making contracts in or have been amended. Explanations Through the Presidential Decree no. 85 published on the Official Gazette dated September 13, 2018, it was ensured that residents in Turkey, except for the situations determined by the Ministry, cannot determine contract value and other payment obligations in or cannot index them to for certain type of contracts. Such contracts are; purchase and sales of movable and real estate, all kinds of movable and real estate rental contracts including charter and financial leasing, leasing contracts, employment contracts, service contracts and contracts of construction. Through the Communiqué (No /51) on the Amendment of the Communiqué (No /34) on the Decree No. 32 on the Protection of the Value of Turkish Currency published on the Official Gazette dated October 6, 2018; regulations have been made on exceptions regarding contracts concluded in or and on the implementation of these provisions. Through the Communiqué (No /52) on the Amendment of the Communiqué (No /34) on the Decree No. 32 on the Protection of the Value of Turkish Currency published on the Official Gazette dated November 16, 2018 and numbered 30597; procedures and principles on making contracts in or as are redefined. Relevant regulations are outlined below. I. Regulations and Exceptions as per Contract Types 1. Real Estate Sales and Rental Contracts It is not possible for residents in Turkey to determine contract value and other payment obligations in or to index them to, arising out of real estate sales and rental contracts to be made among them, including residence and indoor workplaces contracts subject matters of which are remained in domestic. It is possible for non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more either directly or indirectly in Turkey, to determine contract value and other payment obligations of real estate sales and rental contracts to which they are involved as either buyer or tenant party in or to index them to. It is possible to determine contract value and other payment obligations in or to index them to, arising out of real estate rental contracts

2 concerning rental of accommodation facilities licensed by Ministry of Culture and Tourism to operate. It is possible to determine contract value and other payment obligations in or to index them to, arising out of real estate rental contracts concerning rental of duty-free sales stores. 2. Employment Contracts Residents in Turkey cannot, in respect of the contracts to be made between them, determine contract value and other payment obligations in or as for employment contracts except those which are to be executed overseas and involving seamen as contracting parties. It is possible to determine contract value and other payment obligations in or as for employment contracts where persons who are not Turkish citizen but residing in Turkey are contracting parties. Non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more either directly or indirectly in Turkey, being under their and/or mutual control as well as companies that are based in free zone in terms of their activities within free zone, which are located in Turkey can, determine contract value and other payment obligations in or as for employment contracts to which they are involving as employer. 3. Service Agreements including Consultancy, Brokerage and Transportation Residents in Turkey cannot, in respect of the contracts to be made between them, determine contract value and other payment obligations in or as for service contracts including consultancy, brokerage and transportation services, except those listed below. a) Service agreements, parties of which are not Turkish citizens, b) Service agreements concluded within the scope of exports, transit trade, sales and deliveries deemed as exports and exchange earning services and operations, c) Service agreements made for activities to be performed overseas by Turkish residents, d) Service agreements between residents in Turkey, which are commenced in Turkey and finalized abroad or vice versa or both commenced and finalized abroad. Non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more either directly or indirectly in Turkey, being under their and/or mutual control as well as companies that are based in free zone in terms of their activities within free zone, which are located in Turkey can determine, contract value and other payment obligations in or as for service agreements to which they are involving as buyer. 4. Software Sales and Hardware and Software related License and Service Agreements It is possible, in respect of the contracts to be made between them, for residents in Turkey to determine contract value and other payment obligations in or as for sales contracts of software produced overseas within the scope of information technologies as well as license and service agreements regarding hardware and software produced overseas. 5. Work Contracts

3 Residents in Turkey can, in respect of the contracts to be made between them, determine contract value and other payment obligations in or as indexed them to for work contracts which involve costs in. 6. Sales and Rental Contracts for Movables Residents in Turkey can, in respect of the contracts to be made between them, determine contract value and other payment obligations in or as for sales and rental contracts of movables, except sales and rental contracts of vehicles. For vehicle rental contracts and commercial vehicle sales contracts for passenger transportation purposes which were concluded before when provisional article 8 of the Decree No. 32 became effective, it is not compulsory to re-determine contract price by parties in Turkish. 7. Financial Leasing Contracts It is possible to determine contract values and other payment obligations in or as for financial leasing contracts to be concluded in accordance with articles 17 and 17/A of the Decree No. 32. For financial leasing contracts regarding ships described in the Law on Amendment of the Presidential Decree No. 491 and Law on Turkish International Ship Registry (No. 4490), it is possible to determine contract value and other payment obligations in or as. 8. Contracts entered into by Public Authorities and Institutions as Contracting Party Within the scope of the execution of tenders, contracts and international agreements to which public institutions and organizations are parties; contracts (excluding real estate sale and employment contracts) drawn up by contractors with third parties can be concluded in or can be. It is possible to determine contract value and other payment obligations in or as for the contracts other than real estate sales and rental contracts, where Public Authorities and Institutions or companies under Turkish Armed Forces Foundation are contracting parties. 9. Contracts made under the Law on the Regulation of Public Financing and Debt Management It is possible to determine contract value and other payment obligations in or as for the contracts made regarding operations performed under the Law (No. 4749) on the Regulation of Public Financing and Debt Management. It is possible to determine contract value and other payment obligations in or as for the contracts involving banks with respect to these operations. 10. Capital Market Instruments It is possible to produce, issue, purchase and sale capital market instruments (including capital market instruments and depot certificates as well as investment fund shares) and determine obligations thereof in in accordance with the Capital Market Law (No. 6362) and regulations made under this law. 11. Contracts precious metal or commodity

4 Contracts precious metal and/or commodity, price of which is determined in in international markets or indexed indirectly to, are assumed as "contracts ". In service agreements regarding transportation activities, it is possible to index them to petroleum price. 12. Contracts on Passenger, Cargo and Postal Transportation Activities It is possible for commercial air transportation companies based in Turkey, active in passenger, cargo and/or postal transportation business, companies providing technical services regarding aircrafts, their engines and mechanisms and parts, organizations with public or private legal entity status and licensed or authorized to do business in providing land services at airports under civil aviation regulations as well as enterprises and companies and partnerships (holding directly or indirectly at least 50 percent of capital share) established by the aforesaid organizations to make contracts with residents in Turkey in or including prices, with the exception of real estate sales and rental contracts and employment contracts. II. Summary General rules and exceptional provisions regarding contracts in or are summarized based on contract types in the following table. Contract Content Rental and sales of domestic real estate (including houses and indoor workplaces) General Rule on making contract Cannot be made in or Exceptions i) Contracts where following persons are buyer or tenant parties; - Persons not Turkish citizen but residing in Turkey, - non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more, - Companies in free zone ii) Rental of accommodation facilities licensed by Ministry of Culture and Tourism to operate iii) Rental of duty-free stores Employment Contracts Cannot be made in or i) Employment contracts to be executed abroad ii) Employment contracts involving seamen

5 iii) Employment contracts involving those who are not Turkish citizen but residing in Turkey iv) Employment contracts involving non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more either in Turkey as well as companies in free zone in terms of their activities within free zone Service agreements including consultancy, brokerage and transportation Cannot be made in or i) Service agreements involving persons who are not Turkish citizen ii) Service agreements concluded within the scope of exports, transit trade, sales and deliveries deemed as exports and exchange earning services and operations iii) Service agreements made for activities performed overseas iv) Service Agreements commenced in Turkey and finalized abroad or vice versa v) Service Agreements involving non-residents' branches, representative agencies, offices, liaison offices, companies in which they hold shares of 50% or more either in Turkey as well as companies in free zone in terms of their activities within free zone Work Contracts Movables sales and rental contracts Cannot be made in or in or i) Work contracts including costs in i) Vehicle sales and rental contracts (excluding vehicle rental contracts and commercial vehicle sales contracts for passenger transportation signed before )

6 Sales contracts for software produced abroad; and license and service agreements for hardware and software produced abroad Financial leasing contracts (under the Decree No. 32, articles 17 and 17/A, and the Law No. 4490) Contracts involving public authorities and institutions as well as companies under Turkish Armed Forces Foundation Contracts made by contractors or companies in charge and their counter contracting parties with third parties, provided that these contracts are intended for execution of tenders, agreements and international treaties involving public authorities and institutions Contracts made for transactions performed under the Law (No.4749) on Regulation of Public Financing and Debt Management Contracts to be made by commercial air transportation companies based in Turkey, active in passenger, cargo and/or postal transportation business, companies providing technical services regarding aircrafts, their engines and mechanisms and parts, organizations with public or private legal entity status and licensed or authorized to do business in providing land services at airports under civil aviation regulations as well as enterprises and companies and partnerships (holding directly or indirectly at least 50 percent of capital share) established by the aforesaid organizations with residents in Turkey in or in or in or in or in or in or i) Excluding real estate sales and rental contracts i) Excluding real estate sales and rental contracts i) Excluding real estate sales and rental contracts i) Excluding real estate sales and rental contracts III. Other Regulations 1. Negotiable instruments regarding contracts which are neither concluded in nor

7 Values in negotiable instruments drawn up regarding contracts, for which contract value and other payment obligations arising out of these contracts cannot be determined in or, cannot be set in or. Nonetheless, negotiable instruments within such context, issued and released before when provisional article 8 of the Decree No. 32 came into effect are excepted from the provisions of said article. 2. The concept of being resident in Turkey Turkish residents' branches, representative agencies, offices, liaison offices, companies in which they directly or indirectly hold shares of 50% or more are considered to be residents in Turkey. However if such contract is fulfilled abroad, this rule shall not apply. 3. Revising existing contracts Contract value and other payment obligations arising from these contracts are obliged to be revised by parties as Turkish Lira for contracts which cannot be determined in or. If parties are unable to reach a consensus in revising contract value in Turkish ; fees in contracts concluded in or shall be determined by converting the amounts into Turkish using Turkish Central Bank's cash selling rate as of January 2, 2018 and applying inflationary adjustment based on monthly consumer price index rate changes determined by Turkish Statistical Institute from January 2, 2018 until the date when fees are revised. Provisions of this sub-clause shall not apply to already collected or delayed receivables in contracts, contract value and other payment obligations of which cannot be determined in or, as well as deposits already paid under real estate rental contracts and negotiable instruments released for fulfilment of contracts. Contact Us: Tax Services KPMG Yeminli Mali Müşavirlik A.Ş. KPMG Istanbul Office İş Kuleleri, Kule 3, Kat:2-9, Levent, İstanbul T: +90 (212) KPMG Ankara Office Paragon Tower Kızılırmak Mah. Ufuk Üniversitesi Cad. No: 8 Çukurambar, Ankara Tel :+90 (312) Fax : +90 (312) KPMG Izmir Office Heris Tower, Akdeniz Mah.Şehit Fethi Bey Cad. No:55 Kat:21 D:34 Alsancak-Konak / İZMİR Tel : +90 (232) Fax : +90 (232) The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. KPMG International Cooperative, a Swiss entity. Member firms of independent firms are affiliated with KPMG International Cooperative.

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