Turkey maintains a broadly liberal foreign exchange regime for businesses, but with several important regulatory requirements that can catch foreign investors off guard. The country allows free capital movement, profit repatriation, and foreign currency holdings, yet imposes mandatory conversion rules on export proceeds, restricts certain domestic transactions to Turkish Lira denomination, and has periodically introduced emergency measures during periods of currency volatility.
For foreign-owned businesses, understanding these regulations is not optional. Non-compliance can result in administrative fines, transaction blocking, and regulatory scrutiny. Our analysts have prepared this expert-written guide covering every aspect of Turkey's foreign exchange regulations relevant to business operations, from the legal framework and capital repatriation rules to export proceed requirements, currency hedging options, and practical compliance strategies.
Legal Framework
Turkey's foreign exchange regime is governed primarily by Decree No. 32 on the Protection of the Value of the Turkish Currency (Turk Parasinin Kiymetini Koruma Hakkinda 32 Sayili Karar), originally issued in 1989 and amended numerous times since. The Central Bank of the Republic of Turkey (Turkiye Cumhuriyet Merkez Bankasi, TCMB) issues implementing communiques that provide detailed rules and procedures.
Turkey liberalized its foreign exchange regime in 1989 when Decree No. 32 replaced the restrictive capital controls that had been in place since the 1930s. Since then, the country has maintained a generally open capital account, with foreign investors free to bring capital into and out of the country through the banking system. However, the economic challenges of recent years, particularly the Turkish Lira's significant depreciation, have led to the introduction of several defensive measures including mandatory export proceed conversion, TRY denomination requirements for domestic contracts, and incentive programs encouraging TRY-denominated deposits.
The key regulatory bodies are the Central Bank (TCMB), which sets FX policy and issues detailed regulations, the Banking Regulation and Supervision Agency (BDDK), which oversees banks' compliance with FX rules, and the Ministry of Treasury and Finance, which sets the broader economic policy framework.
Capital Flows: Inbound and Outbound
Bringing Capital into Turkey
Foreign investors can freely bring capital into Turkey in any convertible currency. There are no restrictions on the amount of foreign currency that can be transferred into the country through the banking system. However, capital transfers must be processed through licensed Turkish banks, and the bank will record the source and purpose of the transfer.
For direct investments, the investment must be registered with the General Directorate of Incentive Implementation and Foreign Investment at the Ministry of Industry and Technology. This registration is a reporting requirement, not an approval process, and is typically handled by the company's accountant or legal advisor.
| Capital Flow Type | Restriction | Requirement |
|---|---|---|
| Foreign direct investment | None | Registration with Ministry |
| Portfolio investment | None | Processed through licensed intermediaries |
| Loan proceeds from abroad | None | Registration with TCMB if over threshold |
| Trade payments (imports) | None | Documentation of underlying transaction |
| Personal transfers | None | Banking system processing |
Repatriating Capital and Profits
Turkey's Foreign Direct Investment Law (Law No. 4875) guarantees foreign investors the right to freely transfer abroad the following: net profits and dividends, proceeds from the sale or liquidation of all or part of an investment, compensation for expropriation, license fees, royalties, and management fees, and principal and interest payments on foreign loans.
These transfers are processed through the Turkish banking system and require supporting documentation such as board resolutions for dividend payments, audited financial statements, tax clearance certificates, and sale or liquidation agreements.
Capital repatriation is not subject to government approval, but it is subject to applicable taxes. Dividend distributions to foreign shareholders are subject to a 10% withholding tax, which may be reduced under Turkey's double taxation treaties. Turkey has signed treaties with over 80 countries, many of which reduce the dividend withholding rate to 5% or 10%. Companies should verify the applicable treaty rate before making distributions. See our guide on Turkey double taxation treaties for details.
Export Proceed Conversion Requirements
One of the most operationally significant FX regulations for businesses is the mandatory conversion of export proceeds into Turkish Lira.
Current Rules
As of 2026, exporters must convert 40% of their foreign currency export proceeds into Turkish Lira through a Turkish bank within 180 days of the export date. The conversion must be at the prevailing exchange rate on the day of conversion. The remaining 60% can be retained in foreign currency accounts or converted at the company's discretion.
How It Works in Practice
When a Turkish company receives foreign currency payment for an export, the bank credits the amount to the company's foreign currency account. The company then has 180 days to convert 40% of that amount into TRY. The conversion is performed as a standard FX transaction through the bank, with the rate determined at the time of conversion.
Key Details
| Aspect | Requirement |
|---|---|
| Conversion percentage | 40% of export proceeds |
| Conversion deadline | 180 days from export date |
| Applicable transactions | All goods and services exports |
| Conversion channel | Through a Turkish bank |
| Exchange rate | Market rate at time of conversion |
| Non-compliance penalty | Administrative fines, potential export restrictions |
| Tracking | Banks report conversion compliance to TCMB |
Practical Implications
Companies with significant export revenue should factor the mandatory conversion into their cash flow and currency management planning. Since 40% of export proceeds must be converted to TRY regardless of the company's TRY needs, exporters effectively bear a forced currency exposure. Strategies to manage this include timing conversions to coincide with TRY-denominated expense payments (salaries, rent, taxes), using forward contracts to hedge the conversion rate, and maintaining sufficient TRY liquidity from conversions to cover domestic obligations.
The export proceed conversion requirement has been adjusted multiple times since its reintroduction. It was initially set at 80% in 2022, reduced to 40% in subsequent amendments. Our analysts note that this requirement is actively managed by the Central Bank based on macroeconomic conditions and could be adjusted again. Companies should maintain awareness of current rates through their bank or accountant.
TRY Denomination Requirements
Turkey has imposed requirements that certain domestic contracts be denominated in Turkish Lira rather than foreign currencies.
Covered Transactions
The following types of contracts between Turkish-resident parties must be denominated and settled in Turkish Lira:
- Real estate lease agreements (including commercial leases)
- Real estate purchase agreements
- Employment contracts
- Service contracts between Turkish-resident entities (with certain exceptions)
- Construction contracts
Exceptions
Several important exceptions exist. Contracts involving free zone companies (for intra-zone transactions), contracts with entities whose capital is primarily sourced from abroad, international transportation contracts, and contracts specifically permitted to be in foreign currency by law or regulation are exempt from the TRY denomination requirement.
Practical Impact
For foreign-owned companies, the most significant impact is on lease agreements. If you rent office or warehouse space in Turkey, the lease must be denominated in TRY. Historically, commercial leases in Turkey were commonly denominated in USD or EUR, but this is no longer permitted for contracts between Turkish-resident parties.
Employment contracts must also be in TRY. While you can benchmark salaries to foreign currency equivalents, the contractual obligation and payment must be in Turkish Lira.
| Contract Type | Currency Requirement | Exception |
|---|---|---|
| Commercial lease | TRY only | Free zone intra-zone transactions |
| Employment | TRY only | None for Turkish-resident employers |
| Service (domestic) | TRY only | Certain international service contracts |
| Real estate sale | TRY only | Limited exceptions |
| Export contracts | Any currency | Standard practice to use USD/EUR |
| Import contracts | Any currency | Payment in original currency |
| Intra-company international | Any currency | Between Turkish entity and foreign parent |
Central Bank Regulations and Monetary Policy
The Central Bank of Turkey plays an active role in FX markets and has introduced several measures affecting business operations.
Reserve Requirements
Banks are required to maintain reserves against their FX liabilities. These reserve requirements affect the interest rates and fees banks charge on foreign currency accounts and services. Higher reserve requirements on FX deposits have made TRY-denominated deposits relatively more attractive for banks, which translates into better interest rates for TRY deposits compared to FX deposits.
KKM (Kur Korunmali Mevduat) - FX-Protected TRY Deposits
The government introduced KKM accounts as an incentive for businesses and individuals to convert foreign currency holdings into Turkish Lira. These special TRY deposit accounts guarantee that if the TRY depreciates against the deposited currency benchmark during the deposit term, the government will compensate the difference. This effectively provides FX-linked returns on TRY deposits.
While KKM accounts have been primarily marketed to individual depositors, corporate versions exist. Companies considering KKM accounts should consult their bank and accountant about the specific terms, tax implications, and suitability for their cash management needs.
FX Position Limits for Banks
The Central Bank limits the foreign currency net positions that banks can hold. These limits can affect the availability and pricing of FX products offered to corporate clients, including forward contracts and FX swaps.
Currency Hedging Options
Turkish banks offer several hedging instruments for businesses managing foreign currency exposure.
Forward contracts: Agreements to buy or sell a specified amount of foreign currency at a predetermined rate on a future date. Forward contracts are available for most major currency pairs (USD/TRY, EUR/TRY, GBP/TRY) with terms typically ranging from 1 week to 12 months.
FX swaps: Combined spot and forward transactions used to manage short-term FX liquidity. Commonly used by companies that need to temporarily convert currencies and reverse the position at a later date.
Options: FX options providing the right (but not the obligation) to buy or sell currency at a specified rate. Options are available at major Turkish banks but are less commonly used by SMEs due to premium costs.
Natural hedging: Matching FX-denominated revenues with FX-denominated expenses reduces net exposure without financial instruments. Companies can achieve this by sourcing raw materials in the same currency as their export revenue or maintaining operational expenses in the same currency as income.
Our analysts recommend that every business with significant foreign currency exposure develop a formal hedging policy rather than making ad hoc FX decisions. At minimum, companies should identify their net FX exposure by currency, determine their risk tolerance for exchange rate movements, implement basic hedging (forward contracts for known future obligations), and review and adjust their hedging strategy quarterly. Your Turkish bank's treasury desk can assist with implementing hedging strategies appropriate for your company's size and exposure profile.
Reporting and Compliance Requirements
Balance of Payments Reporting
Companies engaging in international transactions above certain thresholds are required to submit balance of payments reports to the Central Bank through their banks. Banks typically handle this reporting automatically for standard trade payments and capital transfers.
FX Transaction Reporting
Banks are required to report FX transactions to the Central Bank. For companies, this is transparent as the bank handles all reporting. However, companies should maintain their own records of all FX transactions for accounting and audit purposes.
Tax Implications
Foreign exchange gains and losses are included in the corporate tax base. Realized FX gains (from actual currency conversions) are taxable income, and realized FX losses are deductible expenses. Unrealized gains and losses on open FX positions at year-end are also recognized for tax purposes.
The tax treatment of FX gains and losses can significantly impact a company's tax liability, particularly during periods of rapid currency movement. Companies should work with their accountant to ensure proper recognition and reporting of FX-related items.
For comprehensive tax guidance, see our guide on Turkey corporate tax rates and tax incentives for foreign investors.
Practical Guidance for Foreign-Owned Companies
Setting Up FX Operations
When establishing FX operations at your Turkish company, ensure the following: open multi-currency accounts at your bank (TRY, USD, EUR at minimum), designate authorized persons for FX transactions with appropriate limits, establish a process for tracking export proceed conversion deadlines, set up your accounting system to track FX gains and losses, and discuss available hedging products with your bank's treasury desk.
Managing the Lira Exposure
The Turkish Lira has experienced significant volatility in recent years, creating both risks and opportunities for foreign-owned businesses. Companies earning revenue in foreign currency but incurring costs in TRY benefit from Lira depreciation (their TRY costs decrease in USD terms), while companies importing goods priced in foreign currency face increased TRY costs.
Key strategies include maintaining a balance between TRY and FX-denominated assets, timing large currency conversions strategically (while remaining compliant with export proceed requirements), using forward contracts to lock in exchange rates for known future payments, and keeping informed about Central Bank policy changes that may affect exchange rates.
Common Compliance Mistakes
Missing export conversion deadlines: The 180-day window for converting 40% of export proceeds is strictly enforced. Set up a tracking system to ensure timely compliance.
FX-denominated domestic contracts: Ensuring all required domestic contracts are in TRY is easy to overlook, especially for companies accustomed to operating in USD or EUR. Review all contracts for compliance.
Inadequate documentation for capital transfers: When repatriating profits or making other outbound transfers, ensure all supporting documentation is prepared in advance to avoid delays at the bank.
Ignoring tax implications of FX transactions: Foreign exchange gains are taxable income in Turkey, and many companies fail to properly track and report these gains. During periods of significant Lira depreciation, companies holding foreign currency assets may realize substantial FX gains that increase their corporate tax liability. Work with your accountant to ensure proper tracking from the outset, and consider the interaction between FX gains and any tax incentives your company may hold through free zones or investment incentive certificates.
For banking setup guidance, see our guide on opening a business bank account in Turkey. For payment processing information, see our guide on Turkey payment methods for businesses.
Conclusion
Turkey's foreign exchange regime is fundamentally open and supportive of foreign investment, but it operates within a framework of specific rules and requirements that businesses must understand and comply with. The mandatory conversion of export proceeds, TRY denomination requirements for domestic contracts, and evolving Central Bank regulations create an operating environment that requires active management and ongoing awareness.
For foreign-owned companies, the key priorities are establishing robust FX tracking and compliance systems, developing a hedging strategy appropriate for the company's currency exposure, working with a bank that provides responsive treasury services and clear guidance on regulatory changes, and retaining an accountant experienced with the tax implications of FX transactions.
The regulatory environment has been dynamic in recent years, with several changes to conversion ratios, deposit incentives, and denomination rules. Companies should treat FX compliance as an ongoing operational priority rather than a one-time setup task.
For broader guidance on establishing and operating a business in Turkey, explore our guides on company registration, corporate tax, and free zone tax benefits.
Frequently Asked Questions
Can foreign companies freely repatriate profits from Turkey?
Yes, Turkey generally allows free repatriation of profits, dividends, and capital by foreign investors. Under the Foreign Direct Investment Law (Law No. 4875), foreign investors can transfer abroad net profits, dividends, proceeds from the sale or liquidation of investments, royalties, license fees, and other legitimate payments through Turkish banks using the banking system. There is no government approval required for profit repatriation. However, the transfers must be processed through the banking system and are subject to applicable withholding taxes (typically 10% on dividends, reducible under double taxation treaties). Companies must ensure all tax obligations are settled before making transfers.
What are Turkey's rules on export proceeds?
Turkey requires exporters to convert a portion of their foreign currency export proceeds into Turkish Lira through the Turkish banking system. As of 2026, exporters must convert 40% of their export proceeds into TRY within 180 days of the export date. The conversion must be done through a Turkish bank at the prevailing exchange rate. The remaining 60% can be retained in foreign currency accounts. These rules are set by the Central Bank of the Republic of Turkey (TCMB) and have been adjusted multiple times based on economic conditions. Non-compliance can result in penalties and restrictions on future export transactions.
Can Turkish companies hold foreign currency accounts?
Yes, Turkish companies can open and maintain foreign currency accounts at Turkish banks. There are no restrictions on holding USD, EUR, GBP, or other major currencies in corporate accounts. Companies can receive foreign currency payments from abroad, make international payments in foreign currency, and convert between currencies at market rates. However, certain domestic transactions must be denominated and settled in Turkish Lira, including lease agreements for properties in Turkey, employment contracts for work performed in Turkey, and service contracts between Turkish-resident entities. Violations of these TRY denomination requirements can result in administrative fines.