25.02.2022/15
Amendments to the Capital Movements Circular
Explanations regarding the amendments to the Capital Movements Circular of the Central Bank of the Republic of Turkey regarding foreign currency borrowings between holding or group companies are given below.
Article 38 of the section of the Capital Movements Circular regulating obtaining domestic credits has been amended. Accordingly, in accordance with the foreign exchange legislation, it is not possible for a company to extend a foreign currency loan to another company since residents in Turkey can obtain foreign currency loans from banks and financial institutions as stated in Decree No. 32. However, in the event that the transaction is carried out in order for the company with a surplus of funds to deposit the foreign currency equivalent of the relevant amount to the company or group company within the same holding with a deficit of funds, it is possible to transfer the foreign currency equivalent of the amounts related to the borrowing transactions to the relevant accounts in the country based on the written declaration of the company, provided that the borrowing and follow-up are made in Turkish Lira.
However, it is not possible for the company that utilizes a new foreign currency loan to transfer the said loan to another company within the same holding or group. Banks or financial institutions shall notify the Ministry of the companies that they determine to be acting in this manner through bridge loans and similar practices.
Accordingly, FX borrowing between holding or group companies is subject to the condition of having surplus funds. Except for this condition, borrowing and transfer by using a new foreign currency loan is prohibited. Banks or financial institutions will notify the Ministry of companies that they determine to be acting in this manner through bridge loans and similar practices.
In addition, according to the provisional Article 1 of the aforementioned Circular, for companies with a loan balance of USD 15 million or more on the date of use, the holding company or the companies within the holding company shall submit the documents certifying that it operates within the holding company while using foreign currency loans to the banks and financial institutions that lend/intermediate the use of credit with the written statement of the company indicating the holding company and all companies within the holding company. With the subparagraph added regarding the certification of this issue, in order to certify that the company in the status of indirect subsidiary/partnership within the holding company is within the same holding, an independent audit firm report or a document approved by a CPA stating that the company is an indirect subsidiary/partnership of the holding company and is included in the consolidated financial statements of the holding company must be submitted.
You can access the relevant CBRT Circular here.
Sincerely,
BİLGENER
