Introduction
Foreign currency loans in Turkey are a critical issue for companies, banks, foreign lenders, investors, project sponsors and corporate borrowers. Turkey has a highly active credit market, and many Turkish companies seek financing in currencies such as USD, EUR and GBP because foreign currency borrowing may offer longer maturities, international lender access, export finance opportunities, project finance structures and lower nominal interest rates compared with Turkish lira loans.
However, foreign currency borrowing in Turkey is not unrestricted. Turkish law contains detailed rules on when Turkish residents may obtain foreign currency loans, who may provide such loans, whether the borrower must have foreign currency income, how the USD 15 million loan balance threshold operates, when exemptions apply, whether foreign currency-indexed loans are permitted, how foreign loans must be transferred into Turkey and what compliance risks arise if the rules are breached.
The main legal instrument in this field is Decree No. 32 on the Protection of the Value of Turkish Currency and the related communiqués and administrative guidance. Decree No. 32 is a central part of Turkey’s foreign exchange legislation and has been amended several times, especially to manage Turkish companies’ foreign currency exposure. International legal commentary on the 2018 amendments explains that the rules were designed to restrict foreign currency borrowing by Turkish companies that do not regularly generate foreign currency revenues, while preserving access for borrowers that satisfy certain thresholds or exemptions.
This article provides a comprehensive legal guide to foreign currency loans in Turkey, focusing on legal restrictions, Decree No. 32, foreign currency income, eligible borrowers, exemptions, guarantees, security packages, cross-border lending, tax, enforcement and compliance risks.
1. What Is a Foreign Currency Loan?
A foreign currency loan is a credit facility denominated in a currency other than Turkish lira. In Turkey, such loans are often denominated in USD or EUR. They may be granted by Turkish banks, Turkish financial institutions, foreign banks, foreign financial institutions, development finance institutions, export credit agencies, parent companies or other international lenders.
A foreign currency loan may be structured as a bilateral loan, syndicated loan, project finance loan, acquisition finance facility, shareholder loan, export finance loan, working capital facility, refinancing loan or financial leasing-related facility.
The key legal point is that a foreign currency loan is different from a Turkish lira loan, and it is also different from a foreign currency-indexed loan. A foreign currency loan is directly denominated and repayable in foreign currency. A foreign currency-indexed loan, by contrast, may be expressed in Turkish lira but indexed to a foreign currency value. Under the foreign exchange regime introduced by the 2018 amendments, Turkish residents are generally no longer able to obtain foreign currency-indexed loans from abroad or within Turkey.
This distinction is essential. A loan that is not technically denominated in foreign currency may still be problematic if its value is indexed to exchange rates. Therefore, legal review should focus not only on the currency label but also on the economic structure of the repayment obligation.
2. Legal Framework: Decree No. 32 and Related Communiqués
The primary framework for foreign currency loans is Decree No. 32 on the Protection of the Value of Turkish Currency. Decree No. 32 regulates various foreign exchange matters, including foreign currency loans, foreign exchange transactions, capital movements, foreign currency-indexed obligations and certain cross-border transfers.
The Decree is supplemented by communiqués, circulars and administrative practice. Amendments are often published in the Official Gazette and may materially affect borrowing structures. For example, important amendments were made by the decision published in the Official Gazette dated 15 March 2025 and numbered 32842, and related communiqué changes were published in the Official Gazette dated 28 March 2025 and numbered 32855.
For this reason, foreign currency loan analysis in Turkey must always be current. A structure that was permissible in one period may become restricted later, and a previously unclear issue may be clarified by a new amendment or administrative interpretation.
The legal framework should be reviewed together with Turkish banking law. Banking Law No. 5411 regulates banks, lending activities, credit exposure, internal risk systems and BRSA supervision. It also treats cash and non-cash loans broadly within the regulated banking framework.
3. Why Turkey Restricts Foreign Currency Loans
Foreign currency loans create exchange rate risk. If a Turkish company earns revenue in Turkish lira but borrows in USD or EUR, a depreciation of the Turkish lira can sharply increase the borrower’s debt burden. This may threaten the borrower’s solvency, lender recovery, financial stability and the wider economy.
For this reason, the Turkish foreign exchange regime restricts foreign currency borrowing by Turkish residents that do not have sufficient foreign currency income or do not fall within specific exemptions. The policy logic is clear: companies that naturally generate foreign currency income, such as exporters, may be better positioned to repay foreign currency debt, while companies earning only Turkish lira revenue may face excessive currency mismatch.
Legal commentary on the 2018 restrictions explains that the amendments were introduced to curtail foreign currency loans by local companies that do not regularly benefit from foreign currency-denominated revenues, while maintaining certain exemptions such as public entities, banks, financial institutions, investment incentive certificate holders, PPP project companies and entities with a USD 15 million loan balance.
4. Who Is a Turkish Resident for Foreign Currency Loan Purposes?
The foreign currency loan restrictions apply primarily to persons resident in Turkey. In practice, this includes Turkish legal entities and, subject to strict limitations, real persons resident in Turkey. The exact residency analysis may depend on the relevant foreign exchange legislation and tax-related definitions.
For companies, the analysis is usually straightforward if the borrower is incorporated and operating in Turkey. A Turkish joint stock company, limited liability company, bank, financial institution, project company or branch may be treated as resident in Turkey for foreign exchange purposes.
For foreign lenders, residency matters because a Turkish resident borrower is subject to Decree No. 32 restrictions even if the facility agreement is governed by foreign law. A London-law or New York-law loan agreement cannot override mandatory Turkish foreign exchange rules applicable to the borrower.
5. General Rule for Turkish Legal Entities Borrowing FX Loans
The general structure under Decree No. 32 is that Turkish resident legal entities may obtain foreign currency loans if they satisfy the foreign currency income requirement or fall within an exemption.
A key rule concerns the borrower’s foreign currency income and loan balance. Legal commentary summarizing the Decree states that legal entities generating foreign currency income may borrow foreign currency loans from foreign lenders; however, if the borrower’s loan balance on the utilization date is below USD 15 million, the aggregate of the new loan amount and existing loan balance should not exceed the borrower’s foreign currency income for the last three financial years.
This rule is central to foreign currency loan compliance. The borrower must not simply ask whether it has some foreign currency income. It must also calculate its foreign currency loan balance and determine whether the proposed new borrowing exceeds the permitted amount.
6. The USD 15 Million Loan Balance Threshold
The USD 15 million threshold is one of the most important concepts in Turkey’s foreign currency loan regime. If a Turkish resident legal entity has a foreign currency loan balance of at least USD 15 million on the utilization date, it may benefit from an exemption from the foreign currency income limitation in certain structures.
If the borrower’s foreign currency loan balance is below USD 15 million, the foreign currency income cap becomes critical. In that case, if the borrower has foreign currency income, the sum of the new loan and existing foreign currency loan balance should not exceed the borrower’s foreign currency income generated during the previous three financial years, unless another exemption applies.
For compliance purposes, the borrower and lender should document the calculation carefully. The analysis should include existing onshore and offshore foreign currency loans, the amount of the new facility, the utilization date, foreign currency income records and the source documents supporting the borrower’s calculations.
A lender should not rely only on a borrower’s informal representation. Conditions precedent should require documentary evidence, accountant confirmation, bank confirmation or legal confirmation where appropriate.
7. Foreign Currency Income Requirement
Foreign currency income is generally linked to export, transit trade, sales and deliveries deemed as exports, and foreign currency-generating services and activities. A Turkish company with export revenues may therefore be eligible to obtain foreign currency loans, subject to the statutory restrictions.
Legal summaries explain that foreign currency income refers to income generated from activities and services such as exports, transit trade, sales and deliveries constituting exports, and foreign currency-generating activities. They also explain that if the borrower’s loan balance is less than USD 15 million, the proposed loan plus existing balance cannot exceed the borrower’s foreign currency income for the previous three financial years.
In practice, the following documents may be relevant to prove foreign currency income:
Export invoices, customs declarations, foreign currency receipts, bank transaction records, financial statements, tax records, export registry documents, contracts with foreign customers, transit trade documents and accountant-certified income schedules.
The lender should ensure that the documents are consistent. Discrepancies between invoices, bank receipts, financial statements and tax records may create compliance and AML concerns.
8. Exceptions to the Foreign Currency Income Requirement
Decree No. 32 includes several exemptions allowing certain Turkish resident legal entities to obtain foreign currency loans without demonstrating foreign currency income.
Common exemptions include loans obtained by public authorities and institutions, banks, financial leasing companies, factoring companies and financing companies; borrowers with a foreign currency loan balance of at least USD 15 million; borrowers obtaining loans under investment incentive certificates; loans used to finance certain machinery and equipment; borrowers awarded internationally announced domestic tenders; borrowers undertaking certain defense industry projects; borrowers appointed to conduct public-private partnership projects; and borrowers that can demonstrate potential foreign currency income from export or similar foreign currency-generating activities.
These exemptions are highly important for project finance, infrastructure finance, export finance, investment finance and acquisition of machinery. However, exemptions should not be assumed. Each exemption has its own conditions and documentary requirements.
For example, a company claiming an investment incentive exemption should produce the relevant investment incentive certificate and confirm that the loan is within its scope. A PPP project company should produce the project documents showing its appointment or role. A company relying on potential foreign currency income should provide credible contracts, projections and supporting evidence.
9. Onshore and Offshore FX Loans
Foreign currency loans may be obtained from Turkish lenders or foreign lenders. An onshore foreign currency loan is generally extended by a Turkish bank or authorized financial institution. An offshore foreign currency loan is extended by a foreign bank or financial institution.
Both structures may be subject to Decree No. 32 restrictions, but monitoring and processing mechanics may differ. International legal commentary explains that Turkish intermediary banks through which offshore loan proceeds flow, and Turkish banks or financial institutions extending onshore loans, have responsibilities in monitoring compliance with restrictions concerning loan balance and foreign currency loan amounts.
This monitoring role is important in practice. A Turkish intermediary bank may refuse or delay processing if the borrower cannot show eligibility, supporting documents or compliance with the foreign exchange regime. Therefore, loan documentation should be coordinated with the bank handling the disbursement and repayment.
10. Obligation to Transfer and Use Offshore FX Loans Through Turkish Banks
Turkish borrowers obtaining foreign currency loans from foreign lenders are generally required to transfer and utilize such loan proceeds through banks in Turkey. Legal commentary explains that those who obtain foreign currency loans from foreign lenders are, in principle, obliged to use and utilize those loans in Turkey by transferring the foreign currency loan amounts through local banks in Turkey.
There may be exceptions where the Turkish legal entity uses the loan for its business abroad and does not transfer the proceeds to Turkey for investments in Turkey. But this must be analyzed carefully.
From a practical standpoint, this means that a foreign lender should not disburse directly to an offshore account or third-party account without confirming whether Turkish foreign exchange rules allow the structure. Improper fund flow may create regulatory, tax, accounting and AML problems.
11. Foreign Currency Loans to Real Persons
Foreign currency loans to real persons resident in Turkey are heavily restricted. Legal commentary on the 2018 amendments explains that Turkish real persons would no longer be able to obtain foreign currency loans from abroad or onshore after the amendment, subject to very limited circumstances under the regime.
This is especially important for individuals seeking personal finance, real estate loans, investment loans or shareholder-related foreign currency borrowing. A structure that may be possible for a Turkish company may not be available for a Turkish resident individual.
Where an individual is involved as a guarantor or surety rather than borrower, separate rules on foreign currency guarantees, suretyship formalities and spousal consent should also be reviewed.
12. Foreign Currency-Indexed Loans
Foreign currency-indexed loans are generally prohibited for Turkish residents. These are loans where the debt is nominally expressed in Turkish lira but indexed to a foreign currency or exchange rate.
Legal commentary on the 2018 Decree amendments explains that foreign currency-indexed loans were disallowed and that Turkish residents would no longer be able to obtain such loans either from abroad or within Turkey.
This restriction prevents parties from bypassing foreign currency loan rules by creating Turkish lira loans that economically behave like foreign currency loans. For compliance purposes, lawyers should review not only the loan currency but also any adjustment, indexation, conversion, exchange rate protection or repayment formula.
13. Foreign Currency Guarantees and Sureties
Foreign currency loans often require guarantees, sureties or collateral support. Historically, foreign currency-denominated guarantees and sureties between Turkish residents created legal uncertainty and restrictions.
The 2025 amendments to Decree No. 32 clarified certain rules. Legal updates explain that, following the March 2025 amendments, direct shareholders or group companies of Turkish residents that obtained foreign currency or precious metal loans from banks and financial institutions established in Turkey may provide foreign currency-denominated guarantees and sureties to such Turkish banks and financial institutions for those loans.
Other legal summaries state that guarantees and sureties for foreign currency or precious metal loans may now be provided by group companies and direct shareholders resident in Turkey, in the context of the amended framework.
This is a major issue in secured finance. Before the amendment, many transaction parties faced uncertainty when structuring foreign currency security support from Turkish resident group companies or shareholders. After the amendment, certain structures have become clearer, but the exact conditions still require careful legal review.
14. Security Packages for Foreign Currency Loans
Foreign currency loans may be secured by mortgages, movable pledges, share pledges, account pledges, receivables assignments, bank guarantees, corporate guarantees, suretyships, promissory notes and other security instruments.
The security package must be analyzed from several angles:
Can the borrower lawfully obtain the foreign currency loan?
Can the security provider lawfully secure the foreign currency obligation?
Can the security amount be denominated in foreign currency?
Does the collateral document need registration?
Does the collateral require official form, notarization, land registry procedure or pledge registry entry?
Is the secured obligation described correctly?
Are foreign currency guarantees or sureties permitted under current Decree No. 32 rules?
For example, a mortgage over Turkish real estate securing a foreign currency loan may require careful drafting and land registry compliance. A Turkish resident group company guarantee in foreign currency may require analysis under the 2025 amendments. A receivables assignment securing a foreign currency loan should consider whether the receivable itself is foreign currency-denominated or Turkish lira-denominated.
15. Banking Law and Credit Risk
Foreign currency loans are also relevant from a banking regulatory perspective. Banking Law No. 5411 recognizes loan transactions as part of banking activity and regulates credit risk, loan limits, internal systems, supervision and non-cash credit exposure. The law treats cash loans and various non-cash instruments such as letters of guarantee and counter-guarantees as credit exposure for banking purposes.
Turkish banks extending foreign currency loans must comply not only with Decree No. 32 but also with BRSA regulations, internal credit procedures, risk management policies, capital adequacy requirements and loan classification rules.
For foreign lenders, Turkish banking law may be relevant indirectly. A Turkish bank processing the loan may request extensive documentation. A Turkish borrower may have existing bank covenants limiting further foreign currency debt. Security sharing with Turkish banks may require intercreditor arrangements.
16. Tax and Stamp Duty Risks
Foreign currency loans may have tax consequences in Turkey. Interest payments to foreign lenders may be subject to withholding tax depending on the lender’s status, loan maturity, applicable domestic rules and any double tax treaty. Loan agreements, security documents, guarantees and amendments may also create stamp tax exposure unless an exemption applies.
In cross-border transactions, tax gross-up clauses should be drafted carefully. Foreign lenders often expect payments free from deductions, while Turkish borrowers need clarity on withholding, treaty relief procedures, documentation requirements and whether the lender must cooperate to reduce tax.
Stamp tax can be material because finance documents often contain large monetary amounts. The parties should review whether any exemption applies before signing, especially for foreign currency loan agreements and related security documents.
17. AML, Source of Funds and Bank Processing
Foreign currency loans are often cross-border transactions, and therefore banks will usually conduct anti-money laundering checks. Turkey’s main AML statute is Law No. 5549 on Prevention of Laundering Proceeds of Crime, whose stated objective is to determine principles and procedures for preventing laundering of crime proceeds.
Turkish banks may request corporate documents, ownership charts, loan agreements, source-of-funds explanations, lender information, board resolutions, invoices, export records, investment incentive certificates and foreign currency income documentation.
Foreign lenders should expect Turkish banks to ask questions before processing disbursements or repayments. A lack of documentation may delay the loan even if the facility agreement has been signed.
For borrowers, AML readiness is practical risk management. A borrower seeking urgent disbursement should prepare KYC and supporting documents before the closing date.
18. Compliance Risks for Borrowers
Borrowers face significant compliance risks if they obtain foreign currency loans without satisfying Decree No. 32 conditions. Legal commentary states that residents in Turkey that fail to comply with Decree No. 32 and the relevant amendments may be held directly liable and subject to administrative sanctions.
Potential risks include administrative penalties, refusal by banks to process funds, recall or conversion consequences, accounting problems, tax scrutiny, covenant breaches and lender default claims.
A borrower that incorrectly declares foreign currency income or miscalculates loan balance may face serious consequences. Therefore, the borrower should keep a complete compliance file, including foreign currency income documents, loan balance calculations, exemption evidence, board approvals, bank confirmations and legal opinions.
19. Compliance Risks for Lenders
Foreign lenders also face practical risks. Even if the primary legal liability may fall on the Turkish resident borrower, the lender may suffer commercially if the loan is non-compliant. The loan may be delayed, funds may not be processed, repayments may face obstacles, security may be challenged or the borrower may assert regulatory problems as a defense or restructuring argument.
Lenders should therefore include Decree No. 32 compliance as a condition precedent and representation. The borrower should represent that it is eligible to obtain the loan, that the loan complies with Turkish foreign exchange legislation, that required bank intermediation is satisfied and that all documents provided are accurate.
The facility agreement should also include covenants requiring the borrower to maintain compliance throughout the loan term, notify changes in foreign currency income, provide updated documentation and avoid actions that would breach foreign exchange rules.
20. Documentation for FX Loan Compliance
A strong foreign currency loan file should include:
Borrower corporate documents, board and shareholder approvals, facility agreement, repayment schedule, foreign currency income evidence, USD 15 million loan balance calculation, existing loan statements, exemption documents, investment incentive certificate if applicable, PPP project documents if applicable, export contracts, bank confirmations, Turkish intermediary bank records, tax analysis, KYC documents, security documents, guarantee approvals and legal opinions.
If the borrower relies on potential foreign currency income, the file should include contracts, export commitments, project documents, financial projections and supporting evidence demonstrating the future income basis.
The compliance file should be maintained throughout the loan term, not only at signing. Amendments, renewals, refinancing, maturity extensions and additional drawdowns may require fresh analysis.
21. Refinancing, Renewals and Amendments
Foreign currency loan rules are particularly important during refinancing and renewal. A loan that was validly obtained under previous rules may be grandfathered or treated differently depending on the applicable transitional provisions. However, amendments, renewals or increased commitments may trigger new compliance analysis.
Legal commentary on the 2018 regime noted that loans extended before the effective date were grandfathered, but renewals after the effective date needed to comply with the applicable exceptions where relevant, and foreign currency-indexed loans could not be renewed unless converted into compliant structures.
In practice, refinancing should not be treated as a simple extension. Counsel should review whether the new loan amount, maturity, borrower status, foreign currency income, security package and guarantees comply with current rules.
22. Foreign Direct Investment and Repatriation
Foreign currency loans are often linked to foreign investment. Foreign investors may fund Turkish subsidiaries through shareholder loans or external financing. Turkish foreign investment law generally permits foreign investors to transfer abroad reimbursements and interest payments arising from foreign loans through banks or special financial institutions.
This is commercially important, but it does not remove the need to comply with Decree No. 32, tax rules, AML requirements and bank documentation. The right to transfer loan repayments abroad must be supported by a compliant loan structure and proper banking documents.
Foreign investors should decide whether funding should be made as equity, shareholder loan, third-party loan, convertible instrument or intra-group financing. Each structure has different legal, tax and foreign exchange implications.
23. Common Mistakes in Foreign Currency Loan Transactions
Common mistakes include:
Assuming all Turkish companies may borrow in foreign currency.
Ignoring the USD 15 million loan balance threshold.
Failing to document foreign currency income.
Treating potential foreign currency income as automatic eligibility.
Using foreign currency-indexed Turkish lira structures.
Disbursing offshore without checking Turkish bank intermediation requirements.
Relying on outdated Decree No. 32 rules.
Drafting foreign currency guarantees without checking the 2025 amendments.
Failing to align security documents with the foreign currency loan.
Ignoring tax and stamp duty.
Failing to prepare AML and KYC documents before closing.
Assuming a foreign law facility agreement overrides mandatory Turkish rules.
These mistakes can cause serious delays and legal exposure.
24. Practical Checklist for Borrowers
A Turkish borrower should follow this checklist before obtaining a foreign currency loan:
Determine whether the borrower is resident in Turkey.
Confirm whether the borrower is a legal entity or real person.
Calculate existing foreign currency loan balance.
Determine whether the USD 15 million threshold is met.
Calculate foreign currency income for the previous three financial years.
Identify whether any exemption applies.
Collect supporting documents.
Coordinate with the Turkish intermediary bank.
Review tax and stamp duty.
Confirm corporate approvals.
Check whether the security package is permitted.
Review guarantee and surety rules.
Obtain legal advice before signing.
25. Practical Checklist for Foreign Lenders
Foreign lenders should also follow a structured checklist:
Request Decree No. 32 eligibility confirmation.
Include foreign exchange compliance representations.
Make eligibility documents conditions precedent.
Require disbursement through compliant banking channels.
Review Turkish security documents.
Confirm foreign currency guarantees and sureties are valid.
Check tax gross-up and withholding provisions.
Conduct KYC and source-of-funds checks.
Obtain Turkish legal opinions.
Monitor compliance during renewals and amendments.
Prepare enforcement strategy in case of default.
26. Why Legal Support Is Essential
Foreign currency loan regulation in Turkey is technical and frequently updated. It combines foreign exchange law, banking law, secured finance, tax, AML compliance, corporate law and cross-border enforcement.
A Turkish finance lawyer may assist with Decree No. 32 analysis, foreign currency income verification, USD 15 million threshold review, exemption assessment, facility agreement comments, Turkish bank coordination, security package structuring, foreign currency guarantee analysis, tax coordination, compliance documentation and legal opinions.
Legal support is especially important before signing and disbursement. Once the loan has been advanced, regulatory defects may be difficult to cure.
Conclusion
Foreign currency loans in Turkey are commercially useful but legally sensitive. Decree No. 32 imposes important restrictions on Turkish resident borrowers, especially those without sufficient foreign currency income or without a qualifying exemption. The USD 15 million loan balance threshold, three-year foreign currency income test, prohibition of foreign currency-indexed loans, bank intermediation requirements and foreign currency guarantee rules are all central to compliance.
For borrowers, the main risk is obtaining a loan without legal eligibility or sufficient documentation. For lenders, the main risk is funding a structure that later faces banking, regulatory, tax or enforcement problems. For both sides, the safest approach is to conduct a detailed Decree No. 32 review before signing, before disbursement and before any refinancing or amendment.
A compliant foreign currency loan structure should answer five questions clearly: Who is the borrower? Does the borrower have foreign currency income or an exemption? Is the USD 15 million threshold satisfied? Are the funds transferred and used through proper banking channels? Are the guarantees and security documents valid under current Turkish law?
In Turkish finance law, foreign currency borrowing is not only a commercial decision about interest rates and exchange rates. It is a regulated legal structure that must be carefully documented, monitored and aligned with Decree No. 32. A properly structured foreign currency loan can support investment, exports, project finance and international growth, while a non-compliant structure may create serious financial, regulatory and enforcement risks.
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