Legal Framework
Regulations on Bookkeeping in Foreign Currency in Turkey are primarily governed by Article 215 of the Turkish Tax Procedure Law (VUK) and related secondary legislation. Under this framework, statutory books must, as a general rule, be maintained in Turkish Lira (TRY), unless specific authorization is granted for foreign currency bookkeeping.
Foreign currency bookkeeping constitutes a regulated exception to this principle. Under Article 215 and the relevant secondary legislation, including VUK General Communiqué No. 404 and VUK General Communiqué No. 569, certain taxpayers may maintain their statutory books in a foreign currency, subject to specific eligibility criteria and, where applicable, administrative approval by the Ministry of Treasury and Finance.
There is no statutory entitlement to maintain books in foreign currency. The regime operates on a permission-based framework and is subject to ongoing compliance conditions.
1. General Regime Under Article 215 VUK
Companies whose transactions are predominantly denominated in foreign currency may apply to the Ministry of Treasury and Finance for authorization to maintain their statutory books in a foreign currency.
The legislation does not prescribe fixed capital thresholds or mandatory foreign ownership ratios. Instead, the Ministry assesses applications based on:
- The functional currency of the business
- The volume and continuity of foreign currency transactions
- The financing structure
- The economic substance and operational scale
Approval is discretionary and based on economic justification.
Consequences of Approval
Where authorization is granted:
- Accounting records are maintained in the approved foreign currency.
- Financial results are determined in that currency.
- Tax returns are filed in Turkish Lira equivalents.
- Tax liabilities are paid in Turkish Lira.
- Conversion back to Turkish Lira is not permitted for a minimum period of five years unless otherwise authorized.
The five-year restriction creates structural rigidity. Therefore, companies must evaluate long-term currency exposure before transition.
Failure to maintain the economic conditions that formed the basis of the administrative approval may trigger revocation of the authorization, retrospective tax base adjustments, exchange difference recalculations, and potential tax exposure, including penalties and late payment interest.
2. Bookkeeping in Foreign Currency in Free Zones
Under Article 6 of the Free Zones Law No. 3218 and related secondary regulations, taxpayers operating independently within Turkish free zones may maintain their books in foreign currency.
This regime applies to:
- Corporate or income tax payers operating within the free zone
- Entities whose activities are legally confined to free zone operations
If a company headquartered in Türkiye operates only through a branch in a free zone, eligibility must be assessed separately based on operational structure and tax registration status.
Technical Implications
Within this framework:
- Accounting records may be maintained in foreign currency.
- Financial statements are prepared in the chosen foreign currency.
- Tax returns must be declared in Turkish Lira equivalents.
- Tax payments remain in Turkish Lira.
Free zone foreign currency bookkeeping provides operational alignment for export-driven or FX-based business models but does not eliminate Turkish tax filing and payment obligations.
3. Istanbul Financial Center (IFC) Regime – Communiqué No. 569
VUK General Communiqué (Serial No. 569), published in the Official Gazette dated 25 September 2024 (No. 32673), introduced a specific foreign currency bookkeeping regime for companies operating within the Istanbul Financial Center (IFC).
Pursuant to VUK General Communiqué No. 569, the foreign currency bookkeeping regime for Istanbul Financial Center (IFC) participants applies as of the 2025 accounting period and continues under the current legislative framework, unless amended.
This regime remains in force under the current legislative framework.
Eligibility Conditions
To qualify:
- At least 30% of the company’s capital must be owned by persons resident outside Türkiye.
- At least 30% of total income must derive from IFC-qualified activities (no income requirement applies to newly established entities).
- Application must be submitted at least two months prior to the relevant accounting period.
Operational Requirements
Where approved:
- Records are maintained in the selected foreign currency.
- Daily exchange rates determined by the Central Bank of the Republic of Türkiye (CBRT) are used.
- Tax returns and tax payments are made in Turkish Lira equivalents.
Eligibility thresholds represent ongoing compliance criteria. A post-approval failure to maintain the required ratios may result in reassessment of foreign currency bookkeeping status.
Compliance and Risk Considerations
Foreign currency bookkeeping is not merely an accounting preference but a strategic tax position with structural implications.
Key risk areas include:
- Revocation of administrative approval
- Exchange difference recalculations
- Tax base distortions
- Inconsistencies between statutory and tax reporting
- Breach of five-year non-conversion rule
Accordingly, transition to foreign currency bookkeeping should be preceded by a detailed legal, tax, and financial impact assessment.
Given the discretionary nature of approval and the ongoing compliance obligations, companies should conduct a comprehensive eligibility and risk review before initiating an application.
For technical evaluation of eligibility, regulatory exposure, and implementation procedures under VUK Article 215, Free Zone regulations, or the IFC regime, you may contact ÖzbekCPA for structured advisory support.
