Legal Framework
In Turkey, companies may keep their books in a currency other than the Turkish Lira, in accordance with Article 215 of the Tax Procedure Law (VUK) and General Communiqués No. 404 and 569.
As a rule, all books and documents must be kept in Turkish Lira (TL). However, companies with certain characteristics are permitted to keep books in foreign currency with the permission of the Ministry of Treasury and Finance.
This practice provides an opportunity to more accurately reflect financial reality, particularly for companies with foreign capital, export-oriented companies, or companies whose financial activities are based on foreign currency.
1. Capital Size Requirement
Legal regulations do not specify a direct minimum capital limit; however, the Revenue Administration (GİB) considers the company’s financial scale—particularly its paid-in capital, asset size, and foreign currency transaction ratio—when evaluating applications.
- In practice, companies with a paid-in capital of at least USD 100 million or its equivalent in Turkish lira, and with at least 40% of their shareholding owned by persons whose residence, legal, and business headquarters are located outside Türkiye, may be granted permission by the Presidency to maintain their accounting records in a foreign currency other than the Turkish lira.
- This amount has been determined to prevent small-scale companies from unnecessarily switching to a foreign currency-based accounting system and to cover only economically significant companies.
Foreign Capital Ratio
- At least 40% of the company’s capital must belong to direct or indirect foreign partners.
- Foreign partners must not be resident in Turkey.
Foreign Currency Revenue and Expense Ratio
- At least 40% of revenues must be earned in foreign currency,
- and a significant portion of expenses (e.g., payments for imports, licenses, consulting) must be foreign currency-based.
2. Bookkeeping of Accounts in Foreign Currency in Free Zones
Free zones in Turkey have a special status in terms of tax and foreign exchange regulations, despite being within customs borders.
Article 6 of the Free Zones Law No. 3218 grants the Ministry of Treasury and Finance special powers regarding bookkeeping and documentation in these zones.
In this context:
- Income or corporate tax payers operating in free zones may keep their books (including e-books) in foreign currency.
- This option applies to companies that operate independently in the free zone.
- If a Turkey-based company only has a branch in the free zone, it cannot benefit from this exception.
Principles of Application
- Transactions are recorded based on the TCMB foreign exchange buying rate.
- Economic values and tax bases are tracked in the currency in which the records are kept.
- Tax returns are submitted in Turkish Lira equivalents.
- Tax payments, refunds, and offsetting transactions are conducted in Turkish Lira.
- Ledgers maintained in foreign currency cannot be converted to Turkish Lira for at least five years.
This practice provides accounting convenience and exchange rate difference management advantages to free zone companies operating on a foreign currency basis.
3. Bookkeeping in Foreign Currency for Companies Operating in the Istanbul Financial Center
The “VUK General Communiqué (Serial No: 569)” published in the Official Gazette dated September 25, 2024, and numbered 32673 introduces an important innovation for participants in the Istanbul Financial Center (IFC).
Starting from the 2025 accounting period, companies operating in the IFC and holding a participant certificate will be able to keep books and records in any foreign currency based on daily exchange rates determined by the CBRT.
This right has also been granted to new companies that obtain a participant certificate and start operations by December 31, 2024.
Scope of Application
- Companies that benefit from certain tax exemptions and deductions as IFM participants can take advantage of this opportunity.
- If a company operates both in the IFM and elsewhere in Turkey, but only wishes to exercise this right for its branch in the IFM, it must apply to the relevant tax office.
Application Requirements
- As of the application date, 30% of the capital must belong to persons outside Turkey.
- At least 30% of the company’s income must be derived from activities within the scope of the IFC (no income requirement for start-ups).
- The application must be made at least two months before the period for which the books will be kept.
This regulation aims to make the Istanbul Financial Center an international standard financial center and to create a transparent and compliant reporting environment for foreign investors.
Foreign currency bookkeeping practices:
- Make the financial statements of companies operating in foreign currencies more accurate and comparable,
- Reduce accounting errors arising from exchange rate fluctuations,
- and provides transparency and standardization for international investors.
When Free Zones, the Istanbul Financial Center, and the capital size criterion are considered together, the foreign currency-based reporting system in Turkey is no longer merely an exception but has become a systematic privilege for strategic investors.
