1. Introduction
The economy of the Republic of Türkiye is among the world’s largest, playing a significant role in the development and sustenance of global trade through its exporters and importers. Export transactions, which provide foreign currency inflows, are considered a crucial element of economic development and the balance of foreign trade. However, customs and exchange regimes, international relations, and global developments can sometimes result in unfavorable outcomes for exporters, leading to disruptions in the repatriation of export receivables.
As unrepatriated export proceeds concern not only the exporter but also our country’s economy in terms of the exchange regime, laws and administrative regulations have established procedures and sanctions to ensure the repatriation of these proceeds. In Türkiye, the regulations concerning the repatriation of export proceeds are shaped by the Law No. 1567 on the Protection of the Value of Turkish Currency (LPVTC) and the communiqués issued based on this law.
2.Repatriation of Export Proceeds
a. The Concept of Export Proceeds
Although not explicitly defined in legislation, export proceeds can be described as the receivables due to the exporter in exchange for all kinds of goods, assets, services, and capital exported. These proceeds constitute a significant source of foreign currency for the national economy and hold special importance within the exchange regime.
b. The Obligation to Repatriate Export Proceeds
The first sentence of Article 8 of Decree No. 32 fundamentally stipulates that the disposition of export proceeds is free. The second sentence of the same article grants the Ministry of Treasury and Finance the authority to regulate the repatriation of export proceeds when necessary. Within the scope of this authority granted to the Ministry of Treasury and Finance, Communiqué No. 2018-32/48 Regarding Decree No. 32 on the Protection of the Value of Turkish Currency was prepared and entered into force. Article 3, paragraph 1 of the relevant communiqué mandates that export proceeds be transferred or brought to the intermediary bank for the export, directly and without delay, following payment by the importer.
c. The Period for Repatriating Export Proceeds
Article 3 of Communiqué No. 2018-32/48 Regarding Decree No. 32 on the Protection of the Value of Turkish Currency sets the period for the repatriation of proceeds at 180 days from the actual date of export. Furthermore, Article 5/5 of the Communiqué stipulates that if export contracts provide for a maturity of more than 180 days from the actual date of export for the collection of proceeds, the proceeds must be repatriated within 90 days from the end of the maturity date.
In addition to the rules mentioned above, Article 5 of the Communiqué, titled “Exports with Special Characteristics,” provides for special time limits with different start dates for exports by contractors, consignment exports, and other situations. Intermediary banks, which are responsible for monitoring the repatriation of export proceeds, must notify the relevant tax offices about any export proceeds not repatriated within the periods stipulated in the Communiqué.
d. Repatriation of Export Proceeds in Turkish Lira or Foreign Currency
Communiqué No. 2018-32/48, Article 3/3, states: “It is essential that export proceeds be repatriated in the declared Turkish lira or foreign currency. However, it is possible to receive a different foreign currency in exchange for an export declared to be in foreign currency, or to receive foreign currency in exchange for an export declared to be in Turkish lira.” Accordingly, if the value declared in the export declaration is in Turkish Lira, the export proceeds may be repatriated in either Turkish Lira or a foreign currency. If the value declared is in a foreign currency, the proceeds cannot be repatriated in Turkish Lira but can be brought back in the declared foreign currency or another foreign currency.
3. Sanctions for Failure to Repatriate Export Proceeds
a. Form of Regulation for the Sanction
LPVTC Article 3/3, clause 1 establishes that “Those who import or export all kinds of goods, assets, services, and capital, or who act as intermediaries in these transactions, and fail to repatriate their receivables arising from these transactions according to the provisions in the decisions taken under Article 1 and within the periods specified in these decisions, shall be punished with an administrative fine equivalent to five percent of the market value of the assets they were obliged to repatriate.” The term “decisions” in the relevant provision refers, in practice, to Decree No. 32 and the sequential regulatory acts of the institutions authorized under this Decree.
b. Parties Liable for Non-Repatriation of Export Proceeds
i. The Exporter
This is the person who is listed as the exporter on the customs declaration and who carries out the export. Under the LPVTC and related legislation, this person is primarily responsible for the repatriation of export proceeds.
ii. The Assignee of the Export Receivable
If the exporter assigns the export receivable to a third party, bank, or factoring company in accordance with the legislation, the assignee becomes responsible for repatriating these proceeds.
iii. The Bank
Communiqué No. 2018-32/48, Article 6/3, establishes a special liability for banks. Accordingly, the intermediary bank for the export is also obligated to monitor compliance with the legislation governing the repatriation of export proceeds and to report any non-compliance. The bank’s negligence in this matter will give rise to liability.
c. The Administrative Fine Sanction
Pursuant to LPVTC Article 3/3, exporters who fail to close their export account by repatriating the export proceeds within the prescribed period will be subject to an administrative fine of 5% of the unrepatriated export proceeds. If the relevant export proceeds are repatriated before this administrative fine becomes final, the monetary fine stipulated in LPVTC Article 3/1 will be applied, by reference from LPVTC Article 3/3, clause 2. The range for this monetary fine varies from three thousand to twenty-five thousand Turkish Liras.
If a penalty is imposed under LPVTC Article 3/3, clause 2, and Article 3/1, the amount of the penalty cannot exceed 2.5% of the amount that was required to be repatriated. The authority competent to apply the sanctions regulated under LPVTC Article 3 and mentioned above is the Public Prosecutor, as per LPVTC Article 3/10.
d. Sanctions for Fictitious Transactions
LPVTC Article 3/4, clause 1, stipulates that “Those who engage in fictitious transactions with the intent of smuggling foreign currency or Turkish Lira in import, export, and other foreign exchange transactions shall be punished with an administrative fine equal to the market value of the assets they were obliged to repatriate or that they smuggled.” According to this provision, if transactions with a false appearance are conducted or false declarations are made to avoid repatriating export proceeds, the provision will apply, and an administrative fine equal to the market value of the smuggled asset will be imposed. If the fictitious transaction also constitutes a criminal offense, the exporter will face criminal liability.
e. Other Applicable Sanctions
In addition to the administrative fines that can be imposed by the Public Prosecutor, in case of non-compliance, a tax audit may be initiated against the exporter by the Tax Administration and the General Directorate of Financial Markets and Foreign Exchange, pursuant to LPVTC Additional Article 1. Furthermore, failure to repatriate export proceeds in a timely manner may lead to various disciplinary actions within the exporter’s association, and could result in commitment breaches with institutions like Eximbank. Such situations may create various difficulties for the exporter in future transactions.
f. Recidivism
In the event of recidivism, in other words, if the offense is repeated, the provisions for recidivism under LPVTC Article 3/9 will apply, and the administrative fine will be doubled.
4. Legal Remedies Against Sanctions
Against administrative fines imposed by the Public Prosecutor, an application can be made to the criminal peace judgeship within fifteen days at the latest from the date of notification or pronouncement of the decision, in accordance with Article 27 of the Misdemeanors Law. According to the same provision, if no application is made to the criminal peace judgeship within the prescribed period, the administrative fine will become final. The application is to be made with a petition, and to avoid any loss of rights, it is important to ensure that the petition includes the grounds for challenging the sanction and the evidence supporting them.
5. Conclusion
To ensure compliance with the legislation on the repatriation of export proceeds and to avoid any loss of rights, it is crucial for companies that conduct or will conduct export transactions to be meticulous in drafting contracts and preparing documents used at every stage of the export process. It is also important for them to utilize more secure payment methods, such as letters of credit, to ensure timely collection of receivables, to take the necessary steps to repatriate the proceeds within the prescribed periods, and to monitor the process. Considering the volatile nature of international trade, minimizing the additional risks that may arise from the failure to repatriate export proceeds in a timely manner will be to the benefit of our exporting companies.
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