CROSS BORDER FINANCIAL LEASING IN TURKEY
Subject to the satisfaction of several conditions set forth by the relevant regulations; cross-border financial leasing contract in Turkey in which a Lessor residing abroad funds a Lessee residing in Turkey can be concluded.
The Law No. 6361 on Financial Leasing, Factoring, and Financing Companies (hereinafter referred as to ‘Law No 6361’) categorises the financial leasing companies as financial institutions who are required to obtain a license from Banking Regulation and Supervision Board to operate and conclude financial leasing contract. However, under certain circumstances, foreign financial leasing companies can conclude financial leasing contracts with Turkish lessee.
Besides the above-mentioned main piece of legislation -Law No 6361- the below secondary legislations regulate financial leasing in Turkey:
- Regulation No. 28627 on Principles for Establishment and Operations of Financial Leasing, Factoring and Financing Companies (hereinafter referred as to ‘Regulation’),
- Circular on Registration of Financial Lease Contracts Covering Financial Leases of Persons Residing Abroad to Persons Residing in Turkey (hereinafter referred as to ‘Circular on Registration from Abroad’)
- Circular on Rules and Procedures Regarding the Registration of Financial Leasing Contracts to the Special Registry (hereinafter referred as to ‘Circular on Special Registry’).
Definition of Financial Leasing Contract under Circular on Registration from Abroad:
A cross-border leasing contract that qualifies as financial leasing contract in Turkey was defined as per the below Article 3/1 (c) of the Circular on Registration from Abroad.
‘’A leasing transaction based on a financial leasing contract enabling one of the following aspects;
- transferring the ownership of an asset by the lessor authorized pursuant to this Law or related legislation to the lessee at the end of the lease period
- giving the lessee the right to purchase the asset at a sum less than its current market value at the end of the lease period,
- lease period shall cover more than eighty percent of the asset’s economic life,
- the sum of current value of lease payments to be made pursuant to the financial leasing contract shall constitute more than ninety percent of the current market value of the asset.”
How a cross-border Financial Leasing Contract can be concluded between foreign Lessor and a Turkish Lessee in Turkey?
Turkish regulation allows a cross border financial leasing contract to be concluded on a condition that it is registered at the Registry of the Association. The contract registration process must be carried out before the subject matter product of the financial leasing enters into Turkey.
Circular on Registration from Abroad clearly defines the nature of a cross border contract that can be registered. Article 4 of the Circular states that ‘’contracts for air transport vehicles, vessels, medical devices and high technology productsthat were certified such features by the relevant authority and whose annual average lease payment is more than USD 100,000will be registered.’’
The Financial Leasing Contract must be in compliance with the Turkish laws and regulations. At the time of the application, it must be declared and undertaken that the financial lease contract complies with the financial lease definition as indicated above under Article 3/1 (c) of the Circular.
Registration of cross-border Financial Leasing Contract in Turkey:
Financial Leasing Contract will be registered by the submission of the following documents and information before the Association:
- A notarized financial lease contract
- Certificate of Authorization
- The financial leasing company has to be duly authorized to make financial leasing transactions in the country of its seat. Therefore, original document with an Apostille seal indicating that the Lessee has the permission to operate in financial lease transactions and the notarized translation of this document
- the original or notarized copy of the document given by a specialized agency indicating that the product is of high technology
- The lessor company must prove and document that it has the ownership of the leased property
- Pro-forma invoice
- Bank receipt for the registration fee
According to Article 6 of the Circular on Registration from Abroad, it is essential that documents obtained from abroad in connection with applications are approved by the competent authorities in abroad and by the Turkish Consulates or certified as per the provisions of the Convention on Lifting Requirement for Certification of Foreign Official Documents (apostille) and that notarized translations of documents from Turkish public notary.
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