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New Turkish Lira law

LAW ON THE CURRENCY UNIT OF THE REPUBLIC OF TURKEY

LAW NO:5083

ENACTMENT: 31.01.2004

New Turkish banknotes

The currency unit of the Republic of Turkey

The currency unit of the Republic of Turkey is the New Turkish Lira. The hundredth part of the New Turkish Lira is the New Kurus. One New Turkish Lira (NTL) is equivalent to a hundred New Kurus (NKr).

The Council of Ministers is empowered to remove the expression of "New" used in the "New Turkish Lira" and the "New Kurus" and to establish the principles on its application.

Conversion rate between the Turkish Lira and the New Turkish Lira and rounding off to the New Kurus*

Article 2- When the Turkish Lira values are converted into the New Turkish Lira; one million Turkish Lira (1.000.000 TL) shall be equivalent to one New Turkish Lira (1 NTL).

On the transaction results and at the payment stages of conversion transactions of the Turkish Lira values to the New Turkish Lira and the transactions to be conducted in terms of the New Turkish Lira, a half New Kurus and the values higher than a half New Kurus shall be rounded off to one New Kurus. The values lower than a half New Kurus shall not be taken into account.

Amendment in references to Turkish Lira

Article 3- All references made to Turkish Lira or Lira in laws, other legislation, administrative transactions, court decisions, legal transactions, negotiable instruments and other documents that produce legal effects as well as payment and exchange instruments shall be considered to have been made to New Turkish Lira at the conversion rate specified in Article 2.

Reproducing and publishing of pictures and images of banknotes

Article 4- Reproducing and publishing conditions related to dimension, color, material, resolution, expression to be written on the banknotes and other related conditions for the banknotes currently in circulation, or withdrawn from circulation, or to be put into circulation shall be set by the Central Bank of the Republic of Turkey and announced in the Official Journal.

Persons who fail to comply with the conditions to be announced shall be charged with a heavy fine starting from one billion five hundred million Turkish Lira up to five billion Turkish Lira, unless it related to a more serious crime.

Provisions repealed

Article 5- The Law No. 3290 on the Mandatory Use of Lira in the Central Government Accounts dated 24 December 1937 has been repealed.

Provisional Article 1- The Turkish Lira banknotes and coins that are currently in circulation shall be circulated along with the New Turkish Lira banknotes as well as the new coins to be issued between 1 January 2005 and 31 December 2005.

The regulations on the concurrent circulation and conversion of these banknotes shall be determined by the Central Bank of the Republic of Turkey, while the regulations on the concurrent circulation and conversion of coins shall be established by the Prime Ministry, the Under secretariat of Treasury.

The Minister responsible for the Under secretariat of Treasury shall be entitled to remove the doubts with respect to the execution of the Law hereby and make necessary regulations; the Ministry of Finance, the Ministry of Industry and Trade, the Under secretariat of Treasury, the Central Bank of the Republic of Turkey, the Capital Market Board, the Banking Regulation and Supervision Agency shall be entitled to make regulations in the matters that fall within the scope of their duties.

Provisional Article 2- If any and all kinds of legal transactions and documents issued in terms of Turkish Lira producing legal effects are converted into the New Turkish Lira before 31 December 2005 (including that date) by taking the conversion rate into account as stipulated in Article 2 of the Law hereby, transactions and the documents shall be exempt from any and all kinds of tax, duty, fee and other liabilities.

Provisional Article 3- Between 01 January 2005 and 31 December 2005, the prices of all goods and services shall be expressed in terms of both the Turkish Lira and the New Turkish Lira on the lists of labels and tariffs to be arranged within the framework of Article 12 of the Law on the Protection of Consumers, No. 4077.

Those who do not fulfill this requirement shall be subject to the penalty stipulated in the second paragraph of Article 25 of the Law, No. 4077.

Enforcement

Article 6-

a) Article 4, the second and third paragraphs of provisional Article 1 of this Law shall enter into force on their enactment dates,

b) The other Articles shall enter into force on 1 January 2005.

Execution

Article 7- The provisions of this law shall be executed by the Council of Ministers.

 

GENERAL STATEMENT OF REASONS

The inflationary process experienced in Turkish economy in the 1980-2002 period was also reflected in the amount of banknotes in circulation. While the amount of banknotes in circulation (volume of currency issued) stood at TL 278.6 billion on 31 December 1980, it reached TL 7 quadrillion 635 trillion 621,9 billion, increasing by 27,407 times as of 31 December 2002.

As a result of this development, while the need for banknotes in circulation had simply been met by banknotes with denominations varying from 50 Kurus to 1,000 Turkish Lira in the period between 1927 and 1980, new banknotes with larger denominations have made their way into circulation since 1981, driving away those in smaller denominations from circulation, in order to cope with the increasing need for banknotes in circulation. Thus, the composition of Turkish Lira banknotes in circulation consisted of denominations of 250.000, 500.000, 1.000.000, 5.000.000, 10.000.000 and 20.000.000 at the end of 2002.

Consequently, Turkish Lira has ended up in large denominations unprecedented in the world, creating several problems for expressing and writing the figures.

For this reason, removing six zeros from banknotes, adopting a new unit of currency based on a conversion rate, with which one million Turkish Lira equals one New Turkish Lira (1,000,000 TL = 1 NTL), and thus bringing a general simplification in expressing and writing the monetary values and records within the scope of the national economy is considered useful for practical reasons.

The Law has been prepared for this purpose.

 

THE RATIONALE OF ARTICLES

Article 1- The Article provides that the currency unit of the Republic of Turkey shall be the New Turkish Lira (NTL). The centesimal subdivision of the New Turkish Lira (NTL) is the New Kurus (NKr), and one New Turkish Lira corresponds to a hundred New Kurus.

Therefore, it is obvious that the New Turkish Lira should replace the Turkish Lira as a unit of account in keeping the books and records.

A look at the worldwide applications reveals that the countries, which have scrapped zeros from their currency unit, have generally renamed their currency unit by placing the expression of "new" before their former currency. Afterwards they have removed this expression returning to their former currency name. The same is true also in Turkey. The New Turkish Lira shall be the new currency unit by scrapping six zeros from the money still in circulation. The Council of Ministers has been authorized to remove the expression of "new" in "New Turkish Lira" and "New Kurus" with the aim of returning to the old currency unit and using the Turkish Lira as a unit of account in books and records again.

Article 2- As provided by this Article, the Turkish Lira has been re-named as the New Turkish Lira; six zeros have been removed from the Turkish Lira, and one million Turkish Lira has been equaled to one New Turkish Lira (1.000.000 TL= 1 NTL).

The prices of goods and services can be less than one New Kurus and such values can also be expressed with fractions of one New Kurus. By multiplying certain fixed numbers, the values involved in accrual, collection and payment transactions such as taxes, foreign exchange buying and selling may result in less than one New Kurus, or the remainder thereof can be less than one New Kurus.

This Article provides that this rounding off operation should be applied not on the unit prices, but on the transaction results and at the payment stage. Payments should be recorded with two digits after comma at the most. The Article also stipulates that due to lack of coins that will allow payments less than a New Kurus on the transaction results and at the payment stages of conversion transactions of the Turkish Lira values to the New Turkish Lira and the transactions to be conducted in terms of the New Turkish Lira, a half New Kurus and the values higher than a half New Kurus shall be rounded off to one New Kurus. The values lower than a half New Kurus shall not be taken into account. Hence, some technical difficulties, such as renewal of numerical data processing electronic devices and computer software have been averted.

Article 3- Relying on the fact that the New Turkish Lira is accepted as the new currency unit, this Article hereby provides that any references to Turkish Lira or Lira in laws and other regulations, in administrative transactions and legal acts, in documents bearing legal effects, or in a broader sense, in any juridical relationship, in instruments of payment and exchange should be deemed to be made to the New Turkish Lira and considered as valid, with a conversion rate of one million Turkish Lira corresponding to one New Turkish Lira (1.000.000 TL= 1 NTL).

The introduction of the New Turkish Lira shall not alter the terms and conditions of juridical relations, and shall not give the right to any of the parties to claim an excuse to alter or cancel a juridical relation unilaterally, in fulfillment of his/her obligation.

Article 4- As there are no penal clauses to be applied in our legislation for unintentional reproducing and publishing of pictures and images of banknotes that might result in counterfeiting, with this Article it has been aimed to eliminate this legal deficiency and harmonize with the legislation of European Union.

As these arrangements might be updated by the European Central Bank, in order to minimize the amendment of this Law, it is envisaged that reproducing and publishing conditions related to dimension, color, material, resolution, expression to be written on the banknotes and other related conditions for the banknotes currently in circulation, or withdrawn from circulation, or to be put into circulation shall be set by the Central Bank of the Republic of Turkey and announced in the Official Journal. It is also envisaged that persons who fail to comply with the conditions to be announced shall be subject to punishment.

Article 5- As the Article provides that the New Turkish Lira shall be the currency unit of the Republic of Turkey, the Law No. 3290 on the Mandatory Use of Lira in the Central Government Accounts dated 24 December 1937 has been repealed.

Provisional Article 1- With this Article, in view of experiences of other countries, it is envisaged that Turkish Lira banknotes and coins should remain in circulation along with the New Turkish Lira banknotes and coins for one year at maximum between 1 January 2005 and 31 December 2005 to allow sufficient time to elapse before the replacement of the old currency unit with the new one, to avoid adverse effects on the credibility of the new currency, and to allow smooth monitoring of both currency units.

It is decided that principles related to dual circulation and replacement of banknotes shall be determined by the Central Bank of the Republic of Turkey whereas principles related to dual circulation and replacement of coins shall be determined by the Under secretariat of the Treasury.

Moreover, in order to avoid a legal gap in the transition period of this Law, the Minister responsible for the Under secretariat of Treasury shall be entitled to remove the doubts with respect to the execution of the Law hereby and make necessary regulations; the Ministry of Finance, the Ministry of Industry and Trade, the Under secretariat of Treasury, the Central Bank of the Republic of Turkey, the Capital Market Board, the Banking Regulation and Supervision Agency shall be authorized to make regulations in the matters that fall within the scope of their duties.

According to Article 37 of the Law on the Central Bank of the Republic of Turkey No. 1211, dated 14 January 1970, the legal circulation period of Turkish lira banknotes to be withdrawn from circulation shall be ten years beginning from 1 January 2006.

Provisional Article 2- With this Article, it is decided that parties will be exempt from taxes, fees, charges and other liabilities arising from all kinds of legal acts, negotiable instruments and documents issued in terms of Turkish Lira producing legal effects into the New Turkish Lira before 31 December 2005 (including that date) by taking the conversion rate into account as stipulated in Article 2 of the Law hereby.

Provisional Article 3- With this article, it is required that the prices of all goods and services shall be expressed in terms of both Turkish Lira and New Turkish Lira starting from 01 January 2005, when the New Turkish Lira will be put into circulation, until 31 December 2005, which is the deadline of dual circulation of banknotes and coins of Turkish Lira and New Turkish Lira, on the lists of labels and tariffs to be arranged within the framework of Article 12 of the Law on the Protection of Consumers, dated 23 February 1995 and No. 4077. It is decided that those who do not fulfill this requirement should be subject to the penalty stipulated in the second paragraph of Article 25 of the same Law.

Article 6- With this article, it is envisaged that Article 4, the second and third paragraphs of provisional Article 1 of this Law should enter into force on the enactment date, while the other Articles should enter into force on 1 January 2005, in order to facilitate the preparatory and regulatory works to be done by the Ministry of Finance, the Ministry of Industry and Trade, the Under secretariat of Treasury, the Central Bank of the Republic of Turkey, the Capital Market Board and the Banking Regulation and Supervision Agency for transition to the New Turkish Lira, as well as to avoid any problem in keeping the books and records.

Article 7- This articles refers to the execution of this Law.

* Amended by Law dated 16/07/2004 and numbered 5228, published in the Official Journal dated 31/07/2004 and numbered 25539.

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