Turkish Grand National Assembly Approves New Law on Foundations

The International Journal
of Not-for-Profit Law

Volume 9, Issue 1, December 2006


The wave of democratic reforms in Turkey continues with Turkish Parliament approval of the new Law on Foundations on November 9, 2006. Since its establishment in 1993 to promote the legal, fiscal, and operational strength of the sector, TÜSEV has been working to encourage reform of the foundations law (as it affects new foundations). In 2004, TÜSEV, in partnership with the International Center for Not-for-Profit Law (ICNL), prepared a series of comparative reports (see and, which proposed a number of reforms and best practices for revising the foundations, associations, and public benefit laws in Turkey. These reports, in conjunction with continued research and advocacy, were incorporated into the new law passed in early November.

The new law creates a single set of rules for the different types of foundations spanning the Ottoman and Republican Eras. The new provisions will affect “old” foundations (foundations established during the Ottoman Era), minority foundations (foundations established by non-Muslim communities during the Ottoman Era), and “new” foundations (mainly cash foundations, established according to Civil Code provisions after the founding of the Turkish Republic in 1923).

Following parliamentary approval, the President vetoed nine provisions and returned the draft to Parliament for further action. The vetoed articles affect both minority foundations and new foundations. If accepted by the Parliament, the vetoed provisions would require new foundations to list in their bylaws economic enterprises, international relationships, and other specific areas of activity in order to be permissible, whereas the original draft made new foundations permissible by default. To comply, some foundations would have to change their bylaws, which requires court approval. A final resolution is likely in early 2007, which will mark the beginning of the third year since the original draft was submitted for discussion. Upon the law’s approval, TÜSEV hopes to continue its cooperation with the Foundations Directorate in preparing the new regulations, which must be published within six months of the law’s ratification.

Although the veto process creates setbacks, the new law is by and large compatible with international standards of freedom of association and represents significant improvement in Turkey’s environment for civil society and philanthropy. Some of the changes include the following:

  • Moving from prior approval toward prior notification
  • Increasing the rights of the executive board in operational and economic decisions of the foundation
  • Expanding tax benefits of certain forms of donations to foundations
  • Easing the ability of foundations to cooperate with foreign counterparts, and allowing foreigners to establish foundations and to be board members of Turkish foundations

Though the notable shift from prior approval toward prior notification is a positive change, it is critically important that the regulations and the General Directorate of Foundations (GDF, hereafter referred to as “regulatory authorities”) minimize procedures and costs, which can otherwise burden foundations as well as government authorities with needless paperwork.

Increasing the governance and oversight standards for the executive board and expanding this responsibility to staff members will enhance the transparency and accountability of foundations. However, foundations should continue to develop ethical and operational self-regulatory codes to ensure the highest possible standards in foundation management. A good example of these codes can be found through the European Foundation Center (

Expanding tax benefits of certain types of donations to all foundations, and not solely those with public benefit status, also indicates a more favorable direction in government policy toward philanthropy. However, additional reform in this area is needed, specifically the following: (a) increasing individual and corporate deduction levels for cash and in-kind donations, as well as broadening certain tax exemptions; and (b) improving the procedures and systems for associations and foundations to obtain and retain public benefit status from the Council of Ministers, which allows for additional tax benefits.

Finally, one central point of discussion during the course of this legislation has been the Turkish government’s policy toward enabling cooperation with foreign foundations. One critical provision in the Civil Code still requires prior authorization (permission) for cooperation between Turkish and foreign associations and foundations. However, the regulations for accepting grants from foreign sources have been changed from authorization to notification. This provision continues to be of concern and prevents both the associations and foundations laws from fully complying with international standards. In particular, the provisions below marked with asterisks remain at odds with international standards.

Some of the provisions of Law on Foundations affecting new foundations are as follows:


As per best practice, registration of foundations will continue to be overseen by the courts. However, minimum endowment amounts for newly established foundations will now be determined on a case-by-case basis, depending on the scope of the foundation’s objectives.

Foundations may undertake international relations and open branches or representative offices abroad without restraint, so long as (a) these activities are included in the bylaws, and (b) prior notification is provided – prior authorization is no longer necessary.

Board Membership

The former law did not allow foreigners to create foundations in Turkey. The new law permits this, but requires a majority of the executive board of directors to physically reside in Turkey.

Members of the board may be removed from their position only by court order based on evidence of criminal acts.

Members of the executive board as well as the staff of the foundation can be held personally responsible for negligence.

Foreign Foundations and Grants

* The principle of reciprocity replaces the previous ban on foreigners establishing foundations in Turkey. In the new law, foreigners (persons who are not citizens of Turkey) can establish foundations in Turkey as long as the law in their home country allows Turkish citizens to establish foundations.

* Foundations may receive grants from foreign funders with prior notification; permission is no longer necessary.

* Foundations are still required to obtain authorization from regulatory authorities before cooperating with foreign foundations (the same provision exists for associations).

Property and Assets

In the former law, foundations needed approval from regulatory authorities before acquiring or selling assets. In the new law, foundations may acquire or dispose of property based on the guidance of an independent expert’s report (to ensure fair market value) and a decision from the executive board. For endowment assets put forth at the time of establishment, foundations no longer need regulatory agency approval; they can proceed directly to the courts.

In the previous law, foundations needed prior approval of regulatory authorities in order to become partners of economic enterprises. In the new law, foundations will be able to do so merely with prior notification.


In the new law, finally, donations to all foundation – with or without public benefit status – will be exempt from inheritance and estate taxes. Previously, only foundations with public benefit status had this benefit.


1 TÜSEV (the Turkish acronym for Third Sector Foundation of Turkey) is a network organization for the nonprofit sector, formed in 1993 by Turkey’s leading foundations. TUSEV now comprises more than a hundred Turkish foundations and nonprofit organizations.