Benefiting From Tax Exemption For Foundations
According to the Law on Foundations, tax exemption is granted to foundations that meet certain conditions. The conditions, procedures and principles for foundations to benefit from tax exemption and to lose their exemption are determined by the Ministry of Finance.
According to Article 20 of the Law No. 4962 on Amendments to Certain Laws and Granting Tax Exemption to Foundations, “Foundations established for the purpose of fulfilling a service or services that are included in the budgets of general, annexed and special budget administrations in terms of at least two-thirds of their revenues may be granted tax exemption by the Council of Ministers upon the proposal of the Ministry of Finance.”
In addition to the legal regulation, detailed regulations are regulated by General Communiqués on Granting Tax Exemption to Foundations.
CHARACTERISTICS OF FOUNDATIONS TO BE GRANTED TAX EXEMPTION BY THE COUNCIL OF MINISTERS
Foundations wishing to benefit from tax exemption must first meet the conditions written in Article 20 of Law No. 4962.
Foundations that aim to carry out activities in the fields of health, social assistance, education, scientific research and development, culture and environmental protection and afforestation are within this scope. The subject of activity of the foundation that will benefit from the exemption may be related to one or more of these. In addition to being active, the legislator also requires that these activities are open to the public and have the effect of reducing the public service burden of the State, and that these activities have been ongoing for at least one year.
The foundation that will benefit from the tax exemption should not be divided into purposes and the amounts to be spent should not be used for any other purpose. Foundations that are found to have such a separation of purposes or that are found to spend the amounts they are required to spend for other purposes will be exempted from tax exemption, even if they benefit from exemption.
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Even if the subject of activity is among the above-mentioned subjects, foundations that aim to serve a certain region or a certain group of people, and whose assets do not exceed a certain amount and also do not have an income of at least 10% of the assets of the foundation will not be granted tax exemption.
Another condition for exemption is to keep books on a balance sheet basis. Foundations that do not keep books on a balance sheet basis are not entitled to benefit from the exemption.
For foundations that apply to the Ministry of Finance with the belief that they meet the conditions stated above, the opinion of the General Directorate of Foundations and other organisations that are related to the subjects aimed in the foundation deed is taken. This opinion affects the foundation’s ability to benefit from the exemption.
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