Turkey: New law on foundations

The new Law on Foundations was adopted by the Turkish National assembly on February 20th 2008. 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 (private cash foundations, established according to Civil Code provisions after the founding of the Turkish Republic in 1923).

Following parliamentary approval in November 2006, the ex-President vetoed nine provisions and returned the Law to Parliament for further action. Although the vetoed articles affect both minority foundations and new foundations, the debate between the experts and among public focused mainly on minority foundations.

The vetoed articles were adopted by the parliament with slight changes after hot debates in the General Assembly on the 20th February. From that day forward, the major concentration would be the preparation of the new regulations, which must be published within six months that would constitute the backbone of the implementation.

In general, 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 provisions of Law on Foundations affecting new foundations are as follows:

Establishment

• The amount of the registration endowment of foundations will be determined by the Foundations Council in yearly basis. This amount will be the overall minimum requirement for all foundations.
• Foundations may undertake international relations and open branches or representative offices abroad without restraint, so long as (a) these activities are included in their bylaws, and (b) prior notification is provided ? prior authorization is no longer necessary.
• Foreigners shall be able to establish new foundations in Turkey in accordance with the principle of de jure and de facto reciprocity.

Board Membership

• The former law did not allow foreigners to be board members of foundations in Turkey. The new law permits this, but requires a majority of the executive board members 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. Such ?terminated? board members cannot serve as board members for any other foundation or be elected to Foundations Council for five years.
• 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 free to co-operate with foreign foundations provided that it is contained in their by-laws.

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.

Exemption from gift- and inheritance tax

• In the new law, donations to all foundations ? with or without public benefit status ? will be exempt from gift- and inheritance taxes.

Exemption from income and corporate tax

• In the new law donations, grants or expenses made by real or legal persons for the maintenance, reparation, restoration and landscaping of cultural properties that belongs to foundations will be fully deductible ? with or without public benefit status ? from income or corporate taxes. Whereas according to the old regime, a tax deduction on the taxable income is possible up to 5 percent of yearly taxable income by real persons or corporations to foundations with public benefit status.

Foundations Council

• A new organ called ?Foundations Council? is established as the highest decision-making body of the Foundations.
• A new body called ?Foundations Council? is established as the highest decision-making body of Foundations. The Council shall be composed of fifteen members in total. Five members will be from The General Directorate of Foundations — which is affiliated to the Prime Ministry. Five will be appointed through a joint decree upon a proposal by the Prime Minister and the president. The remaining five seats will be filled by the representatives of ?new? foundations, ?old? foundations, and minority foundations.

More info:
www.tusev.org.tr