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Memo
From: Filiz Bikmen, Programme Director, Türkiye Üçüncü Sektör Vakfı (TÜSEV)
Date: June 29, 2017
Meeting Summary Report:
Roundtable on Foundations and Philanthropy in Turkey 14 June 2003
This summary report was prepared based on a roundtable meeting in Istanbul, Turkey on 14 June 2003,
hosted by the Third Sector Foundation of Turkey (TÜSEV) with Turkish and foreign foundation
representatives1. The objective of the meeting was to identify and discuss current challenges and
opportunities facing foundations in Turkey. Items referring to legal and fiscal issues are subject to change
due to frequent current legislation reforms. For more information regarding these topics and subsequent
activities, please contact [email protected].
Legal and Fiscal Environment
The ‘Definition’ of Foundation:

Turkish law distinguishes between foundations (asset-based) and associations (member-based).
Foundations tend to be operating (as opposed to grantmaking) and several of them are also
actively fundraising. Due to the lack of a sector-wide research study (such as CIVICUS CSI and
Johns Hopkins) the third sector has yet to officially classify the myriad of different types of
organizations which comprise ‘foundations’ and ‘associations’. The emerging organizational model of
NGOs (neither member nor asset based, formed with purpose of public benefit) is creating new
debates on the frameworks which exist to support civic organizations.

Turkish law does recognize differences between state and private foundations, although this is not
well understood by the public at large and leads to misconception of the purpose and aim of a
foundation. Furthermore, there are many emerging differences in types of private foundations
(family, company sponsored, etc.) which currently go unrecognized and lead to governance and
operational challenges.

State foundations are currently under State scrutiny, in the sense that they are being considered
bodies of the government and therefore, with regards to procurement activity, it is suggested that they
act as such (e.g. open tenders for purchasing of materials, etc.). Should this law take effect,
universities and hospitals in particular, will have serious difficulty supporting the financial and
operational needs of their respective institutions.
1
Representatives from the following organizations participated: Bosphorus University Foundation,
Compagnia di San Paolo (Italy), Eczacibasi Foundation, European Foundation Centre (Brussels) , Mother
Child Education Foundation, Open Society Institute (Turkey), Third Sector Foundation of Turkey, Turkish
Informatics Foundation, Turkish Kidney Foundation, H. Sahin, C.P.A and Tax Consultant for TÜSEV.
International Fundraising and Cooperation:

Turkish foundations can accept donations from foreign foundations and organizations only after
obtaining permission from the Department of Foreign Affairs and Interior Ministry. This is a deterrent
and the process is long and arduous. After accepting one donation, the second (from the same
organization) is considered a partnership and requires further approval. There are cases of Turkish
foundations which are dealing with law suits due to this law. Part of the problem is that the law does
not clearly recognize differences between gifts, donations, project support and other ‘types’ of income
for foundations.
Asset Management in Foundations:

Minimum capital to start a foundation is between $200,000 and $400,000 USD. This acts as a
deterrent especially to local organizations and has also created an increasingly popular model of
foundations in which a membership structure is formed, in an effort to raise the money required
to form a foundation, creating other governance and management issues in the long term (since
members are defined as ‘trustees’).

All foundations are required by law to keep their cash assets in State banks, which prevents gain
from more competitive rates in private banks- regardless of the fact that the State is currently
undergoing privatization of its own State owned banks.

Financial managers of foundations are in need of more skill building with regards to asset
management of foundations, especially due to the turbulence of the economic environment.
Tax Exemption:

Of the 4576 foundations in Turkey, only 210 have tax exemption status (and of the 78,000
associations, only 340) and since 1999, the government has ceased granting this benefit and is
considering now to eliminate this completely. Even those granted exemption do not benefit much as
many activities are still taxed. Regardless of their status, they do not benefit at all compared to any
other private entity.

Only foundations with activities in health, scientific research and education areas are granted
exemption, although this is not the only criteria. The process and criteria for being granted ‘tax
exemption’ status is highly political and non transparent.

Most State foundations, on the other hand, are 100% tax exempt. This further challenges the
private and public foundation status and discourages their potential support.
Tax Deductions of Donations:

Individuals: Individuals can donate, with no limit, but can only claim exemption (5%) if the
organization they are donating to is one that is tax exempt or one that is State formed (both comprise
a very small percentage of the total number of foundations and associations) or 10% if the
organization is found in a developing region of the country (e.g. Southeast Turkey). In addition to this
being below the desired standard, for individuals, tax laws do not enable a mechanism and process
to claim this deduction so it is, in effect, defunct.
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
Corporations: Private companies can donate, with a limit of 5%, to a foundation or association, but
can only claim exemption if the organization they are donating to is one that is tax exempt or one that
is State formed (full list of approved organizations not included here). According to the new 6th
framework package, there is 100% exemption for building/repairing of schools and hospitals.
EU Accession as a Policy Development Influence:

Turkey’s candidacy for accession to the EU has created a platform on which NGOs and civic
initiatives have been able to influence policy reform with regards to issues such as association and
foundation law. Although the process of adopting Copenhagen Criteria benefited the association
reform, foundation law has yet to undergo similar reforms.

It is important to note: Turkey has an existing foundation law (however restrictive) in place since
1936 (even prior to that in the Ottoman Empire). The EU, on the other hand, is only recently in the
process of adopting a ‘model statute’ ( for which the EFC, via the EU committee, has taken on the
responsibility of developing). The committee scored a big win by making the case that foundations
have a separate definition and statute from associations. However, this also indicates that foundation
law reform is unlikely to come as an accession ‘requirement’ from the EU, as they are just newly
defining this criteria themselves. It is ever so important that TUSEV and Turkish foundations work
closely in collaboration with the EFC on its Legal and Tax framework for foundations initiative in order
to use this as a model statue for foundation law in Turkey.
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Operational Factors
Local Giving, Grantmaking and Philanthropy:

There is a strong tradition of giving and social service in Turkey, motivated both from a community
perspective and a religious one. The goal is to systematize this giving, and develop mechanisms for
more strategic and organized philanthropy. Because it is not systematic, we also can not clearly
state official indicators of how much is ‘given’ and what types of donations - and to whom - are being
made.

Turkey’s foundations tend to be operational rather than grantmaking. The law does have restrictive
claims that only organizations with similar missions can make donations to one another. However the
limitation also extends to practice and tradition. Foundations prefer to manage their own programs
and work directly in the field rather than function to support other NGO initiatives. Thus, we see a lack
of this activity though there is potential for it to become a viable model.

Challenges to local funding are not limited to the lack of mechanisms. Many organizations are
struggling from the continuous negative impact of economic instability and extremely high
inflation rates and the excess resources drained by ineffective use of capital by governments.

The ‘tender’ system: Foundations and other potential institutional donors shy away from the idea of
grantmaking because they compare it to a tender system and do not want to be seen as favoring
NGOs by selecting them. Instead, they prefer to seek out partnerships through their own personal
network and contacts.

Compared to its neighboring countries and regions and the size of its population, Turkey has received
significantly less support from the international donor community and thus relies on local forms of
support to carry out initiatives.
Credibility and Capacity of NGOs:

There are a limited amount of NGOs that know how to seek and apply for available funding due
to an overall lack in capacity to reach out to potential donors to develop sustainable operations and
programs. NGOs that can tend to dominate the sector, leaving less room for other smaller/more
regional recipients .

“Supply and demand of the philanthropic dollar”- NGOs are not successful in making the argument
–for how their work adds value. This can be attributed also to the point made above about the lack
of systemic funding. Turkish NGOs are not acquainted with the process of ‘applying’ for funds, and
having to document who they are, what they do, and why it is important to support them.

Over the past few years, there have been an increasing amount of initiatives to support the skill
development of NGOs in Turkey. Both informal and formal training programs are being developed
and delivered nation-wide, most recently under the auspices of the European Commissions Civil
Society Development Programme (2 million €) which targets underdeveloped regions in Turkey.
However, it is important to develop both the suppliers and deliverers of civil society simultaneously,
so that as NGOs learn how to ask, and how to thank, donors are learning what to support, how to
give and evaluate. TUSEV aims to implement what would be Turkey’s first donor education program
that would include this, and other topics.
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Supporting Development of Local and Provincial Foundations:

Foundations working at the national level have more strength and capacity to reach wider
audience and establish international contacts. Foundations at the local level have less capacity to be
able to communicate their needs and seek support. Efforts should be focused on helping these
foundations who are doing critical work in their communities.

There is a lack of data and research regarding these ‘community’ foundations and organizations,
which are actually quite prominent in regions throughout Turkey. The unique structure and operation
of these foundations as opposed to national foundations has yet to be analyzed and understood.
Role of Corporations in the Support of Civil Society:

Corporations tend to adopt a one-off or case-by-case approach to giving programs. Corporate
philanthropy, corporate social responsibility and just plain sponsorship are all concepts that are slowly
taking shape in the private sector (although the nuances between these concepts are not well
understood), and have influenced Turkish companies via the practices of multinationals and the
formation of Turkey’s first Corporate Volunteer Council.

Turkey has a large number of small and medium size businesses which work at the community
level in all regions of this vast countries. They can be cultivated to work together with local
foundations and associations in achieving joint outcomes. There are some examples of this and it
is a model that has high potential.

There is a trend of large Turkish corporations putting forth ‘seed capital’ in starting NGOs and
foundations. By doing so, the founding company attracts other sponsors and donors which builds
the base for diversified future support.

Many companies use PR agencies to seek opportunities and manage relationships with NGOs, and
are allocating their marketing and advertising budgets to these initiatives. This is indicative of
increasing activity and interest. However, companies and their PR counterparts lack of knowledge
on how to effectively measure needs, develop joint programs, manage relationships, allocate
funds and measure progress.
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