What Is a Non-Profit Organization? How to Set Up an Association or Foundation in Turkey

Anyone who wants to set up a non-profit organization in Turkey has two main options: an association (dernek) and a foundation (vakıf). A non-profit organization is a legal entity that serves a defined purpose and does not distribute its income to its founders or members. An association is formed by at least seven persons and a notice of formation filed with the local civil administration; a foundation is formed by an official deed and registration by the civil court of first instance (asliye hukuk mahkemesi).

Below we explain the steps for setting up an association and a foundation, the position of foreign founders, the tax and donation rules and the obligations that follow formation. For the general framework, see also our article on the legal procedures for establishing a foundation or an association.

What Is a Non-Profit Organization and What Does the Term Mean?

A non-profit organization is one that, even when it earns income, does not share that income out but spends it on its own purpose. The decisive point is not that it makes no money, but that its earnings are not distributed. An association may run a café, offer paid training or collect rental income; that income, however, cannot be paid out to members as a share of profit. This is also the core difference from a company. In a joint stock company or a limited company the partners receive a share of the profit; in an association or a foundation there is no such right.

Turkish law has no separate type of legal entity called a "non-profit organization". The expression is an umbrella term for several forms of organization governed by different laws. The bodies that international texts call CSOs (civil society organizations) or NGOs are, in Turkey, mostly associations or foundations.

Types of non-profit organization in Turkey

• Association (dernek): a union of persons formed by people coming together, governed by Articles 56 et seq. of the Turkish Civil Code No. 4721 (TMK) and by the Associations Law No. 5253.
• Foundation (vakıf): a union of property formed by dedicating assets to a specific and permanent purpose, within the framework of Articles 101 et seq. of the TMK and the Foundations Law No. 5737.
• Trade union (sendika): an organization of workers or employers subject to the Trade Unions and Collective Labour Agreements Law No. 6356.
• Cooperative (kooperatif): subject to the Cooperatives Law No. 1163. Because it aims to protect the economic interests of its partners, whether it counts as a non-profit organization in the full sense is debated.
• Others: political parties, professional organizations with the status of public institutions (bar associations, chambers) and umbrella bodies such as federations and confederations are subject to their own special laws.

How to Set Up an Association: Step-by-Step Formation Process

Under the definition in Article 56 of the TMK, an association is a union of persons formed by at least seven natural or legal persons who permanently combine their knowledge and efforts to achieve a specific, common purpose that is not prohibited by law, other than sharing profit. No prior permission is needed to form an association. Natural and legal persons with legal capacity to act (fiil ehliyeti) may freely form associations, subject to the restrictions in the law.

Founders and articles of association

There must be at least seven founders. The founders need legal capacity to act; there are statutory restrictions for certain public servants and certain criminal convictions. The articles of association (tüzük) work like the association's constitution and should cover at least the following:

• the name of the association and the place of its headquarters;
• its purpose and the activities it will carry out to achieve that purpose;
• the conditions of membership and the procedure for leaving and for expulsion;
• the duties and meeting procedures of the general assembly, the board of directors and the supervisory board;
• sources of income, membership dues and the procedure for borrowing;
• internal audit, amendment of the articles, dissolution and liquidation of the assets.

Steps for forming an association

1. The founders agree on the association's name, purpose and headquarters, and the text of the articles of association is prepared.
2. The articles are finalized and every page is signed by the founders.
3. In practice, the notice of formation is prepared on the Ministry of Interior's Associations Information System (DERBİS), logging in through e-Devlet (the Turkish government portal).
4. The notice of formation, the articles and their annexes are submitted to the local civil administration authority (mülki idare amirliği) of the place where the association's headquarters will be. This work is handled by the civil society relations unit within the governorship or district governorship; in the provinces this unit is known in practice as the Provincial Directorate of Relations with Civil Society (İl Sivil Toplumla İlişkiler Müdürlüğü), formerly the provincial directorate of associations.
5. The administration reviews the documents within the period set by law (as a rule, within sixty days). If anything is missing or unlawful, the founders are asked in writing to remedy it within the period set by law (as a rule, thirty days); if it is not remedied, the head of the local civil administration notifies the public prosecutor's office (Cumhuriyet savcılığı) so that a lawsuit can be filed for the dissolution of the association.
6. A tax identification number is obtained from the tax office, the books are certified, and a bank account is opened in the association's name.

One point is often misunderstood here. An association acquires legal personality when the notice of formation and the articles are submitted to the local civil administration authority; the administration's review is not a prior approval but a check carried out afterwards. Even so, any corrections requested at the end of the review should be taken seriously.

The first months after formation

Until the first general assembly is held, the founders usually act as a kind of provisional board of directors. As a rule, the first general assembly must meet within six months of formation and the mandatory bodies (general assembly, board of directors, supervisory board) must be set up. Under the law, the board of directors has at least five full members and the supervisory board at least three. The results of the general assembly and changes to the bodies are notified to the administration within set periods.

How to Set Up a Foundation: Foundation Deed and Court Registration

Under Article 101 of the TMK, a foundation is a union of property with legal personality, formed when natural or legal persons dedicate sufficient assets and rights to a specific and permanent purpose. In an association, people come together. In a foundation, a body of assets is tied to a purpose, and this difference shapes every stage of formation.

A foundation may be created by an official deed (in practice, a foundation deed drawn up by a notary) or by a disposition upon death, that is, a will or a contract of inheritance. The foundation deed must state the foundation's name, its purpose, the assets and rights dedicated to that purpose, the composition and functioning of its management body, and its headquarters.

1. The founder or founders identify the assets (money, real estate, rights) to be dedicated to the foundation.
2. The foundation deed is drawn up by a notary as an official deed.
3. An application for registration is filed with the civil court of first instance at the place where the foundation's headquarters will be.
4. The process runs with the participation of the General Directorate of Foundations (Vakıflar Genel Müdürlüğü). The General Directorate reviews the deed and whether the assets are sufficient, and it may appeal the decision.
5. Once the registration decision becomes final, the foundation is entered in the register of foundations and acquires legal personality on that registration; the formation is also announced in the Official Gazette (Resmî Gazete).
6. Tax registration, books, a bank account and the setting up of the bodies are completed.

"Sufficient" assets are a legal requirement. The General Directorate of Foundations updates every year the minimum amount of assets required for new foundations; you need to check the amount in force on the application date in the General Directorate's announcements. Depending on the court's workload, registration usually takes a few months. For details, see our article on how to register a foundation in Turkey. If the deed needs to be changed after formation, the route to follow is explained in our article on the lawsuit for amending and registering a foundation deed.

A foundation cannot be set up for purposes contrary to the characteristics of the Republic and the fundamental principles of the Constitution, to the law, to morality, to national unity and national interests, or to support the members of a particular race or community.

Association or Foundation? Comparison Table

The core difference between an association and a foundation is that an association is a union of persons while a foundation is a union of property. The choice often depends on how much in assets the founders can set aside and on who will manage the organization.

For a small group, a neighbourhood or a professional circle, an association is the more flexible and less costly route. If a family or a company wants to set aside assets for a permanent scholarship fund, a school or a health project, a foundation may be more suitable. Which structure fits your purpose depends on the assets you will set aside, on who you want to keep control of management, and on your tax expectations; a lawyer can assess these factors with you in a short meeting.

Can Foreigners Set Up a Non-Profit Organization in Turkey?

Foreign natural persons may form an association and become members of one, provided they have the right to settle in Turkey. In practice, this condition is usually shown by a valid residence permit. As a rule, foreigners who are in Turkey as tourists or who have no residence permit are not regarded as able to be founders. Foreign legal persons acting as founders or members is subject to separate conditions and should be assessed in advance.

The position is different for foundations. Foreign natural and legal persons may, as a rule, set up a new foundation in Turkey subject to the condition of reciprocity. If real estate is to be dedicated to the foundation, the restrictions on the acquisition of real estate by foreigners may also apply.

Activities of foreign associations and foundations in Turkey

An association or foundation established abroad must, as a rule, obtain prior permission if it wants to operate in Turkey, open a representative office or branch, or cooperate with local organizations. For associations, this permission is obtained from the Ministry of Interior; for foreign foundations, the process in practice runs through the General Directorate of Foundations, with the opinion of the relevant ministries.

There is also a rule in the other direction. For an association established in Turkey to receive cash or in-kind aid from abroad, as a rule a notification must be made to the local civil administration before the aid is received. Failing to notify may result in an administrative fine.

Are Non-Profit Organizations Exempt from Tax?

Being non-profit does not automatically mean being exempt from tax. This is the misunderstanding we come across most often.

As a rule, an association or a foundation itself is not liable to corporate tax; income such as membership dues and donations given without anything in return is therefore not subject to corporate tax. However, if the association or foundation carries on a continuous activity of a commercial nature (such as a café, courses or book sales), that activity counts as an "economic enterprise" (iktisadi işletme) under the Corporate Tax Law No. 5520, and the economic enterprise becomes liable to corporate tax. Obligations for VAT, stamp duty and withholding tax also continue separately.

A large part of the tax advantages depends on two special statuses:

• associations granted the status of association working in the public interest (kamu yararına çalışan dernek) by Presidential decision;
• foundations granted tax exemption by Presidential decision.

Donations made to these organizations may be deducted from the donor's income tax or corporate tax base within the percentage limits in the law (under Article 89 of the Income Tax Law No. 193 and Article 10 of Law No. 5520). Certain tax and fee exemptions are also tied to these statuses. In practice, the status requires conditions such as the organization having been active for a certain period and showing that its financial structure and activities serve the public interest. We recommend checking the sources of the Revenue Administration (Gelir İdaresi Başkanlığı) for the current tax rules.

Collecting Donations and Aid: What Does Law No. 2860 Say?

Having set up an association or a foundation does not give you the right to collect donations freely from the public. The Aid Collection Law No. 2860 makes collecting aid, as a rule, subject to permission when it is done in public places, by going door to door, by organizing charity sales or events, or through appeals made online and in electronic media. Under Article 7 of Law No. 2860, permission is obtained from the district governorship (kaymakamlık) if the activity is limited to a single district, from the governorship (valilik) if it covers more than one district of a province, and, if it covers more than one province, from the governorship of the province where the person or organization collecting the aid is domiciled; in this last case, the governorship granting the permission informs the Ministry of Interior.

The law and practice provide for some exceptions. For example, collecting dues from members, or accepting spontaneous donations against a receipt or into a bank account, usually does not require permission. Whether a campaign run by sharing an IBAN on social media is a spontaneous donation or an aid collection activity subject to permission, on the other hand, may be open to debate. The rule is simple: assessment first, campaign second. Collecting aid without permission can have serious consequences, both in terms of administrative sanctions and for the money collected.

Obligations After Formation: Books, Returns and Audits

Once an association or a foundation has been set up, the part that takes the most effort is the regular record-keeping and reporting obligations. These recur every year.

Associations

• Books: a resolution book, a membership register, an incoming and outgoing documents register, an inventory book and a receipt register are kept, together with accounting books on the operating account basis or the balance sheet basis. The books are certified by the provincial directorate or a notary before they are first used.
• Income and expenses: income is recorded with a receipt or through a bank, and expenses with an invoice or similar document. Associations whose annual gross income exceeds the threshold set in the regulations, which is updated every year, move to the balance sheet basis.
• Association return: every year, within the period set in the Associations Regulation (check the current deadline in the DERBİS announcements), a return covering the previous year's activities and accounts is filed with the administration.
• Notifications: general assembly results and changes of address, articles and bodies are notified through DERBİS within set periods.
• Audit: as a rule, the supervisory board audits the association at least once a year; the administration also has the power to audit associations.

Foundations

Foundations are subject to the supervision of the General Directorate of Foundations. The management body must record the foundation's income and expenses in line with the deed and the legislation, submit a return and information to the General Directorate every year, and spend the foundation's income on the purposes stated in the deed. Independent audit may also come into play for foundations that reach a certain size. Spending outside the purpose or careless management of foundation property may give rise to personal liability for the members of the management body.

Common Mistakes When Setting Up a Non-Profit Organization

Most problems appear not on the day of formation but months later. In our practice at Karanfiloglu Law Firm in Istanbul, the problem we see most often is articles of association copied from a sample found online that do not match the association's actual activities.

• Writing the purpose too narrowly or too broadly. A narrow purpose blocks new activities; a purpose that covers everything draws objections from the administration. Solution: a concrete purpose and list of activities that leave room to grow.
• Not noticing commercial activity. Regular sales or paid services create an economic enterprise. Solution: settle the tax office registration before the activity begins.
• Donation campaigns without permission. Social media campaigns may fall within Law No. 2860. Solution: assess before the campaign whether permission is needed.
• Postponing the general assembly and notifications. Failing to hold the first general assembly on time or to notify the results leads to sanctions and to problems with banking transactions. Solution: keep an annual calendar of obligations.
• Leaving the management structure of a foundation unclear. If the deed does not say how management continues when the founder dies or leaves, the foundation may become unable to function. Solution: put a clear system for electing and appointing successors in the deed.

In short, there are two main ways to set up a non-profit organization in Turkey: an association, formed by seven persons and acquiring legal personality by notice, and a foundation, formed by dedicating assets to a purpose and registered by a court. Choosing the right form, drafting the articles or the deed to match the real activities, and planning the rules on books, returns and donations from the start prevents most of the problems that may arise later. For disputes involving associations and foundations, see our civil law page; for the organization's commercial activities and a comparison with a company structure, see our commercial law page.

Speak with a Lawyer in Istanbul

If you would like advice on your own situation, Karanfiloglu Law Firm is a registered law firm in Istanbul serving foreign and Turkish clients across Turkey. You can reach us by phone or WhatsApp on +90 532 659 35 11, by email at karanfiloglu.lawyer@gmail.com, or visit us at Merkez Mah. Hasat Sk. No:12, 34384 Şişli / İstanbul. You can also write to us through our contact page. Contact us to discuss your situation.

Frequently Asked Questions

What is a non-profit organization?

A non-profit organization is a legal entity that does not distribute its income to its members or founders but spends it on a defined purpose. In Turkish law, the concept mostly corresponds to associations and foundations; bodies such as trade unions and cooperatives are subject to their own special laws.

Can non-profit organizations make money?

Yes, non-profit organizations may earn income; what is prohibited is sharing that income out among members or founders. Associations and foundations may set up economic enterprises to serve their purposes, but these enterprises are taxed and the earnings must still be spent on the organization's purpose.

How many people are needed to form an association?

At least seven natural or legal persons are needed to form an association (TMK Art. 56). The founders must have legal capacity to act, and foreign founders must have the right to settle in Turkey.

How much money is needed to set up a foundation?

Setting up a foundation requires assets sufficient for its purpose, and the General Directorate of Foundations sets the minimum amount anew every year. Giving a fixed figure would therefore be misleading; you need to check the amount in force in the year of application in the General Directorate's announcements.

Can a non-profit company be set up?

Turkish law has no separate company type called a "non-profit company". Commercial companies are formed to distribute profit to their partners; if a non-profit structure is wanted, you need to set up an association or a foundation and, where necessary, carry on commercial activity through that organization's economic enterprise or a subsidiary.

Can foreigners set up an association or a foundation in Turkey?

Yes, foreign natural persons may form an association provided they have the right to settle in Turkey; setting up a foundation is, as a rule, subject to the condition of reciprocity. Associations established abroad also need permission to operate in Turkey.

Are associations exempt from tax?

No, associations are not automatically exempt from tax. Although an association is, as a rule, not liable to corporate tax, its economic enterprise is taxed; advantages such as tax deductions for donors usually depend on the status of association working in the public interest.

How long does it take to form an association?

If the documents are ready, an association acquires legal personality on the day the notice of formation is submitted to the local civil administration. In practice, preparing the articles usually takes a few weeks; the administration's review is, as a rule, completed within sixty days.

About the Author

Av. Kaan Karanfiloğlu is the founder of Karanfiloglu Law Firm, a registered law firm based in Istanbul serving Turkish and international clients across Turkey. He is a lawyer registered with the Istanbul Bar Association (Registration No. 58270) and a member of the Union of Turkish Bar Associations (No. 133074); he is also a registered mediator (Registration No. 41909). He has practised law in Turkey since 2017. He graduated from Galatasaray University Faculty of Law in 2016 and advises clients in Turkish, English and French; the firm serves Russian- and Chinese-speaking clients through native-speaking advisors who work at the office.

Disclaimer: This article provides general information about Turkish law and does not constitute legal advice. Laws, regulations, official fees and procedures change over time, and every situation is different. Please consult a qualified lawyer for advice on your own circumstances. No liability is accepted for any loss arising from reliance on the information in this article.