How Are Donations and Aid Treated as Tax-Deductible Expenses?

 

Following the major earthquake disaster that deeply affected Türkiye, many businesses provided both monetary and in-kind support to meet the urgent needs of disaster victims. When certain legal requirements are met, these donations and aids can be treated as deductible expenses or tax deductions. In this article, we explain under which conditions donations offer tax advantages.

 

The Revenue Administration has clarified the tax treatment of earthquake-related donations through official announcements. Below, we outline in detail how cash and in-kind donations can be recorded in compliance with tax legislation.

 

 

Conditions for Deducting Donations from Taxable Income

 

With Presidential Decree No. 3483 published on February 3, 2021, it was decided that aid campaigns for disaster victims after earthquakes would be carried out under the coordination of AFAD.

Within the scope of aid campaigns initiated by the Presidency, cash and in-kind donations made with official receipts may be fully deducted when determining the tax base, pursuant to Article 89 of the Income Tax Law and Article 10 of the Corporate Tax Law.

For donations and aids to be considered deductible, the following conditions must be met:

• The donation must be made to designated institutions and organizations (such as AFAD or the Red Crescent)

• The deduction is limited to the company’s profit for the relevant period

• Donations cannot be deducted in periods where a loss is reported

• Any portion of the donation not deducted cannot be carried forward to subsequent years

 

 

Tax Treatment of In-Kind and Cash Donations

 

Cash donations made to the bank accounts announced by AFAD for the benefit of earthquake victims, as well as donations transferred to accounts designated by the Turkish Red Crescent, may be deducted by income and corporate tax taxpayers.

In-kind donations can be made directly to AFAD or to public institutions and organizations designated by AFAD. Provided that proper documentation is issued, these donations may also be deducted for tax purposes.

 

 

Deductibility of Cash Donations

 

• Donations made to AFAD that do not exceed the company’s profit may be deducted at a rate of 100%.

• Donations made to the Red Crescent and Green Crescent are also eligible for a 100% deduction under the same conditions.

• Donations made to public-benefit associations and tax-exempt foundations may be deducted up to 5% of the company’s profit.

 

 

Important Points Regarding In-Kind Donations

 

• Documentation must be issued by the relevant institution confirming the type of donated goods and their receipt.

• For in-kind donations made from a company’s own inventory, invoices were previously required to include the statement:
  “VAT has not been charged as the goods are donated for the benefit of those in need.”
  However, certain changes have since been made to this practice.

• According to the latest announcement by the Revenue Administration, for payments made by public institutions within the scope of earthquakes affecting 11 provinces, the requirement to submit a “tax clearance certificate” was waived until July 31, 2023.

• If the donated goods are procured from third parties, input VAT may be deducted provided that a delivery receipt is issued by the recipient institution.

• For cash donations, the bank receipt must clearly indicate the specific donation campaign to which the payment relates.

 

 

Where to Find Lists of Tax-Exempt Foundations and Associations

 

The list of foundations granted tax exemption is published on the official website of the Revenue Administration. In addition, a list of associations operating for public benefit can be accessed via the siviltoplum.gov.tr website under the relevant section.

 

It should also be noted that although Ahbap Association has actively organized aid campaigns following natural disasters, it is not currently included in these official lists.