Founder
February 9, 2026
22 min read
The ability of educational institutions to benefit from tax advantages depends on a valid operating license issued by the Ministry of National Education (MoNE) and an appropriate capital company structure (JSC or LLC).
Establishing the fundamental legal and institutional context is a prerequisite for the accurate application of tax legislation to educational institutions. Understanding the prevailing laws and appropriate business structures is necessary for grasping specific tax obligations and exemptions.
The primary legal framework regulating all private education activities in Turkey is the Private Education Institutions Law No. 5580. This law defines the scope of private education activities—ranging from pre-school institutions to various courses—and outlines the operational framework for these institutions to operate under the supervision of the Ministry of National Education (MoNE).
Details regarding the implementation of the Law are provided through secondary regulations such as the Regulation on Private Education Institutions of the Ministry of National Education. This regulation details the procedures and principles concerning the opening, operation, transfer, and closing of institutions.
Institutions operating in more specific areas, such as special education and rehabilitation centers, are subject to special regulations like the Decree-Law No. 573 on Special Education and the Regulation on Special Education Institutions of the Ministry of National Education. These legislations regulate the unique structures of these institutions, specifying everything from curriculum to personnel requirements.
Although the term "educational institution" carries a broad meaning, it is of critical importance to distinguish between the types of institutions defined in Law No. 5580 for tax applications:
Schools: Pre-school education institutions, primary schools, middle schools, and high schools. This group constitutes the core category with the highest potential to benefit from the most significant tax incentives.
Special Education and Rehabilitation Centers: These centers, serving individuals with special needs, also benefit from specific tax incentives.
Various Courses: This covers a wide spectrum such as language schools, art, sports, and vocational training centers. The eligibility of these institutions for certain tax advantages may differ from formal education schools.
Motor Vehicle Drivers' Courses: Defined as a separate category under the Law.
Foundation Universities: These institutions, established by foundations and primarily subject to the Higher Education Law No. 2547, hold a special status. Their possession of "public legal personality" grants them a unique tax position.
To open an educational institution, it is mandatory to obtain an "Institution Opening Permit and Work and Operation License" from MoNE. This permit is the primary document that ensures the legal recognition of the institution and enables it to benefit from tax advantages.
While the legislation does not mandate a specific type of company, the most common and recommended structures for educational investments are capital companies:
Joint Stock Company (Anonim Şirket - A.Ş.): This is the most flexible structure in terms of capital increase and shareholder structure. It requires a minimum capital of 250,000 TL. It is ideal for large-scale projects due to the tax exemption on share transfers after two years and its high potential for attracting external investment or public offerings.
Limited Liability Company (Limited Şirket - Ltd. Şti.): Management is simpler compared to an A.Ş., making it suitable for small and medium-sized institutions. It requires a minimum capital of 50,000 TL. However, it carries disadvantages such as the personal liability of partners for public debts and the requirement of notary approval for share transfers.
Capital companies provide limited liability and corporate scalability compared to sole proprietorships, making them the preferred choice in the education sector.
The legal structure is more than just a formality; it is the gateway to tax advantages. The license obtained from MoNE is the critical link in this process. An entity cannot benefit from advantages such as the five-year earnings exemption or reduced VAT rates until it officially gains "private education institution" status by MoNE. This creates a clear distinction between regulated, tax-advantaged education services and unregulated, fully taxed education activities. Therefore, for an investor to be considered an "educational institution" for tax purposes, they must first be approved by MoNE. This necessitates a meticulous examination of the validity and scope of the MoNE permit during the process of taking over an existing school.
Foundation universities are established by a founding foundation and, unlike private companies, possess public legal personality. These institutions are primarily subject to Law No. 2547 and the Regulation on Foundation Higher Education Institutions.
Despite being non-profit organizations by law, their economic activities, such as providing education services for a fee, bring them within the scope of tax laws, particularly Value Added Tax (VAT). Their status regarding Corporate Tax is more complex; they are generally exempt from tax, but if they operate a separate economic enterprise, they may be subject to tax through that enterprise.
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The 5-year tax exemption provided under Law No. 5520 commences from the accounting period in which the institution starts its activities, not from the date profitability is reached.
The corporate tax exemption represents the most significant tax incentive offered to educational institutions, serving as vital support for new investments.
Educational institutions established as capital companies (A.Ş. or Ltd. Şti.) are subject to Corporate Tax on their net profits. Additionally, they are obliged to submit Advance Tax (Geçici Vergi) returns in three-month periods, which serve as a down payment deductible from the annual corporate tax.
Article 5, paragraph 1, subparagraph 'ı' of the Corporate Tax Law (KVK) No. 5520 exempts the earnings obtained from the operation of certain educational institutions from corporate tax entirely for five taxation periods, starting from the accounting period in which they commenced operations.
This exemption explicitly applies to the following institutions:
Pre-school education institutions
Private primary and secondary education schools
Special education schools
Private nurseries and day hospitals
Rehabilitation centers affiliated with foundations granted tax exemption by the President or associations working for the public interest.
The five-year period begins from the accounting period in which the institution starts its activities. This point is extremely important because the period starts running from the moment operations begin, not from the moment profitability is reached.
While written application to the Ministry of Finance was previously required, this condition has been removed under current regulations (as per General Communiqué on Income Tax No. 295). For corporate tax taxpayers, having a valid MoNE operation license is sufficient to benefit from the exemption, and the exemption is applied directly on the annual tax return.
Earnings Within Scope: The exemption applies only to earnings obtained from core education-teaching or rehabilitation activities. This includes tuition fees. If ancillary services such as meals and accommodation are provided within the school and their costs are included in the main tuition fee, the earnings from these services are also considered within the scope of the exemption. The external procurement of meal services does not prevent the application of the exemption, provided that the fee is invoiced as a single package.
Earnings Outside Scope: Earnings obtained from activities considered as a separate commercial enterprise are not within the scope. Income from operating a canteen, cafeteria, book sales point, or renting out school facilities for external events falls into this category. These earnings must be separated in the accounting records and subjected to standard corporate tax.
Transfer/Sale: When an institution benefiting from the exemption is sold, the new owner can only benefit from the remaining part of the original five-year period. The five-year period does not restart with the transfer.
New Branch: If an existing institution opens a new school or branch, this new unit is considered a separate enterprise and gains a new five-year exemption right starting from its own commencement date.
Capacity Increase/Relocation: Expanding the capacity of an existing school or moving to another building is not considered the opening of a new institution and does not start a new exemption period.
The fact that the five-year exemption period starts from the moment the institution commences activities—not from the moment it achieves profitability—creates a significant strategic challenge. Educational institutions often incur losses in their initial years due to high startup costs and low student numbers. This can mean that a significant portion of the valuable exemption period is "wasted" in years where there is no taxable profit. For example, if a school incurs losses for the firstiki years, it effectively loses 40% of its most significant tax incentive. Therefore, one of the key strategic goals in a new school investment should be to reach operational profitability as quickly as possible to maximize the benefit of the exemption.
When the five-year exemption period expires, the institution becomes a regular corporate tax taxpayer. All standard commercial expenses such as personnel salaries, rent, utilities, and educational materials can be deducted from the tax base. Specifically, scholarships provided to students can be recorded as expenses, and donations made to schools and universities can also be deducted from the corporate tax base within certain limits.
MoNE-approved educational institutions are subject to a 10% reduced VAT rate; however, the inability to deduct incurred VAT for free services provided to scholarship students ("Partial Exemption") constitutes a hidden cost element.
The VAT regime requires precise management for educational institutions due to the coexistence of reduced rates and partial exemptions.
The standard VAT rate in Turkey is 20%. However, the majority of education services are subject to a reduced VAT rate. Historically 8%, this rate was temporarily reduced to 1% during the COVID-19 pandemic; currently, the reduced rate applicable to education services is 10%.
This 10% rate applies to services provided by schools, universities, and other teaching institutions operating under Law No. 5580. Services that do not explicitly fall within the scope of the reduced rate (e.g., private company trainings without MoNE approval or online courses) are subject to the general VAT rate of 20%.
This significant exemption is regulated by Article 17/2-b of the VAT Law No. 3065.
Education services provided free of charge by private schools (from pre-school to high school) subject to Law No. 5580 are exempt from VAT, provided they do not exceed 10% of the institution's total student capacity. While Law No. 5580 itself mandates providing free education to at least 3% of students, it has given the Ministry the authority to increase this rate up to 10%. The VAT exemption is regulated in parallel with this upper limit.
For universities and higher education institutions, this exemption is much broader and covers free education services up to 50% of their capacity.
Donations made to certain institutions, including universities and schools affiliated with MoNE, are exempt from VAT. This covers both monetary donations outside the scope of VAT and in-kind donations in the form of goods and services.
The VAT exemption provided for scholarship students is, in terms of tax technique, a "partial exemption" (partial tax deduction). In accordance with Article 30/a of the VAT Law, VAT paid on the purchase of goods and services (incurred VAT) used for the provision of a service exempted from tax cannot be deducted from the VAT calculated on taxable transactions.
The practical result of this is: If 10% of a school's students are on full scholarship (and therefore exempt from VAT), the school cannot deduct the 10% portion of the total VAT it paid for its general expenses (electricity, stationery, maintenance, etc.). This non-deductible VAT becomes a direct cost or expense item for the institution. This situation does not limit the cost of scholarships merely to the waived tuition fee but also creates an unrecoverable tax burden.
When services subject to different VAT rates are provided together (e.g., education with 10% VAT and book sales with 20% VAT), invoicing must be done correctly. If ancillary services such as meals or transportation are provided as an integral part of the main education service within a single tuition fee, they are generally subject to the reduced VAT rate (10%) of the main service. However, if these services are invoiced separately or are optional, they may be subject to their own VAT rates, which leads to complexity in invoicing and accounting.
VAT Applications of Various Educational and Ancillary Services in Light of Invoicing and Declaration of Integrated Services
The status of frequently encountered services in educational institutions regarding Value Added Tax (VAT) is as follows:
Applicable VAT Rate: 10%
Points to Consider: Must operate under Law No. 5580. (Legal Basis: VAT Law Art. 28)
Applicable VAT Rate: 10%
Points to Consider: It does not matter if it is a foundation or state university. (Legal Basis: VAT Law Art. 28)
Applicable VAT Rate: 20%
Points to Consider: Subject to the general rate. (Legal Basis: VAT Law Art. 28)
Applicable VAT Rate: 10%
Points to Consider: Subject to the rate of the main service (education with 10% VAT).
Applicable VAT Rate: 10% or 20%
Points to Consider: May vary depending on the nature of the service.
Applicable VAT Rate: 10% or 20%
Points to Consider: Delivery of books is generally 10%, but other materials may be 20%.
Applicable VAT Rate: 10%
Points to Consider: Accepted as part of the education service.
Applicable VAT Rate: 10% or 20%
Points to Consider: Rates varying according to the product sold are applied.
Applicable VAT Rate: 20%
Points to Consider: A commercial service subject to the general rate.
The portion of gross salaries of private school teachers corresponding to their equivalents in public schools is exempt from income tax; this advantage requires meticulous monitoring in payroll processes.
Income tax obligations for educational personnel focus on specific exemptions granted to teachers and the standard taxation of administrative staff.
Like all employees in Turkey, educators and administrative personnel are subject to Income Tax on their wage income. This tax is collected by the employer through withholding (stopaj) at the time of salary payment and is declared and paid to the tax office via the Unified Withholding and Premium Service Return (MPHB).
The tax is calculated using a progressive tariff. The income tax brackets stipulated for the year 2025 are as follows:
For earnings up to 158,000 TL, the tax rate is 15%.
23,700 TL for 158,000 TL of 330,000 TL; 20% tax is applied for the part exceeding this amount.
58,100 TL for 330,000 TL of 1,200,000 TL; 27% tax is applied for the part exceeding this amount.
293,000 TL for 1,200,000 TL of 4,300,000 TL; 35% tax is applied for the part exceeding this amount.
For earnings exceeding 4,300,000 TL, 1,378,000 TL for 4,300,000 TL; the highest rate up to 40% applies for the part exceeding this amount.
This is an extremely important and specific exemption. Article 9 of Law No. 5580 states that the portion of payments made to teachers and administrators working in private schools, up to the amount paid to the personnel in equivalent public schools, is exempt from income tax.
The portion of a private school teacher's gross salary corresponding to the gross salary of a public school teacher with the same seniority is exempt from income tax. The portion exceeding this amount is subject to normal income tax withholding.
The Law extends this exemption to payments equivalent to social aid payments (family, birth, death aid, etc.) provided to public school personnel through budget laws. These types of social aid payments are completely exempt from income tax.
This exemption creates a significant administrative burden for the payroll department of the private school. This is because it necessitates constant monitoring of the official salary scales of public school teachers in order to calculate the correct exemption amount for each employee.
Academic and administrative personnel in foundation universities are subject to the Labor Law No. 4857 in terms of salary and other personal rights. Their wages are subject to standard progressive income tax withholding without benefiting from the exemption granted to private school teachers. However, some payments such as "Higher Education Compensation" may be exempt from income tax except for stamp duty.
Employers are obliged to declare both the income tax they withhold from employees (stopaj) and the Social Security Institution (SGK) premiums with a single unified declaration, the MPHB. This return is generally submitted monthly, by the 26th of the following month. For enterprises with fewer than 10 employees, a three-month declaration option is also available.
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While educational institutions can benefit from certain exemptions in property tax and municipal fees, they must include stamp duty costs—arising especially in high-value contracts—in their budget planning.
In addition to major tax categories, educational institutions face various other financial obligations at the municipal and documentation levels.
In accordance with Law No. 488, Stamp Duty is collected on a wide range of official documents and contracts. For educational institutions, this tax usually arises in the following documents:
Employment Contracts: Calculated on the gross salary amount.
Rental Agreements: Calculated on the total rental amount.
Service and Supply Contracts: Charged at a rate of 9.48 per thousand ($0.00948$) over the contract value.
Payroll Records: Stamp duty withholding is made over the gross salaries every month.
Tender Decisions: Charged at a rate of 5.69 per thousand ($0.00569$) over the tender amount.
The institution is responsible for declaring and paying this tax. Under certain laws, some exemptions may apply, especially for expenditures related to primary education. Stamp duty can constitute a significant unforeseen cost item in the budget, especially in high-value transactions such as large construction or service contracts.
Property tax is a tax collected by municipalities on buildings and lands. There is an important exemption for educational institutions. Specifically, buildings belonging to foundation universities are exempt from building and land tax, even if they are leased out, as long as their income is used for university purposes. Other private education institutions may also benefit from property tax exemptions, especially if they operate on lands allocated by the public or within the scope of certain incentive programs.
Institutions are also subject to various municipal fees:
Environmental Cleaning Tax: Paid in two installments a year.
Advertisement and Promotion Tax: Paid for signboards, posters, and other advertising elements.
Although the Municipality Law authorizes municipalities to provide discounted or free water to educational institutions, this is entirely at the discretion of the municipality.
Education investments are considered 'Priority Investments' regardless of their location in Turkey, enabling them to benefit from Region 5 incentives (tax reduction, SGK support, interest support).
Turkey supports investments in this field with robust incentive mechanisms, considering education a priority sector for development.
Private sector investments for pre-school, primary, middle, and high school education are classified among "priority investment subjects." This classification means that regardless of where in Turkey the investment is made, it can benefit from the incentives provided for Region 5, which is one of the most advantageous regions.
For investors to benefit from these incentives, they must first obtain an Investment Incentive Certificate from the Ministry of Industry and Technology. The main advantages an education investment can benefit from within the scope of Region 5 support are as follows:
Corporate/Income Tax Reduction: A significant portion of the investment amount is deducted from the corporate tax base. This support effectively extends the tax advantage period by coming into play after the five-year full exemption period under the KVK expires.
SGK Premium Employer's Share Support: For the personnel hired during the specified period (such as 7 years for Region 5), the employer's share of the SGK premium that must be paid is covered by the state. This significantly reduces personnel costs.
Interest Support: A part of the interest payments of TL or foreign currency loans used for the investment (5 points for TL loans and 2 points for foreign currency loans for Region 5) is covered by the state.
Investment Land Allocation: The state may allocate public land for the investment project.
VAT and Customs Duty Exemption: Machinery and equipment procured from within the country or from abroad within the scope of the investment are exempt from VAT and Customs Duty. This seriously reduces the initial capital cost.
The tax reduction advantage provided by the Investment Incentive Certificate is designed to step in after the five-year full earnings exemption in the KVK expires. This creates a long-term, two-stage tax shield for education investors. In the first stage, 100% tax exemption is provided for five years, while in the second stage, the discounted corporate tax application spread over the years within the scope of the Investment Incentive Certificate begins. This structure significantly improves the long-term return on investment (ROI) of the project.
Applications are made to the Ministry of Industry and Technology with a detailed project file. The certificate has certain conditions such as minimum investment amount and completion period. Failure to comply with these conditions may lead to the cancellation of the certificate and the recovery of all supports provided together with interest.
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The tax compliance process requires not only monthly and annual returns but also full integration into digital systems such as e-Invoice and e-Ledger, along with strict monitoring of legal deadlines.
Regular tax declaration and payment obligations provide a practical roadmap for maintaining the institution's legal standing.
Corporate Tax Return: Declares the total profit or loss of the fiscal year.
Income Tax Return: Applicable for sole proprietorships.
Advance Tax Return (Geçici Vergi): Profit/loss is declared in three-month periods.
Value Added Tax (VAT) Return.
Unified Withholding and Premium Service Return (MPHB).
Stamp Duty Return.
Turkish tax legislation mandates digital transformation for taxpayers exceeding certain turnover thresholds. Educational institutions may also need to use the following systems within this scope:
E-Invoice (E-Fatura): Used in inter-institutional (B2B) transactions.
E-Archive Invoice (E-Arşiv Fatura): Used in transactions (B2C) aimed at final consumers (parents).
E-Ledger (E-Defter): Keeping the journal and general ledger digitally and sending their certificates (berats) to the Revenue Administration. The periods for uploading electronic ledger certificates are extremely strict.
Strategic tax planning aims to create a long-term financial shield by combining the 5-year earnings exemption with investment incentives and optimizing tax burdens arising from scholarship models.
Strategic recommendations transform technical legal analysis into an operational roadmap for educational investors.
Fast Transition to Profitability: A strategy should be developed to reach operational profitability at the earliest possible date in order to benefit from the five-year corporate tax exemption at the maximum level.
Service Packaging: Ancillary services such as meals and transportation should be included in the main tuition fee to expand the scope of both the corporate tax exemption and the reduced VAT rate.
Scholarship Management: Scholarship programs should be carefully managed, taking into account VAT exemption limits (10% for schools, 50% for universities), and negative tax consequences should be avoided.
Proactive Incentive Application: VAT/Customs Duty exemptions and other long-term advantages should be secured by proactively applying for an Investment Incentive Certificate before significant capital expenditures are made.
Corporate Structuring: The corporate structure should be planned accordingly so that new branches to be opened in the future can benefit from their own five-year exemption rights.
Risk: Mistakenly evaluating the income obtained from ancillary services (canteen, etc.) within the scope of the exemption. Measure: Clear separation of non-exempt commercial activities in accounting records.
Risk: Incorrect calculation of the income tax exemption for teachers. Measure: Utilizing expert payroll software or consultancy services that follow public sector salary scales.
Risk: Failure to account for the non-deductible VAT burden arising from scholarship programs in budgets. Measure: Inclusion of this "hidden cost" in financial aid models.
Risk: Missing high-frequency declaration dates. Measure: Implementation of a robust compliance calendar and automatic reminder systems.
Turkey's tax environment is dynamic. Periodic changes in VAT rates and adjustments that can be made in incentive programs depending on economic conditions require educational institutions to constantly monitor tax legislation and policies. While the strong support provided to the education sector is expected to continue, the conditions and rates of these supports may change over time. Therefore, it is vital for institutions to conduct flexible financial planning and closely follow the current legislation for their long-term success.
The tax legislation of educational institutions is a multi-layered and constantly changing structure ranging from Corporate Tax exemptions to VAT applications, from personnel payrolls to Investment Incentive Certificate processes. In this dynamic environment, minimizing the legal risks of institutions and making maximum use of tax advantages requires in-depth expertise. Working with a competent law firm is an integral part of strategic tax planning. You can contact Genesis Hukuk to fulfill all your obligations completely and to benefit from investment incentives correctly by working with a team specialized in education law and tax legislation. Do not hesitate to contact us to benefit from our tailor-made legal solution and consultancy services.
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