Understand how to form an NGO in Costa Rica to support your commercial and social causes.
Costa Rica is a social State of law that cares about the well-being of its citizens and those residing in its territory. The government works to promote sustainability and growth. It also strives to develop policies that pay due attention to the needs of its people through the different institutions of social aid, social security, education and family assistance.
Government institutions and civil organizations can provide social aid to Costa Ricans. People and companies with a broad sense of assistance to others can unite under the same objectives and causes in varied formal company structures. This includes such as non-profit organizations (NPOs), non-governmental organizations (NGOs), associations, foundations, and committees, among others. In this sense, these organizations support people working together to achieve a common goal in whichever sector for which they seek to cooperate.
Why form an NGO in Costa Rica?
NGOs are the perfect organization structures to develop social initiatives in a variety of areas of action, such as environmental protection, education, housing, aid for people and animals, among others.
Costa Rica holds a strong economy with a GDP per capita that has tripled in recent times, and due to its proximity to large markets and the large influx of international companies, forming an NGO in Costa Rica allows people to manage donations and volunteer initiatives in order to achieve its social objectives.
What types of NGO can be established in Costa Rica?
There are 2 common types of NGO structures in Costa Rica, in which their members share objectives and tasks oriented by a common interest. These two legal figures are Associations and Foundations.
The main difference between these two entities is the community sphere associated with an Association. Foundations are a private entity of public utility; although foundational work brings benefits to the community, these kinds of NGOs are not formed as such.
Another differentiator between both figures is the number of participants to form an Association must be at least 10 people, and for a Foundation, at least 1 natural or legal person.
The time of formation of a non-profit organization can vary between 2-4 months.
Characteristics of the Association NGO
The law authorizes the creation of Associations for “scientific, artistic, sports, charitable, recreational and any other lawful purposes that are not solely and exclusively for profit or gain.”
Some of the essential requirements for the registration of the statutes of an Association are:
- The name of the entity
- Your domiciled address
- The aim it pursues and the means to achieve it
- Membership and disaffiliation modality of the associates, rights and duties of the same
- Resources available to the association and body that sets the income and periodic fees, if any
- Organs of the association, procedures to set them up, call them and complete them, how to resolve, make their publications and act, competence and end of their exercise, when appropriate
- Body or person holding the representation of the entity and extent of power
- If you have the power to found subsidiaries, how to create them
- Conditions and modalities of extinction
- Procedures to reform the statutes.
Other requirements to form an Association NGO in Costa Rica include:
- Minimum of at least 10 members
- Indicate month and fortnight in which the ordinary annual meeting is held
- Type of guarantee that the Treasurer must render for the fulfillment of his functions and body that fixes the amount of that guarantee
- The procedure for appointing liquidators, in the event of voluntary dissolution
- publication of an edict.
Members of an association must appoint the governing body of their Association, and the exact start and end date of their appointment.
Characteristics of the Foundation NGO
Costa Rican law recognizes Foundations as “private entities of public utility, which are established without profit and with the purpose of carrying out or helping to carry out, through the use of a heritage, educational, charitable, artistic or literary, scientific, and in general all those that signify social welfare”.
The essential requirements for the registration of the statutes of a Foundation are:
- At least 1 natural or legal person
- Publication of an edict
- Entity name
- Exact address of the NGO to establish
- Foundation heritage
- Purposes it pursues
- Foundation term
- Appointment of director(s)
- NGO administration
- Supervisory body
- Dissolution form.
What are the steps to form an NGO in Costa Rica?
Your must follow the following steps to form an Association and Foundation NGO in Costa Rica:
Step 1: Agree on the constitution of the legal entity:
All members must present a draft of the NGO’s statutes, in which the essential requirements of each figure will be defined. This constitution must be signed by a Public Notary.
Step 2: Register the NGO with the National Registry
Once the essential terms of the entity have been agreed and the statute duly notarized, members must register their NGO with the National Registry section of legal entities.
Step 3: Obtain an identification number
Once registered, the NGO will be granted legal status with an identification number RUT (Registro Unico Tributario) before the Tax Authority. From here, the NGO’s books will be legalized.
Depending on the activity of the NGO, some additional steps may apply, including:
- In the case that the NGO needs to perform any commercial activity to achieve their goals, it must register this activity before Tax Authority to obtain a RUT (Registro Unico Tributario)
- Opening a bank account: some NGOs may need an account available to receive funding to achieve goals.
- In some cases when funds are received from countries listed as risk jurisdictions, the NGO needs to perform an additional registration before the SUGEF (General Superintendency of Financial Entities) to comply with laws concerning narcotics and other drugs, related activities, legitimization of capital and financing of terrorism.
Maintaining your NGO in Costa Rica
According to the Foundation Law, NGOs in Costa Rica must provide an annual report to the Comptroller General of the Republic on 1 January each year through its administrative board. This is an accounting report of the activities of the Foundation. This requirement becomes even more important if in the future foundations want to be beneficiaries of state contributions or if they already receive some type of contribution from government entities.
For simple, federated or confederate Associations, whose development or activity are particularly useful for the interests of the State and fulfill a social need, they may be declared of public utility when they request it from the Ministry of Justice and Peace. With this status, NGOs can enjoy the franchises and administrative and economic concessions that the Executive Power grants them to fulfill their purposes. This condition of state beneficiaries makes them subject to certain controls, and they must submit annual reports to the Ministry of Justice and Peace or to the National Directorate for Community Development (Dinadeco).
An obligation of both types of non-profit organizations is to keep books referring to their activities and administrative bodies. One difference is that for associations, these books must be legalized by the National Registry.
Form your NGO in Costa Rica with Biz Latin Hub
Costa Rica’s legal framework enables people within the country to fulfill a number of social causes. In Costa Rica there are many initiatives that can be supported. When forming your NGO in Costa Rica, members must ensure they operate in full compliance of local legal requirements.
During this process, it’s crucial to engage with an experienced, trusted legal and accounting services provider to support businesses through the market entry and registration process.
Biz Latin Hub has a series of legal and accounting services that support the formation of NGOs and other legal structures in Costa Rica. Our bilingual team of professionals are ready to support and offer guidance to those establishing themselves in the country.