Understand how to form an NGO in Costa Rica to support your commercial and social causes.
Costa Rica is a social State of social rule of law that cares about the well-being of its citizens and those residing in its territory where 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 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.
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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, science, education, housing, aid for people and animals, among others.
In addition, NGOs aim to generate a positive social impact and to not be a for-profit business.
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 that the Association is a non-profit organization where a group of people come together for a common purpose and social object, while the Foundation‘s purpose is to allocate the use of a specific asset to be useful in charitable, educational, or any activity that involves a denotation of social good.
Another difference between both figures is that 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.
Characteristics of the Association NGO
An association is a tax-exempt organization in which a group of people is organized for a common purpose, whether for scientific, artistic, sporting, charitable, recreational or any other lawful purpose that is not solely and exclusively for profit.
In the case of the Constitution of Associations in Costa Rica, these must be formed by at least 10 people and a Board of Directors of 5 members. It is very important to take into account that a high percentage of these members must be women.
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, and its rights and duties
- Resources available to the association and body that sets the income and periodic fees, if applicable
- 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
- Indicate the month and frequency of the regular annual meeting
- Control of legal books by the secretary and accounting books by the Treasurer
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:
- A founder, be it a natural or legal person
- Entity name
- Exact address of the NGO
- Assets of the foundation
- Purposes it pursues
- Foundation term
- Appointment of director(s)
- NGO administration
- Supervisory body
- Dissolution form.
5 steps to form an NGO in Costa Rica
To form an Association and NGO Foundation in Costa Rica, members must:
1. Agree on the constitution of the legal entity:
All members must write the NGO’s statutes, in which the essential requirements of each figure will be defined. This constitution must be signed by a Public Notary.
2. Publication of edict
An edict must be published in the Diario Oficial with an extract of the terms under which the foundation is constituted, dissolution, merger and any other acts that change its structure.
3. Register the NGO in the section of the National Registry of Legal Entities.
Once the essential terms of the entity have been agreed upon and the bylaws duly notarized, the members must register their NGO in the National Public Registry section.
4. Obtain an identification number
Once registered, the NGO will be granted a legal status with an identification number and from here, the NGO’s books will be legalized and for its registration as a social good entity before the Tax Administration.
5. Depending on the activity of the NGO, some additional steps may apply, including:
- 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 regarding narcotics and other drugs, related activities, legitimization of capital and financing of terrorism.
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.