Mexico is considered the gateway between the United States and Latin America, has a large number of resources and a young workforce that is affordable. The country’s economy is growing, with GDP increasing by 2% between 2017 and 2018, reaching US$1,224 billion. According to the IMF and the World Bank, Mexico should experience an overall growth of 2.1% in 2019.
The oil and gas, automotive, financial services, communications, retail trade, and tourism sectors are Mexico’s most important revenue generators. The country is the second-largest destination for foreign investment in Latin America with $31.6 trillion in foreign direct investment in 2018.
Mexico welcomes foreign business in all forms, including those that focus on supporting social causes. We explain how to set up your non-governmental organization in Mexico.
What is a non-governmental organization (NGO)?
A non-governmental organization (NGO) is a group of voluntary, non-profit citizens that is organized at the local, national, or international levels. The function of an NGO can be to provide humanitarian service and assistance or to represent citizens to their governments.
Within NGOs, there are two main groups, according to the World Bank:
- Operational NGOs: focused on development projects
- Advocacy NGOs: promoting particular causes
Some NGOs may belong to both categories.
The different types of NGOs
As a company, an NGO can have different legal status or legal forms. Some examples include:
- BINGO: international and business-friendly
- INGO: International organization
- ENGO: Environmental organization
- GONGO: a non-governmental organization organized by the government
- QUANGO: Quasi-autonomous.
You must be future-focussed when electing your NGO type, and assess how you want your organization to evolve going forward. Choosing your legal status is one of them.
As non-profit organizations, NGOs cannot obtain funding like other business structures in Mexico, but they can use several sources for funding:
- Contributions from its members
- Individual or collective private donor
- Selling goods and/or services
- Receiving state subsidies.
Although NGOs are not dependent on a government, some in itself collect considerable amounts of grants to support their activities. Some reach budgets close to $1 billion, for example, World Vision finished its 57th year with nearly 26,000 employees and a budget of $2.6 billion.
Steps to set up an NGO in Mexico
As a civil law country, with a federal structure (or legal figure), Mexico officially recognizes 4 primary forms of Organización de la Sociedad Civil (OSC) organizations:
- The civil association (AC)
- The private assistance institution (Institución de Asistencia Privada) (IAP)
- Civil society (CS)
- The trust (Fideicomiso)
Being an OSC means having a different tax regime than a traditional business. They are exempt from Value-Added Tax (VAT) under Article 79 of the Mexican Income Tax Act is an “authorized donee”. As such, may issue exemptions from the Income Tax Act to such donors. The same applies to an American who wishes to become a donor of a Mexican OSC, will be able to deduct it from these taxes.
Register your NGO in 5 steps
1. Planning and drafting your statutes
The statutes of your company outline your business objectives. In this step, you’ll need to lay out the strategic aims and measures for your NGO by:
- Defining the corporate purpose and objectives
- Selecting the legal entity: its nature will change according to the number of members and their status.
- Choosing a name for your NGO
- Electing your authorized representatives and with them, deciding which clauses you wish to include in the event of liquidation proceedings of the OSC
- Develop your fundraising and project financing strategy
Make sure to build you statutes in accordance with the Federal Law on the Promotion of the Activities of Civil Society Organisations (Ley Federal de Fomento de las Actividades realizadas por las Organizaciones de la Sociedad Civil)
2. Legal Constitution of the OSC
To properly develop the legal constitution of your organization, you must first apply for authorization to incorporate a company through the Ministry of Economy’s website.
Through this portal, you can submit the name of your organization. You must present an electronic signature issued by the Tax Administration Department.
3. Register your NGO before a Public Notary
For this step, you must go to a Public Notary to confirm the establishment of your NGO. You must present your public deed or articles of incorporation of your OSC. These documents must contain the full name of the partners, the name (or company name) of the organization, followed by the legal form you have chosen to operate with.
4. Register your organization with the tax department (SAT)
To apply for your registration card at the Federal Taxpayers Registry (Registro Federal de Contribuyentes or RFC), you must submit your NGO Servicio de Administración Tributaria (SAT). This is equivalent to service tax administration in English, and is used to pay your taxes in Mexico.
5. Get the CLUNI
The CLUNI or ‘single registration key’ is an indispensable tool for non-governmental organization to access federal government support and to facilitate the implementation of their activities. Through a government portal, you can apply for a CLUNI position.
Requires for assistance? BLH can help you
Setting up an NGO in Mexico may seem complicated at first glance. Thankfully you can utilize local expertise to make your incorporation journey easier. You can partner with a reliable firm that will ensure your business remains in compliance with commercial and tax laws and processes to achieve the best start.
Contact our Mexico City office and receive guidance and support from our team of local and expatriate professionals throughout your expansion process. At Biz Latin Hub, we offer customized market entry and back-office business solutions to ensure your success in a new market.
Reach out to us at [email protected] to get started today.