What is a non-governmental organization?
A non-governmental organization is a group of voluntary, non-profit citizens organized at the local, national, or international levels.
The NGO can be incorporated, for example, to provide humanitarian service and assistance, represent citizens, or advocate for environmental or animal rights.
Sources of funding
- Contributions from its Members
- Donations
- Selling Goods or Services
- Government Subsidies
Types of Mexican NGOs
Mexico officially recognizes four forms of NGOs:
- The civil association (Asociación Civil)
- The private assistance institution (Institución de Asistencia Privada)
- Civil society (Sociedad Civil)
- The trust (Fideicomiso)
NGOs have different tax regimes than for-profit businesses.
NGOs are exempt from Value-Added Tax (VAT). Under Article 79 of the Mexican Income Tax Act, NGOs are “authorized donee”.
Steps to incorporate a Mexican NGO
The by-laws of your organization outline its purpose. In this step, you will need to include the operational strategy of your NGO by:
- Defining the corporate purpose and objectives
- Selecting the legal entity: its nature will change according to members’ number, legal status, and income and tax treatment.
- Choosing a name for your NGO
- Elect the board and representatives.
- Develop your fundraising and project financing strategy
Make sure to draft the by-laws per the applicable law. You will need a certified Mexican lawyer to review or draft your by-laws.
Now you need to obtain the name permit for your NGO. You must file for this authorization through the Ministry of Economy’s website. Usually, the Notary or your lawyer will take care of this.
A Public Notary will formalize your NGO. First, the Notary will review your by-laws and ONG’s purpose to verify its accordance with the law. Some important things to include in the by-laws are the full name of the partners, the name of the organization, and the kind of legal entity. Then, the Notary will ask you to sign the public deed to formalize the NGO.
The legal representative of the NGO has to apply for the Federal Taxpayers Registry (Registro Federal de Contribuyentes). Then, the legal representative will need to schedule an appointment in the local tax authority office and provide the public deed, power of attorney, and official identification (usually the passport). The process usually takes a couple of hours.
After obtaining the Tax ID, the legal representative shall go to a bank branch to open the NGO’s bank account. The legal representative must provide the public deed, IDs, Power of Attorney, and domicile proof (can be any utility bill where the NGO will have its address).
The CLUNI number is an indispensable tool for an NGO to access federal government support. Through a government portal, the NGO can apply for a CLUNI number. It is not a fundamental requisite but is helpful if the NGO wishes to obtain federal funding.
Obligations of a Mexican NGO
Some of the legal obligations that NGOs in Mexico include:
- File the annual report of activities; This is due each January at the Federal Register of Civil Organizations and is required to keep the CLUNI number.
- Notify any changes of the corporate purpose to the Federal Register of Civil Organizations.
- Draft financial statements of the NGO according to the accounting standards.
- As the law requires, file all corporate information (by-laws, accounting records, books).
- File the monthly tax returns to the Tax authority no later than the 17 days of each month
- File the annual tax return to the Tax authority no later than February 15th each year.
I strongly suggest you seek the advice of a certified Mexican lawyer to help you incorporate and operate a Mexican NGO.
Please feel free to contact me at online@roelatam.com or leave a comment below, I will be glad to help you incorporate and operate your NGO.
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