Open a Foundation in Mexico

A foundation in Mexico is a type of non-governmental organization (NGO) that has a non-commercial purpose. In general, the incorporation procedures follow the standard rules for company formation in Mexico.

Certain differences can appear that are specifically made for this type of entity. Therefore, if you want to open a foundation in Mexico, we invite to find out more on the registration procedure from our consultants.

What types of NGOs can one set up in Mexico?

The law in Mexico recognizes 4 categories of NGOs, as follows:

1. the civil association;
2. the private assistance institution;
3. the trust;
4. the civil society.

Those who want to set up a foundation in Mexico must know that this structure is included in the 1st category of NGOs, meaning the civil association. The law stipulates that this entity is set up for other purposes than economic ones and it is constituted when more individuals decide to create an entity. The law is given by the Civil Code for the Federal District, Article 2670. The following also apply:

• the civil association, including the foundation, must have at least 2 founders;
• the main authority for these structures is the general assembly (Article 2674);
• this structure can be liquidated as per its own statutes, but also following the decision of a local authority (Article 2685);
• provided that the structure must be dissolved, the remaining assets will be transferred to a similar structure that has a similar purpose (Article 7906);
• private foundations can make donations to certain communities, starting with 2017.

What are the primary sources of law for NGOs in Mexico?

Whether you open a company in Mexico for commercial purposes or set up a charity, a foundation or another type of NGO, you must follow certain regulations.

Regarding this, it is necessary to know that many regulations derive from the Mexican Civil Code, but also from federal and local Law for the Promotion of Activities Carried out by Organization of Civil Society.

Tax rules derive from the Federal Income Tax Law (although NGOs are not set up for commercial purposes, they are still tax payers). Our accountants in Mexico can present the main obligations applicable to foundations.

Our CPA in Mexico will also present the main tax benefits foundations and other NGOs can have (since they are not commercial entities and they do serve a social purpose, they benefit from certain tax deductions or exemptions).

What are the main incorporation steps for a Mexican foundation?

The process of company formation in Mexico for an NGO starts by preparing the statutes of the entity. In this document, it will be clearly stated the purpose for which the foundation is set up, its name, the objectives to achieve, establishing its representatives, establishing the fundraising strategy. The founding documents must also contain information on the following:

1. the duration (an indefinite duration can be stipulated);
2. the accounting policies the foundation will follow;
3. its initial assets;
4. the funding sources;
5. the dissolution procedure;
6. the manner in which the remaining assets will be distributed.

Further on, it is necessary to register with the Mexican Ministry of Economy (this step can be completed on the website of the institution). Then, the founders must address a local public notary, where the incorporation documents are signed and stamped.

Another step is to register with the Federal Taxpayers Registry. After this, the NGO must apply for the CLUNI, which is a registration key that is mandatory for NGOs that want to benefit from governmental support. Our consultants in company formation in Mexico can offer additional information on other steps that can be necessary when registering an NGO (foundation).

Once registered, the foundation is legally required to present annual reports and submit financial documents. The latter can be done by our accountants in Mexico. The foundation must also present tax returns to the Tax Administration Services; you can hire a CPA in Mexico for financial and tax services.

Funding principles

A foundation in Mexico is entitled to a variety of funding sources, some of which are presented in the list below:

1. private donors (individual/collective);
2. grants and subsidies;
3. sponsorships granted by corporations;
4. crowdfunding;
5. the sale of goods/services;
6. contributions made by the foundation’s members.

What are the obligations of a foundation during the financial year?

Even if the foundation or any other NGO structure is registered for the purpose of developing a non-profit activity, it still has a multitude of obligations to abide by during a financial year, just like commercial companies have.

Besides the financial documents that must be submitted with the Mexican authorities, the structure must report any corporate changes appearing following its incorporation. These changes are reported to the Federal Register of Civil Organizations. Once the process of company incorporation in Mexico is completed and the foundation starts its operations, the entity must abide by the following:

1. prepare the annual financial reports for the financial year (they must be submitted during the month of January of the next financial year);
2. complete the financial statements as per the available accounting standards;
3. submit monthly income tax reports with the Tax Administration Service (this is due by the 15th day of each month);
4. submit the annual income tax return (the due date is 15th of February of the following financial year, and it must be presented to the same institution mentioned above).

Any of the 4 listed obligations can be completed with the assistance of our accountants in Mexico. Please know that if the foundation is in the situation of reporting any corporate changes during the financial year, the law states that the institutions must be informed in maximum 45 days since the change took place.

Corporate changes can refer to any modification brought to the entity that is different from the details stipulated in its founding documents (business name, purposes, owners, managerial structure, business address, etc.).

We invite you to address our consultants in company formation in Mexico for assistance in setting up a local foundation or any other type of NGO structure. We also recommend you to contact us in the case in which you want to set up a company in Mexico; we can provide assistance in this process, regardless of the sector in which the business will operate.