El Salvador - NGO Law Monitor - Research Center - ICNL

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El Salvador - NGO Law Monitor - Research Center - ICNL http://www.icnl.org/research/monitor/elsalvador.html[11/2/2012 12:40:52 PM] endowment and operating funds are required at the time of establishment (Article 22). The establishment of a foundation is formally recognized in a public instrument or will (Article 19). Foundations are governed by their internal by-laws (Article 23). For both associations and foundations, legal personality is obtained by registering with the Ministry of Interior (Article 26). The Municipal Code (MC) provides two additional categories of CSOs at the local level: municipal associations and community associations. Municipal associations are attached to the municipalities that create them (MC, Article 12). Legal personality is conferred by the municipality in the articles of incorporation. The community association is formed by local residents who come together to address their common needs (MC, Article 118). Community associations must have at least 25 members (MC, Article 120). A decision by a special general assembly is required for their establishment and the relevant municipal council confers legal personality on the association (MC, Article 119). Churches do not fall under the application of the LAFSFL (LAFSFL, Article 10), but instead are governed by Title 30 of the Civil Code. Trade unions are regulated under the Labor Code. Neither churches nor trade unions will be examined in the remainder of this report. Public Benefit Status Subject to prior certification by the General Directorate of Internal Taxes under the Ministry of the Treasury, associations and foundations can be declared as public interest entities, and therefore be exempt from paying income taxes. This benefit, which virtually all CSOs request, is regulated by the LAFSFL (Articles 6 and 7) and the Income Tax Law (Article 6). The requirements for obtaining public benefit status are set out in the Income Tax Law (Article 7). CSOs established for the purposes of social assistance, the promotion of road construction, charity, education and instruction, and cultural, scientific, literary, artistic, political and sports activities, as well as trade associations and unions, are eligible to receive the certification, as long as their income and assets are used solely to fulfill the institution’s purpose and are not distributed among members (Income Tax Law, Article 6). In practice, however, the process of obtaining this status is lengthy and bureaucratic. Furthermore, a designation as a public interest entity does not exempt the CSO from complying with other formal obligations, such as the submission of reports and other documentation requested by the tax authority. The authorization for public interest status is granted for one year and may be renewed automatically absent a notice of revocation from the tax authority. The public interest designation may be revoked at any time if the grounds on which it was granted cease to exist (LAFSFL, Article 7). Neither the LAFSFL nor the tax laws outline a specific procedure for revocation of eligibility and there are no known cases of revocation. Barriers to Entry Vague Grounds for Denial: Under the LAFSL, the Registry of Not-for-Profit Associations and Foundations (RAF) has the power to deny registration if a CSO’s objectives are contrary to “public order, morals, and good customs.” Such vague terminology invites the exercise of subjective governmental discretion and the RAF is able to impede or delay the establishment and registration of CSOs because those terms have never been clarified. The Constitutional Chamber of the Supreme Court of Justice has, however, ruled unconstitutional the RAF’s refusal to register an association that advocates for the rights of transvestite homosexuals on the grounds that its purposes were contrary to morals and good conduct. RAF Exceeding its Authority: The RAF exceeds its authority when it processes CSO registration requests by conducting subjective assessments on all applications in coordination with the line ministry or other public entity responsible for the field of activities of the CSO in question. Moreover, the RAF empowers the ministry or public entity to raise objections to the CSO’s by-laws or other founding documents, and to insist that the CSO modify those documents. While the RAF will not compel changes to the substance of the by-laws, it does make recommendations on the form and style of the documents, which can be burdensome on applicants. The Registry may, for instance, demand further information if the aims set out in the CSO’s bylaws are too general or lack specificity and may require information relating to the origin, allocation, and use of funds for the projects to be implemented. The establishment of requirements beyond those provided in the law is arbitrary and creates a situation of legal uncertainty. Ministry of Interior as Final Arbiter: In cases of outright refusal of registration, Article 51 of the LAFSFL provides the right to an administrative appeal. Within three business days of the notification of refusal, the applicant may file a petition for review to the Ministry of Interior, which must decide on the petition within fifteen working days. The Ministry’s decision is final. Excessive Costs. There are a number of expenses associated with the registration of a CSO. First, the LAFSFL sets a fixed registration fee of approximately $35 (LAFSFL, Article 69). In addition, a CSO must pay for the
El Salvador - NGO Law Monitor - Research Center - ICNL http://www.icnl.org/research/monitor/elsalvador.html[11/2/2012 12:40:52 PM] following: a notary public who writes the CSO’s constitution for between $300 to $600 (although sometimes this is done for free); an auditor who certifies the CSO’s initial balance, which costs $30; the publication of the CSO’s articles of incorporation in the Official Journal with the price determined by the number of items contained (30 items cost approximately $85); and the order or decree that grants legal personality, which costs on average $30. Altogether, establishing a CSO may cost between $500 and $800. Non-adherence to Time Limits. At the time of registration, a written request to be entered into the Registry is submitted for the consideration of the Directorate General of the RAF. It must be accompanied by three copies of the public instrument recording the articles of incorporation and by-laws, the election of the first board of directors or governing board, and other documentation (LAFSFL, Article 65). Should the Registry find that the request contains information that is inadequate, incomplete, formally flawed or in violation of the law, it must notify the organization no more than 90 working days from the date the documentation was received, specifying the errors or violations, and advising the organization to correct them. However, this time period is not always adhered to in practice. Delayed Registration at Municipal Level. The Municipal Council must issue a decision approving or rejecting the registration of a community association no later than 15 days following submission of the request. The Council shall verify that the by-laws submitted include the provisions required by the Municipal Code and that they do not contravene any law or ordinance. In case of an objection, the applicant will be notified and will be given a period of 15 days from the date of the notification in which to correct it. Once any objections have been addressed, the Council must issue a decision within 15 days from the date of the new request. Should the Council fail to issue a decision within the 15-day time frame, the association’s legal personality will be automatically recognized, as mandated by law, with its by-laws approved and registered accordingly. The Council will be obligated to enter the association’s registration and immediately order the publication of the approval and the by-laws in the Official Gazette. This compulsory registration is not always observed, however, and some municipalities delay registration. In practice, the registration of community associations with the municipality is less than systematic or standardized. Barriers to Operational Activity The law does not prohibit unregistered groups from forming and operating; they must only have legal aims. The Criminal Code provides penalties for associations established for the pursuit of an illicit aim. Barriers to Speech / Advocacy CSOs are free to criticize the government and advocate for causes that differ from the government’s views. Restrictions on freedom of expression relate to the crimes of defamation, injury and slander, which safeguard other basic rights. The government created the Economic and Social Council, an advisory body under the Executive Branch made up of key sectors of Salvadoran society such as entrepreneurs, social movements, governments, and academia (universities and think-tanks). This Council examines issues of national relevance such as public security, transparency, the fiscal pact, and social development. According to some observers, while the Council has created opportunities for dialogue on key public policy issues, the process for selecting participants has not been informed by transparent criteria, which has led to criticism of its representativeness. As for the selection of CSOs to the Council, there is no generally established legal procedure and in large measure the decision is left to the discretion of government officials. Barriers to International Contact The LAFSL governs the registration and incorporation of foreign CSOs and grants them the same rights as Salvadoran CSOs (Article 44). The operations of foreign entities are approved as long as their purposes are lawful, but they are explicitly prohibited from participating in political activities (LAFSFL, Articles 44 and 47). “Political activities” is not defined in the LAFSL. Barriers to Resources CSOs may participate in any legal activity, whether commercial or economic, related to their purposes or aims. The only limitation is that the funds obtained must be used for the institution itself and not the direct enrichment of its members, founders, and administrators (LAFSFL, Article 9). There are no special rules restricting the ability of CSOs to obtain and manage foreign funds. The law does not establish explicit criteria for certifying public interest status, although it can be inferred that the process includes an examination of the supporting documentation provided with the request. Nonetheless, the law does not specify the criteria that the tax authority will use to certify that any such requirements have been met. This ambiguity leaves room for arbitrary interpretation. The regulations provide no procedure or administrative remedy if a request for certification as a public interest entity is denied, which leaves no other option than protracted and costly legal processes.
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