Your Condo’s Fiscal Year

In my book, the “Jalisco Condo Manual,” I say that a condo’s fiscal year should run from April 1 to March 31.

I get a lot of questions like, “Where does it say this in the condo law?

It’s Implicit Rather Than Explicit

Those of you who’ve asked this are right! There’s nothing in the Civil Code that directly says this. However, in my opinion, this is an implicit requirement, rather than an explicit one.

Here’s my logic:

Article 1012.VII of the Civil Code says that the Administrator must give a financial report in the first fifteen days of April, July, October, and January of each year. These are the quarterly reports. Since the financial reporting is clearly expected to be done in calendar quarters, I believe that the intent is that the fiscal year starts at the beginning of one of these quarters. Therefore, your fiscal year should start on the first of April, July, October, or January.

So… why not January 1st?

Article 1020 of the code says that the annual assembly is required to be held in the first three months of the calendar year, and the purpose of this assembly (among others) is to approve the budget for the next fiscal year.

Assume you want your fiscal year to start on January 1, and you hold your assembly in Mid-March.

Your last approved budget would have expired on December 31. Since your condo can’t operate without an approved budget, I can’t see how you could legally function in January, February, and March until the assembly. If you do this, you would have been operating with no approved budget for two-and-a-half months, and you would also be approving your budget and fees for this time-period after-the-fact.

What if the after-the-fact budget didn’t pass, or had to be changed for any reason?

How do you legally set fees for this first quarter without the approval of an assembly? How can you collect from owners who don’t pay them?

This logic applies no matter in which of these three months you hold your assembly (January, February, or March), since any of these would be after the start of your fiscal year.

OK… so why not July 1st or October 1st?

I don’t believe that starting your fiscal year in July or October will have any legal issues, but there are practical considerations.

Preparing a new budget as close to the end of a fiscal year will always give you more accurate results than preparing one only part way through.

For example, suppose your fiscal year started on October 1st, and you were voting on your budget for the next year at an annual assembly in February. You would only have about four months of actual expense data on which to base your next budget.

For these reasons, I believe that the fiscal year should start on April 1. That said, the best person to ask for advice on this is an accountant.

What about taxes?

I’ve heard conflicting reports that Hacienda insists on a tax year that’s the same as the calendar year (or not).

If this is the case, then it might be possible to have a tax year (for tax accounting purposes) that differs from your fiscal year (for budget and fee purposes). This is common in the US and Canada, but I’m not sure if or how this works in México.

If you know for sure, please help…

If you do have a definitive and substantiated answer on the fiscal year or the tax year, please share it with the rest of us!

Garry Musgrave
Writer of books about running a condo in the Mexican state of Jalisco, and following the state condo laws. Also the laws and processes involved in buying and owning real estate in Mexico. Author of the "Jalisco Condo Manual" and the "Jalisco Condo Law in English." His web site: JaliscoCondos

2 Responses to Your Condo’s Fiscal Year

  1. Our accountants have a problem with this because it makes it impossible to have audited financial statements ready for the Ordinary Assembly which must occur before April 1, preferably by about two weeks in case a second meeting needs to be called for lack of quorum.

    • Needing an audited year-end accounting for your assembly is an interesting issue.

      I’m not an accountant, but I can think of some possibilities:

      1. Perhaps you can do two audited reports.

        The first would be an interim year-end accounting to a date just before the assembly. The latest the assembly can be held is about the third week in March (to allow the minimum 7 days needed for a second call). So perhaps this accounting would cover the year to March 15. This would be noted in the report, and unless some emergency comes up it should reasonably accuratly reflect the year. Major expenses don’t normally come up in the last two weeks. The administration is winding down, and things are quiet.

        Once April 1 passes, and you have all the accounting for the final two weeks of the budget year, then a final year-end report can be done.

      2. You could modify the last suggestion to be only one report – the interim year-end. The next year’s interim year-end would pick up any unexpected stuff from the last two weeks of the previous year.
      3. Perhaps you can have a different accounting year from your fiscal year – shifted by one month. Therefore, your budget year would be April 1 to March 31, but the audited accounting year would be March 1 to the last day of February.

      Whether any of these are acceptable to your accountant, I honestly don’t know. And there may also be other workable scenarios.

      If you do come up with a solution, please post it here!

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