According to article 142 of the Mexican Industrial Property Law (IPL), a franchise exists when along with the license of a trademark there is the transfer of technology or the obligation of providing technical assistance for the manufacture, sales, or for the rendering of services.
In Mexico, the licensing and franchising figures are so closely related, that both figures are regulated by the same articles located in chapter VI of the Fourth Title of the IPL. However, taxes and fees for the licensing or franchising of trademarks are contemplated in our Income Tax Law (ITL).
When registering franchise and license agreements, registrants may delete the provisions dealing with royalties and technical information, however, in order to avoid confusion which may arise from the filing of briefings or short forms, it is recommended to file with Trademark Office (TMO) the whole agreement as executed, deleting such information therefrom.
No license or franchise agreement may have effects against third parties, unless it is recorded with the Trademark Office. If the use of a trademark is rendered through a licensee or franchisee, and the license / franchise agreement is not registered, a third party may validly file a cancellation claim on account of non use of the trademark. Evidence of use by third parties other than the owner of a trademark registration is not valid,
As to the taxes to be paid for the royalties generated in Mexico to be remitted abroad, our ITL in its article 156 establishes a 35% of the gross income, for the use of patents, certificates of invention, trademarks, business names, and advertisements, and 15% for the technical assistance; establishing the obligation upon licensee or franchisee to withhold these taxes in Mexico for its payment to the Taxation authorities.
By José I. De Santiago.
This article is intended to provide a general guide to the subject matter and should NOT be treated as legal advice. Specific legal advice should be sought by you about your particular case and special circumstances.