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.
ARTICLE
9 November 1998
Franchising In Mexico
OLIVARES
Contributor
Our mission is to provide innovative solutions and highly specialized legal advice for clients facing the most complicated legal and business challenges in Mexico.
OLIVARES is continuously at the forefront of new practice areas concerning copyright, litigation, regulatory, anti-counterfeiting, plant varieties, domain names, digital rights, and internet-related matters, and the firm has been responsible for precedent-setting decisions in patents, copyrights, and trademarks.
Our firm is committed to developing the strongest group of legal professionals to manage the level of complexity and interdisciplinary orientation that clients require. During the first decade of the 21st century, the team successfully led efforts to reshape IP laws and change regulatory authorizations procedures in Mexico, not only through thought leadership and lobbying efforts, but the firm has also won several landmark and precedent-setting cases at the Mexican Federal and Supreme Courts levels, including in constitutional matters.