PRODECON issued Systemic Analysis 8/2025 to address a relevant issue for Mexican and multinational groups operating in Mexico under trademark license arrangements granted by a domestic or foreign related party.
The core issue is the deductibility, for Mexican income tax purposes, of advertising and promotional expenses incurred by the Mexican taxpayer to promote products, services or points of sale that use a licensed trademark. During tax audits, the authority may challenge whether those expenses benefit the licensor or trademark owner, rather than the local taxpayer claiming the deduction.
This client alert summarizes the practical implications of the issue and proposes immediate actions to reduce exposure, strengthen the evidentiary file and turn this discussion into a preventive planning opportunity.
Key Aspects of Systemic Analysis 8/2025
- The issue: local advertising vs. benefit to the trademark owner
In distribution, franchise, retail, consumer products, hospitality, technology, food and beverage, automotive and pharmaceutical structures, the Mexican entity commonly pays for marketing campaigns, promotions or institutional advertising linked to a trademark it does not own.
- Tax risk: the SAT may argue that the expense is not strictly indispensable for the Mexican taxpayer’s business, but instead increases the economic value of an intangible owned by a related party.
- Potential effect: denial of the income tax deduction, inflation adjustments, surcharges, penalties, transfer pricing adjustments and potential withholding tax questions where cross-border payments exist.
Practical impact: Companies must be able to demonstrate that the advertising generates a direct, reasonable and measurable benefit for the sales, commercial positioning or market penetration of the Mexican entity, and not only a residual benefit for the trademark owner.
- The deduction should not be automatically denied
The existence of a trademark license with a related party should not, by itself, make advertising expenses non-deductible. The analysis should focus on the nature of the expense, the taxpayer’s business activity, the contractual terms, the traceability of the benefit and evidence that the expense was incurred under arm’s-length conditions.
- Indispensability: document how the campaign is connected to the generation of taxable income in Mexico.
- Substance: keep deliverables, media plans, internal approvals, commercial metrics and evidence of execution.
- Transfer pricing: align the intercompany policy, license agreement and transfer pricing documentation with the operating reality.
Practical impact: The tax file must tell a consistent story: who decided on the campaign, who assumed the risk, who received the economic benefit and why the expense belongs to the Mexican entity.
- Immediate review points for groups using licensed trademarks
We recommend a preventive review focused on contracts, support documentation, accounting records, invoicing, tax treatment and transfer pricing consistency.
- License agreements: verify whether the agreement authorizes, requires or regulates local marketing investments and whether it distinguishes between local advertising and global brand-building activities.
- Expense classification: separate campaigns aimed at local sales from corporate or global positioning expenses that may require reimbursement or different tax treatment.
- Evidence of benefit: prepare sales, traffic, leads, market share, launch, promotion and post-campaign performance reports.
- Cross-border payments: review whether royalties, advertising, technical assistance, reimbursements or intercompany charges trigger withholding tax, VAT or additional requirements.
Practical impact: An early review allows companies to correct agreements, reinforce files and prepare arguments before an audit, refund procedure or conclusive agreement process.
What Comes Next and How to Prepare
- Exposure diagnostic: identify whether the company deducts advertising or promotional expenses linked to related-party trademarks.
- Contractual and tax review: assess license agreements, marketing policies, invoicing, withholding tax and accounting support.
- File preparation: document local benefit, business rationale, evidence of execution and consistency with transfer pricing.
- Action plan: implement preventive adjustments and define a defense strategy before any SAT request.
For any questions or additional assistance, please contact the professionals at Cuesta Campos.
Contact
Hector Aviles
THE ABOVE IS PROVIDED AS GENERAL INFORMATION PREPARED BY PROFESSIONALS WITH RESPECT TO THE TOPIC REFERRED TO HEREIN. THIS DOCUMENT REFERS ONLY TO LAWS APPLICABLE IN MEXICO. WHILE EVERY EFFORT HAS BEEN MADE TO PROVIDE ACCURATE INFORMATION, WE DO NOT ASSUME ANY LIABILITY FOR ERRORS OR OMISSIONS. THIS DOCUMENT DOES NOT CONSTITUTE LEGAL, ACCOUNTING OR PROFESSIONAL ADVICE OF ANY KIND.
