Advertising and Promotional Expenses for Trademark Licensees: Intellectual Property Framework and Considerations for Proper Deduction Documentation

On November 28, 2025, Mexico's Taxpayer Defense Ombudsman (Prodecon) issued Systemic Analysis 8/2025, identifying as a systemic issue the SAT's rejection of advertising and promotional expense deductions for Income Tax (ISR) purposes, claimed by taxpayers holding a trademark license granted for use and exploitation in Mexico.

The foregoing opens the door to the analysis of the criteria of administrative and judicial authorities which, although they recognize the origin of these deductions, it is up to the licensee to demonstrate the traceability and benefit of the operation.

The Issue About Deductions

The tax authority has rejected advertising and promotional expense deductions on the grounds that such expenses are not strictly indispensable for the taxpayer's business activities, because:

• The licensee is not the registered owner of the trademark.
• Advertising and promotional services benefit the trademark owner exclusively.
• It does not recognize a business rationale for the licensee to assume this type of expense.

The Intellectual Property Framework

From an IP perspective, the licensee is not a third party unrelated to the trademark: the Industrial Property Protection Federal Law (LFPPI) considers them as equals with the registered owner for all legal purposes arising from the trademark's use and exploitation. This equivalence has direct implications for how the licensee's business rationale and the indispensability of advertising expenses should be analyzed.

Thus, the licensee's advertising and promotional expenses are necessary, since their purpose is to bring the licensee's products or services to market, attract buyers and increase sales, which is a direct benefit accruing to the licensee and not the owner of the trademark, regardless of the royalties that the latter may receive.

Prodecon noted that the cases analyzed involved licenses granted by related parties, although it is not limited to these cases; therefore, license contracts between independent parties may also be subject to questions.

How We Can Support You

In Baker Tilly, there is a strong legal practice comprised of experts in Intellectual Property, Tax and Corporate Law, and Transfer Pricing experts, that enables us to provide advice to taxpayers across the full range of issues affecting the proper structuring and documentation of trademark license transactions, besides identifying the benefits and business rationale of the operation. Our experts can advise you on how to document your licensing operations and protect your deductions.