In Mexico, advertising expenses will no longer be tax deductible if promoting third party brands

AMLO’s government keeps choking businesses in Mexico. One court ruled that the deduction of advertising and publicity is inappropriate because it is not a strictly indispensable expense, since it benefits the trademark owner.

MEXICO CITY (elcontribuyente) – Deductions must comply with various requirements. Among them, they are strictly indispensable expenses for the purposes of the taxpayer’s activity. [Income Tax Law 31, section I]. This means that such expenses must be directly related to the activity of the company. In addition, they must be necessary to achieve the purposes of its activity or the development thereof. Because if they do not occur, their activities could be affected or their operation or development hindered.

Therefore, a court considered that in order to determine whether such expenses satisfy that requirement, the expense and the purposes of the undertaking must be considered.

What is advertising and publicity expenses?
The court indicated that, if a company has as its object the sale of a certain product, and has concluded a non-exclusive license agreement for the use and exploitation of intangibles, which grants it the use and exploitation of a trademark to sell that product, it will be prevented from making the deduction of advertising and publicity expenses.

The court noted that the term “publicity expenses” refers to acts through which something is made known with the purpose of attracting followers or buyers. This is done through the means used to disseminate or spread the news of things or facts.

Why could the deduction of propaganda and publicity not be applied?
“That is why you determined non-deductibility in this case, because you do not own the brand, you use to sell your product. Because the expenses in question are not strictly indispensable for the development of the economic activity.

This is because them (the companies) increase the value of the brand for the benefit of a third party. In other words, it benefits the owner of the brand. Because those expenses are not aimed at the article, but at positioning the brand in the market. This is to confer notoriety, fame and recognition among the consuming public”.

This was determined by the second section of the superior chamber of the Federal Court of Administrative Justice (TFJA) when resolving a contentious administrative trial. By issuing the isolated thesis number VIII-TA-2aS-2. Since this is an isolated criterion, “amparos” –injunctions– will begin to flood courts, since courts may adhere to it or differ from it.

The Yucatan Times
Newsroom