Tax Implications of Industrial Property Rights

To start, it is important to establish what is understood as industrial property, since in daily practice it might be confused or be similar to intellectual property, that mainly refers to copyrights of scientific, artistic or literary work.

Instead, industrial property is understood as the sum of exclusive rights that protect essentially the innovation manifested in new products creation, production of new processes and/or technical proceedings, or design or tools addition that makes them different by its usefulness or peculiarity.

Under this context, the current Industrial Property Law in our country acknowledges the following industrial creations:

Patents	Distinctive signs
Utility models	Trademarks
Industrial designs	Notices and trade names
Integrated circuits blueprint outline	Designation of origin Trade secrets

Registering the innovation activities pointed out above will grant to its owner the exclusive usage right of what it was registered, stopping this way that a third party makes use of what was registered without owner’s consent.

Now, the fiscal consequences derived from industrial rights existence rise up from the moment that its owner directly uses them or well, from the transfer of such rights in favor of a third party.

In this sense, the Federation’s Tax Code picks up the royalties concept, which implies the existence of received payments for the direct use of industrial property rights or their transfer or cession.

As consequence, the obtained payments must be estimated as industrial property rights owner’s accumulative incomes and their treatment must subdue unfailingly to the dispositions foreseen by the Income Tax Law.

Notwithstanding the above, it’s convenient to point out that such law doesn’t establish particularly the proceeding that must be followed to be able to set up the accumulative income as consequence of the industrial property rights use.

Given the fact that industrial property rights are intangible assets, the difficulty to establish the amount or percentage to be estimated as accumulated income starts when it comes to affecting the starting investment, made to produce a good of this kind.

In this matter, it is reiterated that the Income Tax Law is insufficient by not foreseeing an adequate proceeding or mechanism to figure out the accumulative income in the topic that concerns us and therefore, it would be convenient that such inconsistency is refined in upcoming legislatures.