MEXICO Law and Practice Contributed by: Gustavo A. Alcocer, Luis Astorga, Isabella Montero Torres and Fernanda Martínez Zolezzi, OLIVARES
payments and investment return periods”. Accord - ingly, the regulatory framework focuses on pre-con - tractual disclosure rather than imposing substantive caps on royalty amounts. Any practical limitation would therefore result from commercial negotiation rather than from a mandatory statutory provision. 10.2 Withholding Tax Tax withholding obligations may apply to royalty and technical assistance payments made by a Mexican franchisee to a foreign-resident franchisor that does not have a permanent establishment in Mexico. Pursuant to the Income Tax Law ( Ley del Impuesto sobre la Renta – LISR), royalties and payments for technical assistance are generally subject to a 25% withholding tax (subject to certain exceptions), cal - culated on gross income without deductions. This rate may be reduced (up to 10%) where an appli - cable international tax treaty to avoid double taxa - tion between Mexico and the franchisor’s country of residence applies, provided that the applicable formal requirements, including evidence of tax residence, are satisfied. 10.3 Foreign Currency Controls Mexico does not impose foreign exchange controls or currency restrictions that generally prohibit, limit or condition the payment of royalties or franchise fees to non-Mexican residents. Accordingly, royalty and fran - chise fee payments may generally be made abroad without obtaining prior authorisation from Banco de México (“Banxico”). Nevertheless, under the Monetary Law of the United Mexican States, obligations denominated in a for - eign currency and payable in Mexico may generally be discharged by delivering the equivalent amount in Mexican pesos at the applicable exchange rate, as published by Banco de Mexico in the Official Gazette of the Federation on the date of payment. Accordingly, where the parties intend royalties or franchise fees to be calculated and paid in a foreign currency, the rel - evant franchise agreement should expressly specify the currency of denomination and payment, as well as the applicable payment mechanics and exchange rate, as appropriate.
Although there are generally no foreign exchange restrictions on remitting royalty or franchise fee pay - ments abroad, payments made by a Mexican resident to a non-Mexican resident may be subject to Mexi - can withholding tax, depending on the nature of the payment, the tax residence of the recipient and any applicable income tax treaty. 11. Execution Formalities 11.1 Authentication, Notarisation, Witnessing, Etc A Mexican franchise agreement must be in writing and signed by the parties to be bound, either directly or through duly authorised representatives. Mexican law does not require the signatures to be notarised or oth - erwise authenticated, nor does it require witnesses. No filing with IMPI or another public registry is required as a condition to the execution or validity of the fran - chise agreement. Accordingly, a private written agree - ment signed by authorised parties is sufficient. 11.2 Electronic Signatures Electronic signatures may be used to execute fran - chise agreements in Mexico. Although the LFPPI requires a franchise agreement to be in writing, the Commercial Code provides that this requirement may be satisfied by a data message if the informa - tion remains integral and accessible for subsequent consultation. Where a signature is required, the elec - tronic signature must also permit the document to be attributed to the relevant party. Accordingly, an electronic-signature platform such as DocuSign may be used. Its validity does not depend on the platform’s brand, but on whether the signing method is appropriate for the transaction and provides reliable evidence of the signatory’s identity and con - sent, the attribution of the document, and the integrity and accessibility of the executed agreement. Keeping any authentication records, timestamps and audit trail generated by the platform may help demonstrate the attribution and integrity of the executed agreement. An advanced or reliable electronic signature is not mandatory for every franchise agreement. However,
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