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Mexico: Clarification of the term “standardised software” for tax treaty purposes



David Cuellar

Sergio Lugo

On December 28 2012, the Mexican tax authorities published the MiscellaneousTax Regulations for fiscal year 2013, including a new rule intended to clarify the concept "standardised software" for purposes of interpreting article 12 (royalty payments) of the tax treaties signed by Mexico and also in light of Mexico's view that payments for the use of non-standardised software generally qualify as royalties. In general terms, Mexico follows the OECD Model Tax Convention to elaborate tax treaties with other jurisdictions and applies the commentaries on the OECD Model Tax Convention as a legal authority to interpret tax treaties. According to paragraph 28 of the commentaries on article 12, Mexico holds the position that payments related to software are classified as royalties when less than the full rights to the software are transferred; however, this rule should not be applicable in the following cases:

  • Payments for the use of copyrights on software for commercial exploitation if, and only if, the payment is made for the right to distribute standardised software copies and to the extent such copyrights do not include the right to customise or reproduce such software.

  • Payments for the use of copyrights for the sole use and benefit of the purchaser if, and only if, the software is completely standardised and not adapted/tailored to the purchaser.

In this context, new rule I.2.1.23 provides that standardised software includes the "commercial off the shelf (COTS)" software which is granted homogeneously and massively to any person in the market. In addition, rule I.2.1.23 provides that software which is specific or special should not qualify as standardised. For these purposes, specific or special software includes the following:

  • Software somehow adapted for the purchaser/user. When the software was standardised at the beginning but then adapted for the use of the purchaser/acquirer, such software should be considered as specific or special (and therefore not standardised) as from the moment the adaptation takes place.

  • Software designed, developed or produced for one user or a group of users, for the author or the person who designed, developed or produced the software.

In light of the recent clarification of the term "standardised software", multinational companies should carefully analyse each transaction on a case-by-case basis, including a comprehensive analysis of the corresponding agreements and the technical characteristics of the software to determine any potential tax consequences in Mexico.

David Cuellar ( and Sergio Lugo (

Tel: +52 55 5263 5816

Fax: +52 55 5263 6010


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