Royalty Payments in the scope of Customs Value

Although Turkey is not yet part of the EU, as being a party to GATT and having customs union agreement between Turkey and EU, main principles of customs regulation in Turkey is designed in parallel with EU customs rules.

Accordingly, the primary basis for the customs value of import goods is defined as the transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of Turkey, and adjusted, where necessary.

Adjustments of the transaction value is defined on articles 27 and 28 of the Customs Law. Besides others, as the subject of this article, royalty related adjustment is defined as below;

royalty and licence fees are to be added to the price actually paid or payable for the import goods where they are related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalty or licence fees are not included in the price actually paid or payable.Accordingly; 2 main principles to define a royalty to be added on the customs value are;

  • royalty payment shall be made related with the goods to be valued
  • payment shall be a sales condition to obtain the goods ro be valued

Recently, customs authority in Turkey especially evaluates the royalty engagements of multinationals, distributors, contract manufacturers and others that generally run in the scope of a royalty agreement.

Even in cases raw materials are procured and production is made in Turkey on which the royalty fee is determined, portion of royalty fee corresponding on import of raw materials could be assessed in this scope.

Accordingly, design of royalty engagements and if needed, determining a declaration methodology becomes an important issue.

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