Learn when royalty and license fees must be included in customs value in Turkey, including trademarks, patents, know-how, related-party payments, post-import royalties, customs penalties and compliance risks for foreign importers.

For foreign companies importing goods into Turkey, royalty and license fees are among the most frequently overlooked elements of customs valuation. An importer may correctly declare the commercial invoice price but still face an additional customs assessment years later because Turkish customs authorities conclude that separate payments for trademarks, patents, know-how, designs, copyrights or manufacturing processes should also have been included in the customs value.

This issue is particularly important for multinational companies. A Turkish subsidiary may purchase products from one foreign group company while paying royalties to another entity that owns the group’s intellectual-property rights. Because the royalty does not appear on the commercial invoice for the imported goods, the customs department may initially treat the invoice price as the complete customs value.

That assumption can create significant exposure.

Under Customs Law No. 4458 and the Turkish customs valuation rules, qualifying royalties and license fees must be added to the price actually paid or payable where they relate to the imported goods and the buyer must pay them, directly or indirectly, as a condition of sale, provided they are not already included in the transaction price. The Ministry of Trade expressly identifies royalties and license fees among the potential additions to transaction value.

For importers, the critical question is therefore not simply whether a royalty exists. The company must determine what the royalty is paid for, whether it relates to the imported goods, whether payment is a condition of sale and whether the amount has already been reflected in the declared customs value.

What Are Royalty and License Fees for Turkish Customs Purposes?

Royalty and license payments can arise from many different intellectual-property arrangements.

The Ministry of Trade describes royalty and license fees as payments connected with rights relating to the manufacture, sale for export, use or resale of imported goods, including payments associated with patents, designs, know-how, models, trademarks, registered designs, copyrights and manufacturing processes.

Common examples include trademark royalties paid for selling branded products in Turkey, patent license fees relating to imported technology, know-how payments connected with manufacturing processes, copyright payments, design-license fees and payments for rights connected with proprietary manufacturing techniques.

However, the existence of such a payment does not automatically mean that the entire amount belongs in customs value.

The statutory conditions must first be examined.

When Must a Royalty Be Included in Customs Value?

Two central conditions generally need to be considered.

First, the royalty or license fee must relate to the imported goods.

Second, payment must constitute a condition of sale of those goods.

The amount must also not already have been included in the price actually paid or payable.

These conditions are crucial because they prevent customs authorities from automatically adding every intellectual-property payment made by an importer to the customs value.

The Ministry’s current guidance specifically confirms these requirements.

Accordingly, the analysis must focus on the actual commercial relationship rather than merely the title of the agreement.

What Does “Related to the Imported Goods” Mean?

The first question is whether the royalty has a sufficient connection with the goods whose customs value is being determined.

Consider a Turkish company importing branded sportswear.

If the company pays a royalty specifically for the right to use the trademark under which those imported products are marketed, there may be a clear relationship between the royalty and the imported goods.

The analysis becomes more difficult where the payment covers several different activities.

A multinational company may pay one annual license fee covering imported products, locally manufactured goods, marketing services, software and other intellectual-property rights.

In that situation, it may be inappropriate to include the entire royalty in customs value.

Turkish customs guidance recognizes that where royalties relate partly to imported goods and partly to components added after importation or post-import activities or services, an appropriate allocation may be made based on objective and quantifiable data.

What Does “Condition of Sale” Mean?

This is often the most contested issue in royalty disputes.

A payment may relate to imported goods without necessarily being a condition of their sale.

The legal analysis should therefore determine whether the importer could purchase the goods without being required, directly or indirectly, to make the royalty payment.

The wording of the sales agreement and license agreement is important, but contractual wording alone may not resolve the issue.

Customs authorities may examine the commercial reality of the relationship between the seller, buyer and licensor.

If the seller will supply the goods only because the importer has entered into the license agreement and continues paying the royalty, customs authorities may argue that the royalty effectively constitutes a condition of sale.

What If the Royalty Is Paid to the Seller?

Where the royalty is paid directly to the seller of the imported goods, the customs connection may be easier for authorities to establish.

For example, a foreign manufacturer may sell branded products to its Turkish distributor and separately charge a trademark royalty calculated as a percentage of sales.

The importer should determine whether the royalty is genuinely separate from the purchase price and whether the statutory customs valuation conditions require its inclusion.

Simply issuing two invoices—one for goods and another for intellectual property—does not automatically prevent the second payment from affecting customs value.

Customs authorities can examine the substance of the overall transaction.

What If the Royalty Is Paid to a Third Party?

This is particularly important for multinational corporate groups.

Imagine that a Turkish subsidiary imports goods from Company A, while the trademark is owned by Company B and the Turkish company pays the royalty to Company B.

The fact that the royalty recipient is not the seller does not automatically determine the customs treatment.

The relationship between the seller and licensor must be examined.

Turkish customs guidance specifically addresses payments made to third parties and the circumstances in which the condition-of-sale requirement may or may not be satisfied.

Therefore, multinational companies should map the complete corporate and contractual relationship rather than reviewing only the sales invoice.

Are Trademark Royalties Included in Customs Value?

Potentially.

Turkish customs rules contain specific considerations for royalties concerning the use of trademarks.

According to Ministry guidance, a trademark royalty can be added to the price of imported goods where specified requirements are satisfied, including circumstances where the royalty relates to goods resold in the same condition or subject only to minor processing, the goods are marketed under the relevant trademark and the buyer is not free to obtain such goods from suppliers unrelated to the seller.

This can be particularly important for foreign fashion, cosmetics, luxury goods, automotive, electronics, food and consumer-product companies operating through Turkish distributors.

Are Patent and Know-How Fees Included?

Potentially.

Where a patent or know-how license directly relates to the imported product and payment is required as a condition of sale, the fee may affect customs value.

However, the analysis can become more complicated where the know-how relates to manufacturing performed in Turkey rather than the imported product itself.

For example, a Turkish manufacturer may import components and separately obtain technical know-how for operating a domestic production facility.

The company should determine which portion of the intellectual-property payment relates to the imported components and which portion relates to activities carried out after importation.

The distinction can materially affect the customs value.

What About Copyright Payments?

Copyright royalties may also require customs analysis.

Imported books, software-containing products, entertainment products, digital media integrated into physical products and other copyright-protected goods can involve royalty arrangements.

However, importers should distinguish between intellectual-property rights embodied in imported goods and rights concerning reproduction or other activities after importation.

The Ministry of Trade specifically states that charges for the right to reproduce imported goods in Turkey are not added to the price actually paid or payable when determining customs value.

This exception can be highly important in technology, publishing, entertainment and manufacturing arrangements.

Are Distribution Rights Included in Customs Value?

Not necessarily.

A foreign brand may require its Turkish distributor to pay for exclusive distribution rights.

However, Turkish customs guidance provides that payments for the right to distribute or resell imported goods are not added to the customs value where those payments are not a condition of the sale for export to Turkey.

This means that the agreement must be analyzed carefully.

A genuine standalone distribution fee may receive different customs treatment from a payment that effectively constitutes part of the consideration required to obtain the imported goods.

What If the Royalty Is Calculated as a Percentage of Sales?

This is common in licensing arrangements.

For example, a Turkish distributor may pay 5% of its net sales revenue to a foreign trademark owner.

The fact that the royalty is calculated after the goods have been imported does not automatically mean that it falls outside customs value.

Ministry guidance states that where the amount of the royalty is determined according to the price of imported goods, it is generally presumed, unless evidence shows otherwise, that the royalty relates to the goods being valued.

Therefore, percentage-based royalty structures deserve particular attention.

What If the Royalty Amount Is Unknown at the Time of Import?

This is one of the most practical problems importers face.

Many royalties are calculated quarterly or annually according to sales revenue. The exact amount may therefore be impossible to determine when the goods enter Turkey.

That does not mean the royalty can simply be ignored.

The Ministry’s customs valuation materials explain that where the royalty or license amount will become known only after importation, an exceptional value declaration mechanism under Article 53 of the Customs Regulation may be relevant.

Companies with recurring royalty arrangements should therefore establish the correct declaration methodology before imports begin.

Waiting until a post-clearance audit discovers years of undeclared royalties can create substantially greater exposure.

Can Royalty Payments Be Allocated?

Yes, in appropriate circumstances.

Suppose a single EUR 2 million annual royalty covers imported products, locally manufactured products and marketing rights.

Including the entire EUR 2 million in the customs value of imported goods may not accurately reflect the underlying arrangement.

Turkish customs guidance recognizes proportional allocation where royalties relate partly to imported goods and partly to post-import additions, activities or services, provided the allocation is based on objective and concrete data.

Companies should therefore develop a defensible allocation methodology rather than applying an arbitrary percentage.

Sales data, product categories, licensing schedules and accounting records may become important evidence.

Can Royalties Paid by Related Companies Affect Customs Value?

Yes.

Multinational companies frequently separate manufacturing, intellectual-property ownership and distribution across several group entities.

A Turkish subsidiary might import products from a manufacturing affiliate in one country while paying royalties to an IP holding company elsewhere.

Customs authorities may examine the relationship between all parties.

The analysis should consider whether the seller and licensor are related, whether the seller can supply the goods independently of the licensing arrangement and whether the buyer has genuine freedom to source equivalent goods elsewhere.

Corporate structure alone does not determine customs treatment, but it can be highly relevant to the condition-of-sale analysis.

Does Transfer Pricing Treatment Determine Customs Treatment?

No.

A royalty may be arm’s length and fully defensible under transfer-pricing rules while still being required to be included in customs value.

Conversely, a transfer-pricing adjustment to the royalty does not automatically establish its customs treatment.

Transfer pricing and customs valuation apply different legal tests.

Multinational companies should therefore avoid relying solely on transfer-pricing documentation.

A separate customs valuation analysis should examine the relationship between the royalty and the imported goods.

Can Management or Franchise Fees Be Treated as Royalties?

The name of a payment is not decisive.

An agreement may describe a payment as a “franchise fee,” “technology fee,” “brand contribution,” “technical fee” or “management fee.”

Customs authorities may examine what rights the payment actually provides.

If the payment effectively grants rights to use a trademark, patent, design, know-how or manufacturing process connected with imported goods, customs valuation issues may arise regardless of the terminology chosen by the parties.

Companies should therefore analyze economic substance rather than relying on invoice labels.

What Happens If Royalties Were Not Declared?

The consequences depend on the circumstances.

Turkish customs authorities may assess additional customs duties where they conclude that qualifying royalty or license fees should have been incorporated into customs value.

Where the issue affected many historical imports, the assessment can become substantial.

Administrative penalties may also arise under Customs Law No. 4458, depending on the legal basis and circumstances of the deficient declaration.

The company should separately verify the underlying customs assessment, penalty calculation and applicable procedural rules.

Can Undeclared Royalties Lead to Criminal Liability?

Potentially, but failure to include a royalty does not automatically constitute a criminal offence.

There is an important difference between a company incorrectly interpreting a complicated condition-of-sale test and deliberately concealing royalty payments in order to reduce customs duties.

Criminal risk becomes more serious where authorities allege false documents, concealed payments, artificial contracts or intentional customs evasion.

A technical disagreement concerning whether a particular intellectual-property payment belongs in customs value should therefore be distinguished carefully from deliberate customs fraud.

Can Customs Authorities Review Historical Royalty Payments?

Yes.

This is one reason royalty compliance can create major exposure for multinational companies.

A licensing arrangement usually continues for years. If customs authorities conclude that the royalty should have been included in customs value, the same issue may potentially affect a large number of historical import declarations within the legally reviewable period.

A company discovering a royalty issue should therefore calculate its historical exposure before responding to authorities.

The review should identify affected products, declarations, royalty periods and customs duties.

Can Customs Compare Royalty Agreements with Accounting Records?

Yes.

A customs valuation review may involve much more than examining import declarations.

The authorities may compare customs records with commercial agreements, accounting entries and other available evidence.

For this reason, customs teams should understand the company’s intellectual-property payment structure.

A recurring payment to a foreign IP company may never appear on an import invoice but can still become highly relevant during a customs valuation audit.

What Documents Should Importers Preserve?

Importers should preserve the license agreement, intercompany sales agreements, commercial invoices, royalty calculations, accounting records, bank transfers, transfer-pricing documentation, customs declarations and correspondence with licensors and suppliers.

Amendments to licensing agreements are particularly important.

If the royalty percentage or scope of licensed rights changes, the customs treatment may also need to be reassessed.

Companies should therefore avoid treating customs valuation as a one-time analysis performed when the original license agreement is signed.

Should License Agreements Be Reviewed Before Importation?

Yes.

This is one of the most effective preventive measures.

A customs lawyer or customs specialist reviewing the agreement before imports begin can identify whether the royalty potentially relates to imported goods and whether it appears to constitute a condition of sale.

The company can then establish an appropriate customs declaration mechanism.

This is significantly safer than discovering after several years that millions of euros in royalty payments may have affected historical customs values.

What Should Importers Do During a Customs Audit?

The company should avoid immediately accepting the administration’s conclusion that every royalty payment belongs in customs value.

The analysis should be performed agreement by agreement and product by product where necessary.

The company should determine whether the royalty relates to the imported goods, whether payment is a condition of sale, whether the amount has already been included in the purchase price and whether only part of the payment should be allocated to imported goods.

Where customs proposes to include the entire royalty, the importer should examine whether objective evidence supports a narrower allocation.

Royalty and License Fee Compliance Checklist

An importer should know exactly who owns the relevant intellectual-property rights, who manufactures the imported goods, who sells those goods to the Turkish importer and who receives the royalty payment. The company should determine whether the seller and licensor are related, whether the importer can purchase the goods without paying the royalty, whether alternative unrelated suppliers are available, what rights the license agreement grants, how the royalty is calculated, whether it covers locally manufactured products or services as well as imports, and whether the amount is known when the customs declaration is filed.

If these questions cannot be answered from the company’s existing documentation, the royalty arrangement should receive a customs valuation review.

Frequently Asked Questions About Royalty and License Fees in Turkish Customs Valuation

1. Are all royalty payments included in customs value in Turkey?

No. The statutory conditions must be satisfied. In particular, the payment must relate to the imported goods and generally be payable as a condition of sale.

2. Are trademark royalties included?

Potentially. Turkish customs rules contain specific conditions concerning trademark royalties, including the relationship between the branded goods, their resale and the importer’s ability to source goods from unrelated suppliers.

3. What if the royalty is paid to a company other than the seller?

The payment is not automatically excluded. The relationship between the seller, licensor and buyer and the conditions governing the sale must be examined.

4. Are royalties calculated after importation excluded from customs value?

No. A royalty may still affect customs value even if its precise amount becomes known after importation. Turkish customs rules provide mechanisms for situations where the amount is determined later.

5. Can a royalty covering both imported and locally manufactured products be allocated?

Potentially, yes. Where the payment relates partly to imported goods and partly to other components, activities or services, an appropriate allocation based on objective data may be possible.

6. Are payments for reproduction rights in Turkey included?

The Ministry states that charges for the right to reproduce imported goods in Turkey are not added to the price actually paid or payable when determining customs value.

7. Are distribution rights included in customs value?

Not necessarily. Payments for distribution or resale rights are not added where they are not a condition of the sale for export to Turkey.

8. Can undeclared royalties lead to additional customs duties?

Yes. If qualifying royalties should have been included in customs value, Turkish customs authorities may assess additional duties and potentially applicable administrative penalties.

9. Can undeclared royalties lead to a criminal investigation?

Potentially where authorities allege deliberate concealment or customs evasion. However, a genuine legal disagreement about whether a royalty satisfies the customs valuation requirements should not automatically be equated with criminal fraud.

10. Should multinational companies review their royalty agreements for customs purposes?

Yes. Agreements prepared primarily for intellectual-property, corporate or transfer-pricing purposes may have significant customs consequences that require a separate analysis.

Legal Support for Royalty and License Fee Customs Valuation in Turkey

For foreign importers and multinational companies, royalty and license fee arrangements should be reviewed before they create historical customs exposure. The existence of a royalty does not automatically mean that it must be included in customs value, but qualifying payments relating to imported goods and made as a condition of sale can require an addition to the transaction price.

Particular care is required where the seller and licensor are different group companies, royalties are calculated according to post-import sales, a single license covers imported and locally manufactured goods, or the exact amount becomes known only after customs clearance.

Our law office provides professional legal assistance concerning royalty and license fee customs valuation, trademark royalties, patent and know-how payments, related-party imports, transfer pricing and customs valuation, exceptional value declarations, post-clearance audits, additional customs assessments, customs penalties and customs-related criminal investigations in Turkey.

Fırat Fesih Kaya Law Office assists foreign investors, international manufacturers, multinational companies and Turkish subsidiaries with reviewing licensing structures, determining whether royalty payments should be included in customs value, challenging disputed assessments and developing preventive customs compliance strategies.

Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yıldırım Tower, Balgat, Çankaya / Ankara

For multinational companies making recurring royalty or license payments connected with goods imported into Turkey, reviewing the arrangement from a customs perspective before a post-clearance audit can substantially reduce the risk of unexpected historical assessments and penalties.