Customs Valuation of Software Embedded in Imported Equipment: What Is Included in Turkey? — 2026 Current Guide

How is embedded software valued when equipment is imported into Turkey? Learn which licence fees, firmware, updates, royalties and software services may be included in customs value in 2026.

Modern equipment is often imported with embedded software, firmware, operating systems, control algorithms or digital licences. Turkish Customs may investigate whether the software is already included in the equipment price or whether a separate licence, royalty or service payment must be added to the customs value.

The answer depends on the technical and contractual connection between the software and the imported equipment. Software necessary for the equipment to function may be treated differently from a post-import subscription, cloud service or optional upgrade.

The Turkish Ministry of Trade explains customs valuation principles, including the transaction-value method and special rules concerning data and instructions, in its official customs valuation guidance.

Why Is Embedded Software Relevant to Customs Value?

Software may affect customs valuation because it can be:

• Installed in the equipment before shipment;
• Delivered on a physical carrier;
• Downloaded after importation;
• Licensed separately;
• Supplied by the equipment manufacturer;
• Supplied by a group company;
• Required for operation;
• Optional for advanced functions;
• Updated through a subscription;
• Connected to a cloud platform;
• Subject to a royalty or licence fee.

Customs may ask whether the software is part of the imported goods, part of the purchase price or a separate service used after importation.

Software Included in the Equipment Price

If the invoice price already includes software necessary to operate the equipment, the software value is generally already reflected in the transaction value.

The importer should ensure that:

• The sales contract describes the software;
• The invoice covers the equipment and embedded software;
• No separate payment is hidden;
• The equipment cannot operate without the software;
• The licence is transferable with the equipment;
• The declared price corresponds to the full commercial package.

An additional customs adjustment should not duplicate a software value already included in the invoice.

Firmware and Operating Software

Firmware and operating software may be embedded in:

• Industrial machinery;
• Medical devices;
• Robots;
• Vehicles;
• Telecommunications equipment;
• Laboratory systems;
• Energy equipment;
• Security systems;
• Network hardware;
• Automated production lines.

Where the software is permanently installed and necessary for the equipment’s operation, Customs may consider it part of the imported product’s value. The importer should provide technical documentation explaining whether the software is:

• Essential;
• Optional;
• Permanently embedded;
• Removable;
• Transferable;
• Activated by a key;
• Licensed for a fixed period;
• Updated after importation.

Software Delivered on a Physical Carrier

A special valuation rule may apply where data or instructions are imported on a physical carrier and the value of the carrier can be separated from the value of the data or instructions.

This rule should not automatically be extended to software embedded in a complete machine. The importer must distinguish between:

• A removable data carrier;
• Software embedded in equipment;
• A licence key;
• A cloud subscription;
• A downloadable application;
• A software service;
• A machine-control system.

The invoice and technical file should explain the physical and commercial structure of the software.

Separate Software Licence Fees

A separate licence fee may be added to customs value where:

1. It relates to the imported equipment or goods;
2. The buyer must pay it directly or indirectly;
3. It is a condition of sale for export to Turkey;
4. It is not already included in the invoice price;
5. The amount can be determined objectively.

The payment may be made to:

• The equipment manufacturer;
• A foreign parent company;
• A software owner;
• A trademark or patent holder;
• A group technology company;
• A distributor;
• A licensing affiliate.

The label “software service” or “technology fee” is not decisive. Customs may examine the substance of the agreement.

When Is a Software Fee Less Likely to Be Added?

A payment may be less likely to form part of customs value where it relates exclusively to:

• Post-importation installation;
• Local configuration;
• Domestic training;
• Technical support;
• Maintenance;
• Cloud hosting;
• Data storage;
• Cybersecurity monitoring;
• Optional upgrades;
• A separate subscription;
• Software used by employees after importation;
• Local sales or administration.

The importer should separate these charges from the equipment price and document the services provided after importation.

Condition of Sale

The condition-of-sale test is central.

Customs may consider a software licence a condition of sale where:

• The supplier refuses to sell the equipment without the licence;
• The equipment cannot operate without the licence;
• The supplier controls the activation key;
• The sales contract refers to the licence obligation;
• The royalty is calculated per imported unit;
• The buyer must pay the software owner before delivery;
• The supplier’s price is reduced because the fee is paid separately.

The importer may argue against inclusion where:

• The equipment can be purchased without the software;
• The licence is optional;
• The fee relates only to domestic use;
• The licence is paid to an independent service provider;
• The payment concerns post-import support;
• The software is not used in the imported equipment.

The complete contractual relationship must be examined.

Software Royalties Paid to a Foreign Parent

International groups may pay a parent company for:

• Operating-system rights;
• Industrial algorithms;
• Patent-protected software;
• Brand activation;
• Remote monitoring;
• Artificial-intelligence functionality;
• Product-control systems;
• Technical know-how.

A payment to a parent company is not automatically included in customs value. Customs may examine:

• Ownership of the software;
• The seller’s obligation to provide access;
• The relationship between seller and licence owner;
• Product-specific payments;
• Imported and locally manufactured equipment;
• Royalty calculation;
• Activation requirements;
• Payment records.

The importer should maintain separate agreements for equipment purchase, software licence, technical support and cloud services.

Buyer-Supplied Software as an Assist

The buyer may provide software or technical materials free of charge or at reduced cost for manufacturing imported equipment.

Potential assists include:

• Engineering software;
• Product designs;
• Control algorithms;
• Technical drawings;
• Production instructions;
• Software developed by the buyer;
• Testing systems;
• Manufacturing data.

If the software is supplied for production and its value is not included in the invoice, Customs may require an objective and quantifiable addition.

The importer should maintain:

• Development invoices;
• Software-development agreements;
• Engineering records;
• Cost calculations;
• Allocation schedules;
• Production quantities;
• Evidence of where the software was created;
• Records showing which imported goods used it.

Software Updates and Subscriptions

Software updates may be provided through:

• Annual subscription;
• Cloud platform;
• Remote licence;
• Maintenance agreement;
• Pay-per-use model;
• Technical support package;
• Upgrade fee.

The importer should distinguish between:

• Software necessary for initial operation;
• Optional functionality;
• Updates;
• Maintenance;
• Data services;
• Cybersecurity;
• Post-import support.

A recurring subscription used after importation may be separate from customs value if it is not a condition of sale and is separately invoiced. The facts and contractual terms remain decisive.

Customs Documents for Embedded Software

A complete file should contain:

• Purchase contract;
• Commercial invoice;
• Software licence agreement;
• End-user licence terms;
• Technical specifications;
• Software architecture;
• Activation records;
• Product manuals;
• Price breakdown;
• Royalty invoices;
• Subscription invoices;
• Payment records;
• Bank statements;
• Cloud-service agreement;
• Maintenance and support contract;
• Installation records;
• Import declaration;
• Product photographs;
• Supplier confirmation;
• Allocation calculation.

The importer should provide a clear hardware-software price breakdown.

Customs Valuation Methods

Where the transaction value is accepted, the invoice price remains the starting point. If Customs rejects the transaction value, it may consider:

1. Identical goods;
2. Similar goods;
3. Deductive value;
4. Computed value;
5. A fallback method.

A comparable price for equipment without software should not automatically be compared with equipment including embedded licences. Adjustments must reflect differences in functionality, software scope, support and warranty.

Related-Party and Transfer-Pricing Risks

Where the Turkish importer and software owner are related, Customs may review:

• Group structure;
• Licence ownership;
• Royalty policy;
• Transfer-pricing reports;
• Comparable licence rates;
• Product margins;
• Intercompany payments;
• Year-end adjustments;
• Allocation between imported and domestic equipment.

Tax and customs authorities may apply different legal tests. A royalty accepted for transfer-pricing purposes may still require a customs-value analysis.

Post-Clearance Audits

Turkish Customs may investigate software payments after equipment has been released. The audit may cover:

• Several import declarations;
• Multiple equipment models;
• Licence fees;
• Subscription payments;
• Parent-company invoices;
• ERP records;
• Bank transfers;
• Transfer-pricing reports.

Under the general framework of Customs Law No. 4458, under-assessed customs duties may generally be notified within three years from the date the customs debt arose, subject to statutory exceptions.

Financial and Penalty Risks

If Customs concludes that a software payment should have been included, the importer may face:

• Additional customs duty;
• Import VAT on the revised customs base;
• Additional customs duties;
• Interest;
• Administrative customs penalties;
• Reassessment of earlier imports;
• Contractual disputes with the supplier.

A disagreement about software classification does not automatically establish fraud. However, hidden licence payments or false descriptions may create more serious administrative or criminal risks.

How Can the Importer Challenge an Assessment?

The importer may argue that:

• The software value was already included;
• The licence does not relate to imported equipment;
• The fee is optional;
• It concerns post-import support;
• It is a cloud or data service;
• It is not a condition of sale;
• The software was supplied by the buyer at full value;
• Customs used an incorrect allocation;
• The same amount was counted twice;
• The alternative valuation method was applied incorrectly.

Under Article 242 of Customs Law No. 4458, an objection is generally filed within 15 days from lawful notification of the customs decision.

If the objection is rejected, proceedings may be brought before the competent tax court within the applicable procedural period. A separate suspension-of-execution request may be necessary because an objection or lawsuit does not automatically suspend collection.

Settlement may be available for certain customs debts and penalties.

2026 Compliance Checklist

International companies should:

1. Identify all software connected to imported equipment.
2. Separate embedded software from post-import services.
3. Review the condition-of-sale relationship.
4. Analyse licence and royalty agreements.
5. Prepare a hardware-software price breakdown.
6. Document updates and subscriptions.
7. Check buyer-supplied software and engineering.
8. Reconcile payments with customs declarations.
9. Coordinate customs and transfer-pricing positions.
10. Preserve technical and electronic records.
11. Review related-party payments.
12. Obtain legal advice before a customs disclosure.

Frequently Asked Questions (FAQ)

1. Is software embedded in imported machinery included in customs value?

It may be included if it is part of the purchase price or necessary for the equipment and the value is not separately excluded under the applicable rules.

2. Are software licence fees always added?

No. The fee must relate to imported goods and generally be a condition of sale, among other requirements.

3. Are cloud subscriptions included in customs value?

Often they may be treated separately if they concern post-import services and are not a condition of sale, but the contract must be reviewed.

4. Can a licence paid to a foreign parent be added?

Potentially. Related-party status alone is not enough; the product connection and condition-of-sale test must be assessed.

5. Are software updates dutiable?

Not automatically. Initial operating software, optional upgrades, maintenance and cloud updates may receive different treatment.

6. Does software on a physical carrier have a special rule?

A special rule may apply where the carrier value can be separated from data or instructions. It should not automatically be applied to software embedded in equipment.

7. Can buyer-supplied software be an assist?

Yes, if it is supplied for manufacturing imported goods free of charge or at reduced cost and its value is not included.

8. What documents should be prepared?

Licence agreements, technical specifications, invoices, payment records, price breakdowns, service contracts and allocation calculations are usually important.

9. Can Customs reassess software payments after clearance?

Yes. Post-clearance audits may lead to additional duty, VAT, interest and penalties.

10. What is the objection deadline for a software valuation assessment?

An objection is generally filed within 15 days from lawful notification under Article 242 of Customs Law No. 4458.

This article is intended for general informational purposes only. To avoid any loss of rights, we recommend consulting your lawyer regarding your specific circumstances.

Legal Support for Software and Customs Valuation Disputes

Fırat Fesih Kaya Law Office advises technology companies, equipment manufacturers, international groups, Turkish importers, software owners and distributors on embedded software and customs valuation.

Lawyer Fırat Fesih Kaya can assist with licence agreements, royalty analysis, hardware-software allocation, assists, customs audits, additional-duty assessments, administrative objections and tax-court proceedings.

For urgent legal support:

Mobile / WhatsApp: +90 532 769 22 22
Office: +90 312 434 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yıldırım Tower, Balgat, Çankaya / Ankara, Turkey