A foreign parent company sells goods to its Turkish subsidiary at a discount. Learn when Turkish Customs may question the discounted price, what evidence should be submitted, and how multinationals can reduce customs valuation and penalty risks.

A foreign parent company may legitimately sell goods to its Turkish subsidiary at a discounted price. However, because the buyer and seller are related parties, Turkish Customs may examine whether the relationship influenced the price and whether the discounted invoice amount can be accepted as the customs transaction value.

The central issue is not simply:

“Was there a discount?”

The more important questions are:

Why was the discount granted?

Would a commercially comparable independent buyer receive a similar discount?

Was the discount established before importation?

Does the declared value reflect the amount actually paid or payable for the imported goods?

Under Turkey’s customs valuation framework, a buyer-seller relationship does not automatically require rejection of transaction value. The decisive issue is whether the relationship influenced the price. If Customs has grounds to consider that it did, the importer should be given an opportunity to respond.

1. A Related-Party Discount Is Not Automatically Invalid

A Turkish subsidiary does not necessarily have to purchase goods from its foreign parent at the same price charged to every unrelated customer.

Commercial differences can justify different prices.

Examples include:

• Large-volume purchases;
• Long-term purchasing commitments;
• Distributor status;
• Market-entry strategy;
• Clearance of obsolete inventory;
• Functional differences between distributors;
• Different warranty responsibilities;
• Different commercial levels.

The issue is whether the discount can be commercially and legally substantiated.

2. Customs Will Examine Whether the Relationship Influenced the Price

Suppose:

Independent distributor price: EUR 100 per unit

Turkish subsidiary price: EUR 65 per unit.

Customs may ask why the Turkish company receives a 35% discount.

The importer should be prepared to demonstrate the commercial explanation rather than merely stating that the price was determined under the group’s transfer-pricing policy.

3. Document the Discount Before Importation

Contemporaneous documentation is particularly important.

The company should preserve:

• Intercompany sales agreement;
• Price list;
• Discount schedule;
• Purchase order;
• Pricing correspondence;
• Transfer-pricing policy;
• Internal pricing approval.

A discount documented only after Customs begins an investigation may attract greater scrutiny.

4. The Intercompany Agreement Should Explain Pricing

The agreement should make clear whether the Turkish subsidiary receives:

• Distributor discount;
• Volume discount;
• Annual rebate;
• Promotional discount;
• Market-development discount;
• Other price adjustment.

Avoid vague contractual language where substantial discounts are routinely granted.

5. Volume Discounts Can Be Legitimate

A Turkish subsidiary purchasing significantly larger quantities than independent customers may legitimately obtain lower unit prices.

For example:

Turkish subsidiary: 100,000 units annually.

Independent buyer: 2,000 units annually.

The price difference should therefore be analyzed together with quantity.

Customs valuation rules recognize quantity and commercial-level differences as relevant when comparable transactions are examined.

6. Prepare a Quantity Discount Schedule

A strong file might show:

1–5,000 units: EUR 100

5,001–25,000 units: EUR 90

25,001–50,000 units: EUR 80

50,001+ units: EUR 70.

This is much stronger than simply saying:

“Our subsidiary gets a group discount.”

7. Commercial Level Can Explain Different Prices

A parent company may sell directly to:

• Retailers;
• Regional distributors;
• National distributors;
• Industrial end users.

A Turkish subsidiary acting as the national distributor may receive a substantially lower price because it performs additional functions and bears additional costs.

Commercial-level differences should therefore be documented.

8. Explain the Turkish Subsidiary’s Functions

The Turkish company may independently finance:

• Marketing;
• Warehousing;
• Distribution;
• Local personnel;
• Warranty support;
• Customer acquisition;
• Inventory risk;
• Bad-debt risk.

These functions can help explain why it purchases at a lower wholesale price.

9. Compare Sales to Independent Distributors

Where available, prepare a comparison between:

Foreign parent → Turkish subsidiary

and

Foreign parent → unrelated distributor.

Compare:

• Product;
• Quantity;
• Country;
• Commercial level;
• Delivery conditions;
• Warranty;
• Payment terms;
• Transaction date.

The comparison should not focus solely on the invoice amount.

10. Adjust Comparables Before Drawing Conclusions

Suppose an independent customer pays EUR 100 but buys only 500 units.

The Turkish subsidiary pays EUR 75 but buys 50,000.

The EUR 100 price should not automatically be treated as the appropriate customs value.

Relevant differences should be examined and, where permitted, supported adjustments should be considered.

11. Product Differences Must Also Be Checked

Make sure Customs is not comparing:

Premium model

with

standard model

or

current-generation product

with

discontinued inventory.

Model, specifications, quality and commercial reputation can materially affect price.

12. Market Differences Can Affect Pricing

The parent may use different pricing strategies in different markets.

Relevant commercial factors may include:

• Competition;
• Market size;
• Distribution expenses;
• Product lifecycle;
• Local demand.

However, general statements about market conditions should be supported by evidence.

13. Market-Entry Discounts Need Strong Documentation

A foreign group entering Turkey may deliberately reduce prices temporarily to establish market share.

This can have a legitimate commercial rationale.

Preserve:

• Business plan;
• Market-entry strategy;
• Board approval;
• Promotional pricing policy;
• Period during which the discount applies.

14. End-of-Series Discounts May Also Be Legitimate

A foreign parent may discount:

• Previous-generation products;
• Excess inventory;
• Discontinued models;
• Slow-moving stock.

Document the reason.

A discounted obsolete product should not automatically be compared with a new current-generation model.

15. Payment Terms Can Affect the Commercial Comparison

One customer may receive:

180-day payment terms

while the Turkish subsidiary pays:

100% in advance.

Those transactions may not be commercially equivalent.

Preserve evidence of payment conditions.

16. Reconcile the Discounted Invoice With the Actual Payment

The declared customs value should correspond with the commercial reality.

Prepare:

Invoice

→ bank transfer

→ intercompany account

→ accounting entry

→ customs declaration.

If the invoice shows EUR 700,000 but the Turkish subsidiary ultimately transfers EUR 1 million, Customs will reasonably ask what the additional EUR 300,000 represents.

17. Intercompany Current Accounts Require Particular Care

Multinational groups often settle multiple invoices through current accounts.

A direct one-to-one payment may therefore not exist.

Prepare a reconciliation showing exactly how each import invoice was settled.

18. Hidden Additional Payments Can Undermine the Discount

A parent may invoice goods at a discounted amount but separately charge the subsidiary for:

• Royalty;
• Technology;
• Brand licence;
• Marketing contribution;
• Engineering;
• Management services.

Some of those payments may be entirely separate.

Others may have customs-value consequences.

Their substance must be reviewed individually.

19. Royalties and Licence Fees Need Separate Analysis

Certain royalties or licence fees relating to the imported goods and payable as a condition of sale may need to be added to customs value under the applicable rules.

A low product invoice combined with a substantial royalty payment can therefore attract scrutiny.

20. Review Free or Discounted Assists

The Turkish subsidiary may provide the foreign manufacturer with:

• Moulds;
• Components;
• Designs;
• Engineering;
• Tooling.

Where the statutory conditions are satisfied, qualifying assists may affect customs value.

These arrangements should be disclosed and analyzed separately rather than hidden within the discount explanation.

21. Transfer-Pricing Documentation Can Help

A transfer-pricing report may explain:

• Group structure;
• Pricing methodology;
• Functional analysis;
• Distributor margin;
• Comparables;
• Arm’s-length range.

This can support the customs defense.

But it should not be treated as automatically conclusive.

22. Customs Valuation and Transfer Pricing Are Different

A corporate tax analysis may conclude that the Turkish subsidiary should earn a particular operating margin.

Customs asks whether the import price satisfies customs valuation rules.

These two analyses overlap factually but are not identical.

The multinational should coordinate them carefully.

23. Review Year-End True-Ups

Suppose the subsidiary purchases goods throughout the year at a 30% discount.

At year-end, the parent issues a debit note of EUR 2 million to adjust the Turkish company’s profitability.

That adjustment may create a customs question:

Does the EUR 2 million relate to the imported goods?

The answer should be established from the agreements and calculation methodology.

24. Credit Notes Can Also Matter

A year-end credit note may reduce the economic price ultimately borne by the subsidiary.

Determine whether it relates to:

• Imported goods;
• Services;
• Marketing;
• Performance rebate;
• Another commercial matter.

Do not treat every credit note as irrelevant to customs valuation.

25. Customs May Use Test Values

In related-party cases, qualifying transaction values involving identical or similar goods sold to unrelated buyers can be relevant when assessing whether the relationship influenced the price.

The company should therefore identify its own strongest independent comparables before Customs selects one.

26. Test Values Are Not Automatically Replacement Values

An important distinction is that qualifying test values are used to examine whether the related-party transaction value is acceptable; they are not simply an automatic substitute for the invoice price.

This can be significant where Customs identifies a higher unrelated sale and immediately seeks to impose that price.

27. Customs Should Consider Relevant Differences

When comparing transactions, examine:

• Quantity;
• Commercial level;
• Freight;
• Product characteristics;
• Timing;
• Other relevant cost differences.

A comparable should not be used mechanically without considering supported differences.

28. Customs Valuation Methods Follow a Sequence

If transaction value cannot legally be accepted, the customs valuation framework proceeds through prescribed alternative methods, including transaction values of identical and similar goods before later valuation methods.

Customs should not simply select an arbitrary higher value because it considers the related-party discount excessive.

29. Ask Customs to Explain Why the Discount Is Rejected

The importer should identify the exact concern.

For example:

“The discount is unavailable to unrelated buyers.”

“The transfer-pricing adjustment shows that the invoice was provisional.”

“The Turkish subsidiary’s purchase price is significantly below comparable imports.”

The response should address the actual allegation.

30. Submit a Structured Discount Defense

A strong submission can contain:

1. Group relationship;
2. Intercompany agreement;
3. Pricing methodology;
4. Discount mechanism;
5. Commercial justification;
6. Quantity analysis;
7. Commercial-level analysis;
8. Independent comparable sales;
9. Payment reconciliation;
10. Transfer-pricing evidence.

This is substantially stronger than submitting the invoice alone.

31. Avoid Circular Explanations

Do not argue:

“The price is correct because it is our transfer price.”

That does not explain why the price is acceptable for customs purposes.

Instead explain:

how the price was calculated and why the relationship did not distort it.

32. Preserve the Parent Company’s Pricing Records

Useful parent-company evidence may include:

• Global price lists;
• Discount policies;
• Independent customer invoices;
• Pricing committee records;
• Cost data;
• Historical pricing.

These documents may become important during a post-clearance audit.

33. Customs May Review Historical Imports

If Customs concludes that the parent-subsidiary discount reduced customs values, the issue may expand beyond one shipment.

Prepare a declaration-level database showing:

Date

Product

Invoice price

Discount

Quantity

Customs value

Year-end adjustment.

34. Quantify Historical Exposure Early

Calculate potential:

• Additional customs duty;
• Additional import taxes;
• Penalties;
• Late-payment amounts.

Management should know the potential range before deciding litigation and correction strategy.

35. Do Not Automatically Correct Historical Declarations

A Customs suspicion does not establish that the historical values were wrong.

First determine:

• Whether the discount was genuine;
• Whether transaction value remains acceptable;
• Whether additions were omitted;
• Whether historical periods remain legally open.

Then determine the appropriate response.

36. Challenge Additional Assessments Where Appropriate

If Customs rejects the discounted transaction value and issues an additional assessment, review:

• Reason for rejection;
• Valuation method;
• Comparables;
• Adjustments;
• Calculation.

The challenge should address both legal methodology and factual assumptions.

37. Challenge Administrative Penalties Separately

The company may argue:

Primary position: The discounted transaction value was valid.

Alternative position: Even if Customs adjusts the value, the asserted penalty is legally or mathematically incorrect.

Do not treat additional duty and penalty as inseparable.

38. Protect Procedural Deadlines

Record the notification date of every:

• Information request;
• Valuation decision;
• Additional assessment;
• Penalty.

Internal approval from the foreign parent should not delay protection of the Turkish subsidiary’s procedural rights.

39. Coordinate Customs and Tax Responses

The customs team, tax team and group transfer-pricing team should coordinate factual explanations.

For example, the group should avoid simultaneously asserting:

Tax position: The parent intentionally lowered the goods price to manipulate the Turkish distributor’s profit.

and

Customs position: The relationship had no effect on the goods price.

Factual inconsistencies can damage credibility.

40. Review Customs Broker Information

Determine what the customs broker knew about:

• Related-party status;
• Discounts;
• Royalties;
• True-ups;
• Assists.

A multinational’s internal information may never have reached the broker preparing the declarations.

41. Establish a Discount Approval Procedure

For future related-party imports, substantial discounts should have:

• Written commercial justification;
• Approval;
• Calculation methodology;
• Supporting comparable data.

This creates contemporaneous evidence before any customs investigation begins.

42. Review Discounts Annually

A discount that was commercially justified five years ago may no longer reflect current market conditions.

Periodically review:

• Quantity;
• Functions;
• Market;
• Pricing;
• Comparable sales.

Update the customs valuation file accordingly.

43. Connect Transfer-Pricing Adjustments With Customs Compliance

Whenever the group issues:

• Debit note;
• Credit note;
• True-up;
• Royalty adjustment;

the customs team should be notified.

The company should determine whether the adjustment has consequences for imported goods before year-end accounts are finalized.

44. Maintain an Audit-Ready Related-Party File

The file should contain:

Group structure

Intercompany agreement

Pricing policy

Discount documentation

Independent comparables

Payment records

Transfer-pricing analysis

Royalty agreements

Year-end adjustments

Historical declarations.

This can significantly improve the company’s position during a customs audit.

45. Immediate Strategy When Customs Questions the Discount

The recommended sequence is:

Identify Customs’ concern

→ protect procedural deadlines

→ document the parent-subsidiary relationship

→ explain the discount methodology

→ prove the commercial reason

→ compare unrelated sales

→ adjust for quantity and commercial level

→ reconcile invoices and payments

→ review royalties and assists

→ review year-end adjustments

→ coordinate tax and customs documentation

→ quantify historical exposure

→ challenge unjustified assessments and penalties

→ improve future related-party valuation controls.

25-Point Related-Party Discount Checklist

1. Intercompany sales agreement.
2. Group structure chart.
3. Product price list.
4. Discount policy.
5. Discount approval.
6. Purchase orders.
7. Commercial invoices.
8. Payment records.
9. Intercompany ledger.
10. Accounting records.
11. Quantity commitments.
12. Commercial-level analysis.
13. Independent customer invoices.
14. Comparable-product analysis.
15. Transfer-pricing report.
16. Functional analysis.
17. Benchmarking study.
18. Debit notes.
19. Credit notes.
20. Year-end true-ups.
21. Royalty agreements.
22. Assist documentation.
23. Customs declaration history.
24. Customs valuation correspondence.
25. Additional assessment and penalty calculations.

Frequently Asked Questions

1. Can a foreign parent company legally give its Turkish subsidiary a discount?

Yes. A related-party discount is not automatically invalid for customs purposes. The key question is whether the relationship influenced the price and whether the declared transaction value satisfies the applicable customs valuation requirements.

2. Can Customs reject the price simply because the companies are related?

No. The buyer-seller relationship alone is not sufficient to reject transaction value. The circumstances surrounding the sale and the effect of the relationship on price must be examined.

3. What evidence is most useful for proving a legitimate discount?

Intercompany agreements, pre-existing discount policies, quantity commitments, independent comparable sales, payment records, transfer-pricing documentation and contemporaneous pricing correspondence can be important.

4. Can volume purchasing justify a lower price?

Yes. Quantity differences can be relevant in customs valuation comparisons, particularly where the importer can demonstrate a genuine volume-discount structure.

5. Is an arm’s-length transfer-pricing report enough?

Not necessarily. Transfer-pricing documentation can support the case, but customs valuation requires its own analysis under customs rules.

6. Can year-end transfer-pricing adjustments affect customs value?

Potentially. The company should determine whether a debit note, credit note or true-up relates to the price actually paid or payable for imported goods.

7. Can royalty payments create additional customs exposure?

Yes. Certain royalties and licence fees may require inclusion in customs value where the applicable statutory conditions are satisfied.

8. Can Customs compare the subsidiary’s price with sales to unrelated distributors?

Yes, qualifying unrelated transactions may be relevant. However, differences in quantity, commercial level and other relevant factors should be properly considered.

9. Can Customs investigate earlier imports using the same discount?

Yes. A valuation issue discovered in one shipment can lead to examination of historical declarations using the same related-party pricing structure.

10. What should a multinational do when Customs questions the discount?

The company should demonstrate that the discount has a genuine, documented commercial basis. It should connect the intercompany agreement, pricing methodology, independent comparables, quantity and commercial-level differences, payments, transfer-pricing documentation and year-end adjustments into one consistent customs valuation defense.

Client-Focused Legal Support for Related-Party Customs Valuation in Turkey

Parent-subsidiary valuation disputes can involve:

Related-party discounts

Transaction value

Transfer pricing

Volume discounts

Intercompany pricing

Year-end adjustments

Royalties and licence fees

Post-clearance audits

Additional customs assessments

and customs penalties.

Fırat Fesih Kaya Law Office assists multinational groups, foreign parent companies and Turkish subsidiaries where Turkish Customs questions discounts or other related-party pricing arrangements used for imported goods.

Lawyer Fırat Fesih Kaya provides legal assistance in defending discounted transaction values, reviewing transfer-pricing documentation, analyzing comparable transactions, examining royalties and year-end adjustments, challenging customs assessments and penalties, and managing historical related-party import exposure.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey