Royalty Payments to a Foreign Parent Company: Must They Be Added to Customs Value in Turkey? — 2026 Current Guide

Must royalties paid to a foreign parent company be added to customs value in Turkey? Learn the condition-of-sale test, evidence, transfer-pricing risks, penalties and appeal options in 2026.

Royalty and licence payments between a Turkish importer and a foreign parent company can create significant customs valuation risks. Turkish Customs may investigate whether a royalty paid for trademarks, technology, patents, software or know-how must be added to the customs value of imported goods.

A royalty is not automatically included in customs value. The decisive questions are whether the payment relates to the imported goods, whether the buyer must pay it as a condition of sale and whether the amount was already included in the price actually paid or payable.

The Turkish Ministry of Trade explains the treatment of royalties and licence fees in its official customs valuation guidance.

When Must a Royalty Be Added?

A royalty or licence fee may generally be added where:

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

All five elements should be examined together. A payment to a parent company is not automatically dutiable simply because the parties are related.

What Types of Payments May Be Examined?

Turkish Customs may review payments described as:

• Trademark royalties;
• Patent royalties;
• Technology-licence fees;
• Software licence fees;
• Know-how payments;
• Franchise fees;
• Design and formula fees;
• Technical-information charges;
• Brand-use payments;
• Product certification fees;
• Production-technology fees;
• Distribution rights;
• Resale rights;
• Marketing or intellectual-property charges.

The label used in the contract is not decisive. Customs may examine the substance of the agreement, the payment formula and its connection to the imported products.

The Condition-of-Sale Test

The most important issue is whether the buyer must pay the royalty in order to purchase the imported goods.

Evidence that may support a condition-of-sale finding includes:

• The supplier refuses to sell without a licence agreement;
• The sales contract refers to the royalty;
• The parent company controls both the supplier and intellectual property;
• The supplier’s price is reduced because the royalty is paid separately;
• The licence agreement allows the parent to stop shipments;
• The importer cannot source the goods without the licence;
• The royalty is calculated by reference to imported units.

Conversely, the payment may be less likely to be added where:

• The importer can purchase the goods from unrelated suppliers;
• The licence relates only to domestic manufacturing;
• The payment concerns post-import services;
• The royalty is unrelated to the imported products;
• The payment is for domestic marketing or distribution;
• The buyer can use the intellectual property independently of the import sale.

The contract should be reviewed together with the actual commercial relationship.

Does a Trademark Royalty Have to Be Added?

Not necessarily.

A trademark payment may be added if:

• The mark is incorporated into the imported goods;
• The goods are sold under the licensed brand;
• The payment relates to the imported products;
• The seller requires the buyer to pay the parent;
• The payment is a condition of the sale.

A trademark royalty may be treated differently if it relates only to the importer’s domestic advertising, retail network or post-import sales activity.

The importer should prepare a product-by-product analysis rather than applying the same conclusion to every payment.

Technology, Patent and Software Licences

Technology and patent payments may create customs issues where the imported goods could not be produced, supplied or sold without the licensed technology.

Customs may examine:

• The patent-licence agreement;
• Technical specifications;
• Manufacturing instructions;
• Software functionality;
• Product models;
• Royalty calculation;
• The connection between the licence and imported goods;
• Whether the technology was used before or after importation.

Software payments require special care. A payment for software embedded in imported equipment may raise different questions from a subscription for software used by the importer’s employees after importation.

Payments for Reproduction, Distribution or Resale

The treatment of intellectual-property payments depends on their legal purpose.

A payment for the right to reproduce imported goods in Turkey may be treated differently from a royalty connected to the goods themselves. Similarly, a payment for distribution or resale may not be added where it is not a condition of the sale for export to Turkey.

The importer should separate:

• Manufacturing rights;
• Reproduction rights;
• Trademark use;
• Distribution rights;
• Resale rights;
• Domestic advertising;
• Post-import technical support;
• Franchise services.

Combining all payments under a single “royalty” account increases customs uncertainty.

Payments to a Foreign Parent Company

Payments to a foreign parent company are frequently reviewed because the parent may:

• Own the trademark or patent;
• Control the supplier;
• Set the transfer price;
• Provide technology;
• Receive resale proceeds;
• Approve customers;
• Control production;
• Require a licence as part of the group structure.

Related-party status alone does not establish that the royalty must be added. Customs must examine the contractual and economic connection between the payment and the imported goods.

The importer should maintain separate agreements for:

• Purchase of goods;
• Intellectual-property licence;
• Technical assistance;
• Management services;
• Distribution;
• Marketing;
• Financing.

How Is the Royalty Allocated?

A royalty may be calculated as:

• A percentage of net sales;
• A percentage of gross sales;
• A fixed amount per unit;
• A fixed annual fee;
• A minimum annual guarantee;
• A combination of fixed and variable payments.

The importer should determine which portion relates to imported goods and which portion relates to:

• Domestic production;
• Domestic sales;
• Post-import services;
• Local marketing;
• Products manufactured in Turkey;
• Products purchased from unrelated suppliers.

A reasonable allocation method may use:

• Imported-unit sales;
• Product turnover;
• Production volumes;
• Net revenue;
• Geographic sales;
• Product categories;
• Contractual allocation.

The method should be documented and applied consistently.

Documents Turkish Customs May Request

A customs valuation file should include:

• Licence agreement;
• Royalty agreement;
• Purchase contract;
• Intercompany agreement;
• Supplier invoices;
• Royalty invoices;
• Payment records;
• Sales reports;
• Product lists;
• Bills of materials;
• Technical specifications;
• Trademark or patent registrations;
• Transfer-pricing documentation;
• Accounting entries;
• Allocation calculations;
• Product-by-product analysis;
• Correspondence with the parent company;
• Customs declarations.

The importer should provide a clear explanation of why the royalty is included or excluded and identify the supporting documents.

Transfer Pricing and Customs Valuation

Royalty payments are often reviewed by both tax authorities and Customs. Transfer-pricing rules may require an arm’s-length royalty, while customs rules ask whether the payment must be included in customs value.

These are separate analyses.

A royalty accepted for corporate-tax purposes may still be added to customs value. Conversely, a payment that is commercially justified may not be dutiable if it does not relate to imported goods or is not a condition of sale.

Companies should coordinate tax, customs and accounting positions to avoid contradictory explanations.

What Happens If Customs Adds the Royalty?

If Customs concludes that an omitted royalty 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 previous declarations;
• Storage and financing costs.

A post-clearance review may cover several years and multiple product categories.

If the importer voluntarily identifies a potential omission, it should obtain legal advice before making a correction or disclosure, because the timing and wording may affect penalty exposure.

Customs Investigations and Digital Records in 2026

In 2026, Customs increasingly compares:

• Royalty payments;
• Bank transfers;
• E-invoices;
• E-ledgers;
• ERP records;
• Transfer-pricing reports;
• Licence agreements;
• Sales data;
• Customs declarations;
• Parent-company accounting.

A company should maintain a digital royalty register showing the agreement, products covered, calculation method, payments and customs treatment.

How Can the Importer Challenge a Royalty Assessment?

The importer may argue that:

• The payment does not relate to imported goods;
• It concerns domestic production;
• It concerns post-import services;
• It is not a condition of sale;
• The supplier would sell without the licence;
• The amount was already included in the invoice;
• Customs used an incorrect allocation;
• The payment relates to reproduction or domestic distribution;
• Customs relied on insufficient evidence;
• The duty or penalty calculation is incorrect.

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. Filing an objection or lawsuit does not automatically suspend collection. A separate suspension-of-execution request may be necessary where immediate payment would cause serious and difficult-to-repair harm.

Settlement may be available for certain customs debts and penalties, but the importer should compare settlement with litigation and contractual recovery.

Compliance Checklist for International Groups

Companies should:

1. Map every royalty and licence payment.
2. Separate goods-related and service-related payments.
3. Identify the products covered.
4. Review the condition-of-sale relationship.
5. Document the royalty calculation.
6. Allocate payments across imported and domestic products.
7. Reconcile bank, accounting and customs records.
8. Coordinate transfer-pricing and customs analyses.
9. Review contracts after business-model changes.
10. Preserve evidence for post-clearance audits.
11. Obtain an advance customs opinion where appropriate.
12. Seek legal advice before responding to Customs.

Frequently Asked Questions (FAQ)

1. Are royalties paid to a foreign parent company automatically added to customs value?

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

2. Does related-party status make the royalty dutiable?

No. A parent-company relationship alone does not establish that the payment must be added.

3. Can trademark royalties be excluded?

Possibly, if they relate only to domestic marketing, distribution or post-import activity and are not a condition of sale.

4. Are patent and technology fees always included?

No. The actual agreement, use of the technology and connection with imported goods must be examined.

5. Can software licence fees be added?

Potentially. The result depends on whether the software relates to the imported goods and whether the payment is required for the sale.

6. What if one royalty covers imported and locally manufactured products?

The importer should prepare a reasonable, documented allocation separating the relevant portions.

7. Can Customs inspect the parent company’s royalty records?

It may request supporting records through the importer, exporter or customs-verification process.

8. Can Customs reassess royalties after the goods are released?

Yes. Post-clearance audits may result in additional duty, import VAT, interest and penalties.

9. What is the objection deadline for a royalty assessment?

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

10. Can a royalty assessment be challenged in court?

Yes. After the administrative objection stage, tax-court proceedings may be available within the applicable procedural period.

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 Royalty and Customs Valuation Disputes

Fırat Fesih Kaya Law Office advises international groups, foreign parent companies, Turkish subsidiaries, importers, manufacturers and distributors on royalty-related customs valuation issues.

Lawyer Fırat Fesih Kaya can assist with licence agreements, condition-of-sale analysis, royalty allocation, transfer-pricing coordination, 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