Is software supplied with imported machinery included in Turkish customs value? Learn how embedded software, separate licence fees, activation payments and post-import software charges are treated in customs valuation.

When machinery is imported into Turkey, the commercial package increasingly includes not only physical equipment but also software.

Modern machinery may require software for:

• Operation;
• Automation;
• Production control;
• Calibration;
• Diagnostics;
• Monitoring;
• Data analysis;
• Remote access;
• Safety systems.

This creates an important customs valuation question:

If the Turkish importer pays separately for the software licence, must that payment be included in the customs value of the machinery?

There is no universal answer. The customs treatment depends on the relationship between the software, the imported machinery, the sales agreement and the licence payment.

The key distinction is whether the software payment is effectively part of the consideration necessary to obtain and operate the imported machinery or whether it concerns a genuinely separate post-import service or right.

1. Start With the Machinery Purchase Agreement

The first document to review is the sales contract.

Determine whether the machinery is sold:

with software included

or

without software, followed by a separate licence agreement.

Contract structure is important, but Customs may also examine the commercial substance of the transaction.

2. Is the Software Necessary to Operate the Machine?

This is one of the most important questions.

Suppose a machine physically arrives in Turkey but cannot operate until the manufacturer activates proprietary software.

Customs may examine whether the software payment is economically inseparable from the imported equipment.

The importer should therefore determine whether the machinery can perform its intended function without the licence.

3. Embedded Software Creates Higher Customs Valuation Risk

Many industrial products contain embedded software.

Examples include:

• CNC machines;
• Medical equipment;
• Industrial robots;
• Printing machines;
• Manufacturing lines;
• Testing equipment;
• Automated warehouse systems.

Where software is already installed in the imported equipment and forms an integral part of its operation, treating the software as entirely unrelated to the machinery may be difficult.

4. Separately Invoiced Does Not Automatically Mean Separate Customs Treatment

Assume:

Machinery invoice: EUR 500,000

Software licence: EUR 100,000.

The fact that the supplier issued two invoices does not automatically establish a customs value of only EUR 500,000.

Customs can examine the economic relationship between the two payments.

5. Separate Agreements Are Not Automatically Decisive

Similarly:

Machinery Supply Agreement

and

Software Licence Agreement

may still form part of one integrated commercial arrangement.

Customs may examine:

• Whether both agreements were negotiated together;
• Whether termination of one affects the other;
• Whether the same supplier controls both;
• Whether the machinery functions without the software.

6. Identify Exactly What the Software Payment Covers

The expression “software licence” may cover very different arrangements.

It may represent:

• Embedded operating software;
• Perpetual licence;
• Annual subscription;
• Cloud platform;
• Remote monitoring;
• Software updates;
• Technical support;
• Data analytics;
• Additional optional modules.

Each element may require separate analysis.

7. Mandatory Software and Optional Software Should Be Distinguished

Suppose the imported machine requires basic control software but the purchaser may optionally buy advanced analytics software.

These payments should not automatically receive identical treatment.

The importer should separate:

software required for basic operation

from

optional additional functionality.

8. Can the Machine Operate Without the Licence?

Ask a practical engineering question:

If the Turkish importer refuses to purchase the software licence, what happens?

If the machine becomes commercially unusable, Customs may view the software and machinery as closely integrated.

If the machine operates normally and the licence merely provides optional features, the analysis may be different.

9. Can Software Be Purchased From Another Supplier?

Another relevant question is whether the importer can obtain compatible software independently.

If only the machinery manufacturer can supply or activate the software, the commercial connection may be stronger.

If the machine accepts independent third-party software, that fact should be documented.

10. Activation Fees Require Careful Analysis

A manufacturer may deliver machinery containing software but require an activation key after importation.

For example:

Machine: EUR 750,000

Activation licence: EUR 150,000.

The importer should not assume that paying the activation fee after customs clearance automatically removes it from customs valuation analysis.

Payment timing alone is not decisive.

11. Payment After Importation Does Not Automatically Mean Exclusion

A payment may be invoiced months after the machinery enters Turkey.

Customs may still ask whether the payment was contractually or economically connected with the imported equipment.

The relevant issue is the substance of the payment.

12. Perpetual Licences and Subscriptions Should Be Distinguished

A perpetual software licence supplied together with machinery can raise different questions from an annual cloud subscription purchased independently after installation.

Review:

• Duration;
• Renewal;
• Termination;
• Function;
• Relationship with the machinery.

13. Annual Software Subscriptions May Require Separate Analysis

Suppose the machine operates with its original software but the Turkish company later subscribes to:

• Cloud analytics;
• Remote monitoring;
• Predictive maintenance;
• Additional reporting.

These payments may be commercially distinct from the original imported equipment.

Document that distinction carefully.

14. Software Updates Are Not Automatically Part of Original Customs Value

A company may purchase updates several years after importation.

Ask whether the payment concerns:

the original imported machine

or

a new service or software improvement supplied later.

The timing, contractual basis and functionality should all be documented.

15. Maintenance Agreements Should Be Separated

A software contract may combine:

Licence

• updates
• technical support
• maintenance.

Do not automatically treat the entire payment as one customs-value element.

Where legally supportable, the components should be separately identified using objective documentation.

16. Technical Support Is Different From Software Rights

A supplier may provide engineers who:

• Configure software;
• Train employees;
• Troubleshoot problems;
• Optimize production.

These services require their own customs valuation analysis.

The importer should preserve separate invoices and service descriptions.

17. Post-Import Technical Assistance Can Be Relevant

Certain separately identifiable expenses for construction, installation, assembly, maintenance or technical assistance undertaken after importation may be excluded from customs value under the applicable customs valuation rules.

Therefore, machinery contracts should distinguish genuine post-import services from the purchase price of the imported equipment.

18. Installation Costs Should Be Separately Identified

Suppose the contract price is:

EUR 1 million total

covering:

• Machinery;
• Software;
• Installation;
• Employee training.

If the company intends to rely on separate customs treatment for certain post-import elements, those amounts should be objectively identifiable.

Vague lump-sum contracts create unnecessary valuation disputes.

19. Training Costs Should Also Be Identified

Employee training conducted after importation may have a different character from embedded machine software.

Preserve:

• Training agreement;
• Training schedule;
• Trainer invoices;
• Participant records;
• Separate pricing.

20. Remote Services Need Substance Analysis

Foreign manufacturers increasingly provide remote services after machinery installation.

These may include:

• Remote diagnostics;
• Production optimization;
• Cybersecurity monitoring;
• Predictive maintenance.

Do not automatically characterize all remote payments as part of the imported machinery.

21. Cloud-Based Software Creates New Valuation Questions

A machine may connect to software hosted outside Turkey.

The importer may pay a monthly cloud subscription.

Analyze whether the cloud service is:

• Essential to machine operation;
• Optional;
• Purchased separately;
• Renewable independently;
• Available from third parties.

These facts can materially affect the customs analysis.

22. Software Supplied by a Related Company Requires Additional Review

Suppose:

Company A sells the machinery.

Company B, a related group company, licenses the software.

Turkish Company C imports the machine.

Customs may examine whether the separation between the machinery seller and software licensor reflects genuine economic independence or forms part of one integrated transaction.

23. Transfer Pricing Documentation May Become Relevant

Where the parties are related, review:

• Transfer pricing policy;
• Intercompany agreements;
• Software pricing methodology;
• Royalty arrangements;
• Year-end adjustments.

Customs and corporate tax documentation should tell a consistent factual story.

24. Intellectual Property Payments Must Be Reviewed

A software payment may legally constitute:

• Licence fee;
• Royalty;
• Service payment;
• Subscription.

Where it is a royalty or licence fee related to imported goods and payable as a condition of their sale, customs-value inclusion may arise under the applicable rules.

25. Avoid Double Counting

The machinery invoice may already include the software.

Check:

• Commercial invoice;
• Price breakdown;
• Purchase order;
• Supplier quotation.

If software value is already incorporated into the declared price, it should not be added again merely because an internal breakdown later identifies a software component.

26. Review the Supplier Quotation

Supplier quotations often reveal the true commercial structure.

For example:

Machine: EUR 600,000

Mandatory operating software: EUR 80,000

Optional analytics package: EUR 30,000

Installation: EUR 20,000

This breakdown can be highly valuable during a customs valuation review.

27. Customs May Examine Purchase Orders

Purchase orders can show whether machinery and software were ordered simultaneously.

If they were negotiated and purchased as one commercial package, Customs may investigate whether separate invoicing reflects the economic reality.

28. Technical Evidence Is Important

Customs valuation disputes involving machinery software are not purely accounting disputes.

Obtain technical evidence showing:

• What the software does;
• Whether it is embedded;
• Whether the machine operates without it;
• Whether alternative software exists;
• Which functions are optional.

An engineer’s explanation can be highly useful.

29. Prepare a Functionality Matrix

A practical table may show:

Component	Necessary for Operation?	Optional?
Basic operating software	Yes	No
Remote monitoring	No	Yes
Analytics module	No	Yes
Maintenance support	No	Yes
Employee training	No	Yes

This can prevent Customs from treating every payment as part of one integrated machine price.

30. Review the Software Delivery Method

Software may be:

• Pre-installed;
• Delivered on physical media;
• Downloaded after importation;
• Activated remotely;
• Hosted in the cloud.

Delivery method can be relevant evidence, although it should not be treated as the sole factor.

31. Customs May Discover Software Payments During Audit

A post-clearance audit may identify accounting entries such as:

Software Licence Expense

Technology Royalty

Activation Fee

Machine Software Subscription.

Customs may then compare those payments with historical machinery imports.

32. Prepare a Historical Machinery Matrix

For each imported machine, identify:

Import date

Customs value

Software agreement

Software payment

Activation date

Installation cost

Maintenance payment

Customs treatment.

This allows potential exposure to be assessed efficiently.

33. Do Not Automatically Correct Historical Declarations

Discovery of separate software payments does not establish that every payment should have been included in customs value.

First determine the legal and commercial character of each payment.

34. Calculate Exposure Product by Product

Where a software payment should properly affect customs value, calculate the consequences according to:

• Relevant machinery classification;
• Origin;
• Customs duty rate;
• Additional customs duty;
• Other applicable value-based import charges.

Do not apply one rate to every machine automatically.

35. Review Additional Customs Duty Separately

If the machinery is subject to additional customs duty calculated on customs value, an increase in customs value may also increase that liability.

The exact treatment should be calculated according to the tariff and origin applicable to the relevant import.

36. Administrative Penalties Require Separate Analysis

If Customs concludes that software payments were omitted from customs value, any penalty should be reviewed independently.

Relevant questions include:

• Was the payment known at importation?
• Was the software optional?
• Was the legal characterization genuinely disputed?
• Was the amount separately disclosed?
• Was the payment made years later?

Additional duty does not automatically answer every penalty question.

37. Preserve Contemporaneous Documents

Keep:

• Original quotation;
• Supply contract;
• Software agreement;
• Purchase order;
• Invoice;
• Technical specifications;
• Payment records;
• Installation records.

Documents created before the customs dispute generally provide stronger evidence than explanations prepared afterward.

38. Review New Machinery Contracts Before Importation

Before importing expensive machinery, separate clearly:

Physical equipment

mandatory software

optional software

installation

training

maintenance

cloud services.

Clear drafting can significantly reduce later valuation uncertainty.

39. Avoid Artificial Contract Splitting

Separating one economically integrated purchase into several invoices solely to reduce customs value creates significant risk.

Contractual separation should reflect genuine commercial and technical separation.

40. Establish an Internal Machinery Import Review

High-value machinery purchases should be reviewed jointly by:

• Procurement;
• Engineering;
• Finance;
• Customs;
• Legal.

Customs valuation should be determined before shipment rather than after an audit.

41. Ask the Supplier for a Detailed Price Breakdown

For major machinery purchases, obtain a breakdown showing:

• Hardware;
• Embedded software;
• Optional software;
• Installation;
• Training;
• Maintenance;
• Subscription services.

This provides the evidence needed for a defensible valuation position.

42. Review Future Licence Renewals

A licence renewal occurring years after importation may have different customs implications from the original mandatory licence.

Do not automatically repeat the original customs treatment.

Analyze each renewal according to its actual function and contractual basis.

43. Challenge Overbroad Customs Assessments

If Customs adds every software, maintenance and support payment to the original machinery value, review whether the assessment properly distinguishes:

• Mandatory software;
• Optional modules;
• Post-import services;
• Training;
• Maintenance;
• Cloud subscriptions.

An overbroad assessment may be challengeable.

44. Protect Procedural Deadlines

If Customs issues an additional assessment or administrative penalty, immediately record the notification date and applicable challenge period.

Technical evidence and expert reports can be developed while procedural rights are preserved.

45. Immediate Action Plan

When software is supplied with imported machinery:

Review the machinery contract

→ review the software agreement

→ identify mandatory and optional software

→ determine whether the machine functions without the licence

→ identify the software supplier

→ review related-party relationships

→ separate licence fees from installation, training and maintenance

→ check whether software is already included in the invoice

→ prepare technical evidence

→ review historical payments

→ calculate any customs exposure

→ analyze penalties separately

→ challenge overbroad assessments where appropriate.

25-Point Machinery Software Customs Checklist

1. Machinery sales agreement.
2. Software licence agreement.
3. Supplier quotation.
4. Purchase order.
5. Commercial invoice.
6. Hardware price.
7. Software price.
8. Embedded software.
9. Mandatory software.
10. Optional modules.
11. Activation fee.
12. Perpetual licence.
13. Subscription fee.
14. Cloud services.
15. Software updates.
16. Maintenance.
17. Technical support.
18. Installation.
19. Training.
20. Software supplier identity.
21. Related-party relationship.
22. Technical functionality report.
23. Payment records.
24. Historical customs declarations.
25. Additional assessment and penalty analysis.

Frequently Asked Questions

1. Is software supplied with imported machinery automatically subject to customs duty?

Not automatically. The contractual and economic relationship between the software and imported machinery must be examined.

2. What if the software is essential for operating the machine?

This creates a stronger customs valuation connection. The importer should carefully analyze whether the software payment effectively forms part of the consideration necessary to obtain functional machinery.

3. Does a separate software invoice keep the payment outside customs value?

Not necessarily. Customs may examine the substance of the overall transaction rather than relying solely on separate invoices.

4. What if the software is activated after importation?

Later activation does not automatically exclude the payment. The contractual relationship and whether the software is essential to the imported machine remain important.

5. Are optional software modules treated the same as mandatory operating software?

Not necessarily. Optional analytics, monitoring or additional-function modules should be separately analyzed and documented.

6. Are post-import installation costs included in customs value?

Certain separately identifiable post-import installation, assembly, maintenance and technical-assistance costs may receive different treatment under the applicable customs valuation rules.

7. What about annual cloud subscriptions?

A genuinely separate cloud service purchased after importation may require different treatment from embedded mandatory software. Its function, timing and contractual independence should be documented.

8. Can Customs investigate old machinery imports after discovering software payments?

Yes. Software or licence payments identified during a post-clearance audit can lead to examination of historical machinery imports, subject to the applicable procedural framework.

9. Can Customs impose both additional duty and a penalty?

Potentially, but the additional customs liability and administrative penalty should be analyzed separately.

10. What is the safest approach before importing machinery with software?

Obtain a detailed contractual and price breakdown before importation. Clearly distinguish hardware, mandatory software, optional software, installation, training, maintenance and subscription services, and determine the customs treatment before the declaration is filed.

Client-Focused Legal Support for Machinery and Software Customs Valuation in Turkey

Machinery and software customs disputes can involve:

Embedded software

Software licence fees

Activation fees

Cloud subscriptions

Technology royalties

Imported machinery valuation

Post-import services

Additional customs duties

Post-clearance audits

and customs penalties.

Fırat Fesih Kaya Law Office assists foreign manufacturers, technology companies, multinational groups and Turkish importers where software, licence or technology payments may affect the customs value of machinery imported into Turkey.

Lawyer Fırat Fesih Kaya provides legal assistance in reviewing machinery and software agreements, separating hardware from software and post-import services, analyzing licence payments, reviewing historical customs declarations, calculating potential exposure, and challenging additional customs assessments and penalties.

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