The Importance of Service Invoices in Determining Customs Value (According to Turkish Customs Legislation)

Today, commercial operations can take place in thousands of different forms, and the conditions of sale can change over time. As a result, the customs value of the same goods may vary depending on these circumstances.

In short, customs value is not a static concept like tariff classification; it is a dynamic one. Attempting to define the customs value of goods with a single, universal definition often leads to incorrect conclusions. It is more accurate to consider it as the value determined through the application of the principles laid out in Articles 24 to 31 of the Customs Law.

The customs value of goods — meaning the taxable base for import duties — may not always be:

• The actual transaction value,
• The invoice price, or
• The total payment made by the importer for the goods.

There are many examples of this, but for the purposes of this article, we will focus on one of the most challenging areas: service invoices.

At its core, this topic relates to the breakdown and allocation of value components within a transaction. This issue arises particularly in global corporate structures where functions such as purchasing, intangible rights, R&D, engineering, and design are carried out by different units or legal entities.

Three Main Challenges in Assessing Service Invoices for Customs Value

1. Evaluation Difficulty

Naturally, not all service invoices fall within the scope of customs value. Proper evaluation usually requires reviewing 30–40 pages of legal provisions and examining the fine print in order to determine whether the service in question must be included in the customs value.

2. Tracking Difficulty

These invoices often reach companies long before or long after importation. More importantly, they usually arrive not at customs operations teams, but at departments such as accounting, purchasing, or finance.This creates vulnerabilities both in tracking and in ensuring that the invoice reaches the correct team for proper evaluation.

3. Declaration Method

During importation, the customs value of the goods must be declared fully and accurately. Otherwise, in addition to the tax difference, a penalty of up to three times the tax difference may be imposed.This raises a major question: How can an importer declare a cost element at the time of importation if its amount is not yet known?

Key Legal References: Articles 27 and 28 of the Customs Law

To correctly determine the tax base and related customs duties, it is essential to evaluate whether any service invoiced from abroad relates to the imported goods.

Common examples included in customs value (if conditions are met) include:

• Royalties and licence fees,
• Commissions (except purchasing commissions),
• Payments under general agreements covering various services,
• Payments for labour, engineering, artwork, design, or development services invoiced separately for the production of the imported goods.

Examples excluded from customs value (if conditions are met) include:

• Purchasing commissions (the only commission excluded),
• Financing costs,
• Payments for installation or maintenance of the goods after importation.

Therefore, to avoid both underpayment and overpayment of customs duties, it is crucial that such invoices are properly tracked, assessed by specialists, and declared using the correct method.

A Separate Note on Declaration Methods

As stated earlier, it is not possible to declare, at the time of importation, a value element whose amount is unknown and for which no invoice exists.

However, Article 53 of the Customs Regulation offers a practical mechanism: the “exceptional value declaration method.”

This method allows importers to pay value elements after the relevant invoice is received, without interest or penalties, provided that:

• The existence of the value element is known upfront,
• But the exact amount is not known at the time of importation.

The procedures and variations of exceptional value declaration are outside the scope of this article, but it must be emphasized that this mechanism requires meticulous compliance.

A critical point:The note indicating the use of exceptional value declaration must appear on the import declaration.In other words, the evaluation regarding the service invoice must be completed before the importation, and the necessary application must be submitted in advance.

This requires:

• Correct communication between internal teams already during the contract stage,
• Timely evaluation by experts,
• Monitoring which imported goods the future invoices relate to.

Otherwise, if a service invoice arrives after importation and increases the customs value, it cannot be declared without penalty except through the exceptional value method.

The best-case scenario in such situations is for the company to voluntarily report the element under Article 234/3 of the Customs Law and receive a 90% penalty reduction.

A Note on VAT-Only Imports

It is frequently observed that companies report service invoices affecting customs value through the VAT2(reverse change) return in cases where the imported goods are subject only to VAT.However, except for certain special situations, paying VAT via the VAT2 return does not remove the customs obligation related to the customs value.As a result, companies may still face the penalties mentioned earlier.

How Can These Risks Be Eliminated?

In foreign trade, accurate compliance relies on two fundamental pillars:

1. Transaction flows must pass through the correct internal channels, and
2. Each transaction must be assessed correctly under the relevant legislation.

Therefore, especially for global companies, performing a detailed workflow analysis is one of the most effective ways to prevent risks arising from:

• Improper tracking,
• Miscommunication between departments,
• Delays in forwarding key information, and
• Incorrect or incomplete regulatory evaluation.

A well-structured internal process significantly reduces the risk of penalties and ensures accurate customs value determination.