• Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 1/6/2014

EU - Royalties, license fees dutiable under new legislation 

January 6: The customs treatment of royalties and license fees is a crucial part in the development of new EU customs legislation—known as the Union Customs Code (UCC).

The UCC and its implementing provisions are scheduled to be effective 1 May 2016, and would replace the current Community Customs Code (CCC) and its implementing provisions.

Current rules under Community Customs Code (CCC)

The primary basis for the customs value of imported goods is the price actually paid or payable for goods when sold for export to the EU.

Currently, under the CCC, royalties and license fees paid are only included in the customs value when they relate to the goods being valued and when they can be considered as a condition of sale of those goods.

If royalties or license fees are paid to a party that is not the seller (or a party related to the seller), the royalties or license fees are only to be included in the customs value if the seller (or the party related to the seller) requires the buyer to pay the royalties or license fees.

Under the current customs law, many royalties and license fees are not included in the customs value.

Changes under Union Customs Code (UCC)

As proposed, the process for determining the transaction value would be amended so that royalties more often would be included in the customs value. This change would increase the import duty burden for EU importers.

What’s next?

The European Commission still needs to finalize the procedural rules for determining the customs value; therefore, it remains to be seen whether the conditions for determination will be broadened. It is anticipated that in the first quarter of 2014, the EC will publish new draft legislation for the UCC and is expected to provide greater certainty with regard to the customs treatment of royalties and license fees for the near future.

For more information, contact a KPMG tax professional in the Netherlands;

Tim Hesselink

+31 (0)20 656 19 17

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