Effect of the relationship between the buyer and seller on the customs value

When the seller and buyer are related, the relationship has a bearing on whether the transaction value can be used as a basis for the customs value. In such situations, you should contact Customs Business Information, who will find out if the transaction value can be accepted as a basis for the customs value in your case.

According to Article 70 of the Union Customs Code, the primary basis for the customs value of goods shall be the transaction value. The transaction value is the price actually paid or payable for the goods when sold for export to the customs territory of the Union. The transaction value can be used provided that, among other requirements,

  • the buyer and seller are not related, or
  • the relationship between the parties has not influenced the price.

The customs declaration must state if the buyer and seller are related, and if so, whether their relationship has affected the price. A relationship between the parties does not, as such, pose an obstacle to the use of the customs value as the basis for the transaction value, nor does the mere existence of a relationship between the parties comprise a reason for not using the transaction value in determining the customs value.

Situations of significance for Customs

The relationship becomes significant for Customs in situations where the following three conditions are fulfilled:

  1. goods are cleared for release for free circulation in Finland (customs procedure 4000)
  2. the import is based on a commercial transaction
  3. the customs value is determined based on the primary method, that is, based on the transaction value

The relationship and the formation of the price from Customs’ viewpoint 

In the EU’s Customs Code, the relationship refers to two economic operators who are mutually dependent on each other.

When the formation of the price of goods is viewed from the perspective of customs taxation, the aim is that the price of the goods should correspond to the price that would be formed between independent parties.

In contrast to corporate taxation, the only matter of significance for Customs is the import of goods and the price paid or payable for the goods, including any adjustments. In addition, what is essential is always the import customs declaration and the customs decision formed based on the declaration.

Therefore, the information needed by Customs is often more detailed than it is in corporate taxation. On the other hand, the price setting for intangible assets or intra-group loans is, as a rule, not relevant when determining the customs value. However, these aspects may be of relevance for the customs value if they are directly connected to the imported goods.

As a source of information, Customs may use, for example, transfer pricing calculations produced based on OECD Transfer Pricing Guidelines when assessing if the relationship has affected the transaction price.

What should you do when a relationship exists

When the transaction value used as the customs value is based on a price agreed by related parties, contact Customs Business Information yritysneuvonta(at)tulli.fi in order to establish, in advance, if the transaction value is acceptable. To speed up the handling of your case, prepare to answer the following questions:

  • A brief description of the operator’s role within the group of companies. Is the operator e.g. the distributor or manufacturer?
  • Brief description of goods that are essential from Customs viewpoint
  • How many different commodity codes does the transfer price cover?
  • Will the value of the goods be corrected after the accounting period due to transfer pricing?
  • Do you know if the value will be adjusted up or down?

To support its decision-making, Customs also needs a transfer pricing calculation showing how the transfer price used in the customs declaration has been calculated. In such cases, Customs may use calculations based on OECD Transfer Pricing Guidelines.

Customs will assess your case based on the provisions on customs value and will also find out what price details are needed to make a decision.

If the final price is established only after the time of import, a simplified declaration procedure may be used. A preliminary transaction price may be provided at the release of the goods for free circulation, and the final price is provided once it is known.

For providing the final price, you may apply for authorisation to present missing information once the acceptability of the transaction value has been determined. The time limit for providing the final transaction value can be set to cover the whole accounting period, if needed.

When submitting the final price, there is no need to lodge a separate request from amendment for each customs declaration. Customs will review case by case with each operator what details Customs will need for determining the final customs value.

More information: yritysneuvonta(at)tulli.fi

Points to consider

Two persons¹ shall be deemed to be related if::

a) they are officers or directors of the other person’s business;

b) they are legally recognised partners in business;

c) they are employer and employee;

d) a third party directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them;

e) one of them directly or indirectly controls the other;

f) both of them are directly or indirectly controlled by a third person;

g) together they control a third person directly or indirectly;

h) they are members of the same family.

Persons who are associated in business with one another in that one is the sole agent, sole distributor or sole concessionaire, however described, of the other shall be deemed to be related for the purposes of this Agreement if they fall within the above criteria. For the purposes of paragraph e, f and g one person is deemed to control another when the former is legally or operationally in a position to exercise direction over the latter.

¹"person" means a natural person, a legal person, and any association of persons which is not a legal person but which is recognised under Union or national law as having the capacity to perform legal acts

When two parties are related, the circumstances must always be assessed in order to establish whether the relationship has affected the price. The declarant has the possibility to provide detailed further information on the circumstances when necessary.

However, the trade value of goods must be defined according to the transaction value if the declarant shows that the declared transaction value is very close to any of the following comparative values defined at the same time or approximately at the same time:

a) transaction value of identical or similar goods sold for import to the customs territory of the Union in transactions between buyers and sellers who are not related parties;

b) customs value of identical or similar goods based on the unit price for which identical or similar goods are sold to persons in the customs territory of the Union who are not parties related to the seller

c) the calculated value of identical or similar goods in accordance with Article 74 paragraph 2 sub-paragraph d of the Customs Code.

These comparative values must be used at the request of the declarant, and cannot be used to replace the declared transaction value.

When determining the value of identical or similar goods as mentioned above, one must take into account, among other things, the differences indicated in the level of trade, as well as different quantities and the elements under Article 71 of the Customs Code to be added to the transaction price.