Increase cost of customs duty on royalties - will you be affected?

February 05, 2016


The Union Customs Code (UCC), effective from 1 May 2016, will fundamentally change the duty treatment of royalty payments. For affected businesses this could result in significant annual customs duty increases amounting, in some cases, to several millions of pounds. In addition to the increase in non-recoverable customs duties costs, there will also be a cashflow impact resulting from increased import VAT costs. Increases in these indirect taxes may also require an increase in guarantee levels and the costs associated with servicing them.

What does it mean?

The new regulations under the UCC involve a number of material changes. These include the removal of certain exceptions to a royalty being treated as dutiable and the addition of new language intended to serve as a "catch-all" for making most royalty payments dutiable. The way the new regulation is drafted may make it easier for EU Customs Authorities to assess duties against royalty payments.

EU Customs Authorities may more closely scrutinise royalty payments with the risk of more royalty payments being treated as dutiable. With this heightened level of scrutiny, there is a real risk that more royalty payments will be considered dutiable.


What can you do?

Importers should review their royalty arrangements now in preparation for such scrutiny. Undertaking such a review prospectively will also afford you the opportunity to consider how to optimise your duty position within the realm of the new regulations.


For further details please contact me or Amanda Hektor of PwC's Customs and international trade network, direct line: 020 7213 2369 , Email: [email protected]

Christine O'Malley

e: [email protected]

p: +44 (0)16 1245 2429