Duty-free shop
A duty-free shop (or store) is a
, on the requirement that the goods sold will be sold to travelers who will take them out of the country, who will then pay duties and taxes in their destination country (depending on its personal exemption limits and tariff regime). Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refunding the duty component.Tax Free World Association (TFWA) announced that in 2011
However, some countries impose duty on goods brought into the country, though they had been bought duty-free in another country, or when the value or quantity of such goods exceed an allowed limit. Duty-free shops are often found in the
Duty-free are abolished for intra-
The world's largest airport by duty-free sales is South Korea's Incheon Airport, with US$1.85 billion in 2016,[2] narrowly overtaking Dubai Duty Free with 2016 sales of $1.82 billion.[3]
Haikou International Duty-Free City Shopping Complex is the world's biggest stand-alone duty-free store in terms of physical size. Located in Haikou, Hainan, China, the buildings have a total area of 280,000 square meters.[4][5]
History
1947–1990: duty free establishment
In this same period, several locales grew as duty-free shopping destinations. They are exemplified by Saint Martin and the US Virgin Islands in the Caribbean, Hong Kong and Singapore. Still others claim prices competitive to duty-free. Generally, goods are free of duty and tax levied on imports for sale anywhere in the shopping destination. Merchants may pay inventory/business or other taxes, but their customers usually pay none directly.
The mere absence of duty or other taxes on goods being sold does not assure that they are bargains. Costs of identical goods from different duty-free sources can vary widely. They often depend on the presence or absence of nearby competition, e.g., airport stores, especially if all at any airport are owned by a single firm such as Dufry.[7] Also, prices can often be driven upward by the costs of buyer convenience, e.g., in-flight sales by airlines. Many airlines, such as Emirates,[8] El Al,[9] Singapore Airlines,[10] Middle East Airlines,[11] Ukraine International Airlines,[12] Delta,[13] and Avianca,[14] offer duty-free sales on their flights.
1991–2021: EU duty free changes
In 1991, the EU decided to keep some duty free for a transition period until 1999.[15][16]
In 1999, after the creation of the European Union, the single market and the monetary union, these outlets were abolished for intra-
In 2021, with Brexit duty free are reintroduced in three British nations: England, Wales and Scotland. This allows reduced taxes on wine, Champagne or Prosecco, beer and spirits as well as on cigarettes, cigarillos, cigars, or tobacco.[17]
Duty-free shopping away from ports
Some duty-free shops operate in central business districts away from airports or other ports. In Japan, for example, any visitor whose passport indicates that they have been in the country for less than six months can buy items without paying consumption tax, so long as the total purchase value exceeds ¥5,000 and the items will not be consumed in Japan. Duty-free shops are a mainstay in the Akihabara electronic shopping district of Tokyo.
In Thailand, the
In the
In Australia, duty-free shops, once common, have all but disappeared since the introduction of
Duty-free outside EU ports
Any traveller living in a country outside the
- have residency in a non-EU country
- have a maximum stay of six months within the EU
- make purchases no more than three months prior to export
- obtain a form from the shop where he or she makes the purchase (depending on the tax-free operator)
- present the form, and in certain cases the goods, to a customs officer or DIVA machine when leaving the EU, where they will be stamped
Only goods meant for personal use are eligible for the refund. The stamped forms and receipts can then be sent back to the retailers, or their agents, for a refund.
In most cases, a minimum purchase applies to use the tax-free shopping scheme. The actual amount of VAT reclaimable depends on the VAT rate applicable in the particular country to the goods purchased, and may be subject to a deduction for administration fees.
Security considerations
Travelers on long-haul routes with at least one transit stop between their departure airport and destination airport should be careful to purchase their duty-free alcohol or perfume at the last transit port, as otherwise they may have it confiscated by security when they board at the transit port, as they will be exceeding the current limit on liquids in hand baggage. This does not apply to passengers transferring within the EU and Singapore on the same day, as long as the liquid item is sealed in a plastic security bag with the receipt showing in the bag. Arrivals duty-free shops are now becoming more common. Most of South and Central America, and the Caribbean have such shops, as does South East Asia and Oceania. Switzerland and Canada are looking to introduce them in 2010.[needs update] This method of retail removes any security problems with the transit of liquids, as they are not carried on aircraft.[23]
Several airlines do not allow sales of certain sharp objects in-flight due to security risk. Other objects that have sharp parts, such as model airplanes, may be bought in-flight but received at the passengers' home address for the same reason.
Boarding Pass / Passports
Proof of travel may be requested at the checkout point to prevent airport employees from making personal purchases.
Inbound duty-free
Some countries or districts, including Argentina, Australia, Brazil, Chile, China, Colombia, Iceland, Italy, Iran, India, Jamaica, Kenya, Lebanon, Malaysia, New Zealand, Norway, Panama, Philippines, Sri Lanka, Switzerland, Taiwan, Turkey, United Arab Emirates and Uzbekistan have inwards duty-free facilities, where arriving passengers can purchase duty-free items immediately before going through customs. This not only saves the inconvenience of having to carry these items around the world but also solves the security problem mentioned above. Other countries such as Canada and Sweden have been considering duty-free on arrival. The European Union does not permit arrivals duty-free stores; some EU airports sell goods on arrival in the baggage claim area described as "Tax-Free", but these goods are all tax-paid sales, the local sales tax is discounted. Normally, discounted liquors or tobacco products cannot be bought when arriving into an EU Member State as there is often a high local Excise Duty on these goods as well as the local sales tax (VAT/IVA/TVA) which is included in the price. In some EU Territories the tax on tobaccos and liquors is lower than in other EU countries, which is why the prices still seem competitive and look like duty-free prices. A good example is the difference in tobacco prices between the UK and Ireland, compared to Spain or Portugal.[needs update?]
Legal basis
It is a common feature of most tax systems that taxes are not raised on goods to be exported. To do so could place the goods at a disadvantage to those from other countries, for example if the tax rate in the territory of sale is higher than the tax rate in the territory of consumption. Either the tax system allows the goods to be exported without taxes (stored prior to export in a
Such exemption also applies to goods supplied for use on ships and aircraft, because they are consumed outside the country. Businesses supplying such goods can do so tax- and duty-free.
Goods sold to passengers on board ships or aircraft are tax free. The passenger can either consume them on board, or import them tax-free into the country they are traveling to, so long as they are within the traveler's duty-free allowance. Most tax regimes also allow travelers entering a country to bring in a certain amount of goods for personal use without paying tax on them, the so-called "duty-free allowance"; because it is not economically justifiable to collect the small amounts of tax involved, and would be an inconvenience to the passengers.
A duty-free shop works under the same system. The goods must be exported intact (they cannot be consumed in the country of sale), and they are importing into the destination country under that country's own tax rules. In some countries, in order to ensure that goods are exported intact, they are hand-delivered in a closed bag to the passenger at the gate after their ticket is scanned. In the United States, duty-free shops are technically considered class 9 Bonded Warehouses with regard to the U.S. Customs & Border Protection:
- Class 9. Bonded warehouse, known as duty-free stores, used for selling, for use outside the Customs territory, conditionally duty-free merchandise owned or sold by the proprietor and delivered from the Class 9 warehouse to an airport or other exit point for exportation by, or on behalf of, individuals departing from the Customs territory for destinations other than foreign trade zones. Pursuant to 19 U.S.C. 1555(b)(8)(C), Customs territory, for purposes of duty-free stores, means the Customs territory of the U.S. as defined in 101.1(e) of this chapter, and foreign trade zones (see part 146 of this chapter). All distribution warehouses used exclusively to provide individual duty-free sales locations and storage cribs with conditionally duty-free merchandise are also Class 9 warehouses.
Moreover, in the U.S. some duty-free stores will sell their goods to domestic passengers with appropriate taxes included. Alcohol and tobacco products are restricted to international passengers only and subject to the age limitations of 18 and 21 respectively, even though the age one must be to import those items into other countries may be lower.
Visiting U.S. protectorates
U.S. citizens receive substantially higher duty exemptions than normal when they visit or transit these locales, e.g., Guam, U.S. Virgin Islands.
Competition
According to Autogrill / World Duty Free case, duty free is a market where competition is kept both in the EEA market and in the global market. Even with the 2008 merger of the two biggest duty free operators, Autogrill and World Duty Free, they together own less than 10% of the global market and less than 20% of the EEA market.[24]
See also
- Fuel tax, jet fuel used in international flights is sold wholesale
- List of duty-free shops
References
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- ^ "Incheon Airport duty free sales hit US$2bn in 2016 | Travel Retail Business". 16 January 2017. Archived from the original on 26 January 2022. Retrieved 17 January 2017.
- ^ Reporter, Cleofe Maceda, Senior Web (2017-01-05). "Dubai Duty Free sales drop on currency fluctuations". GulfNews. Archived from the original on 2018-08-04. Retrieved 2017-01-24.
{{cite news}}
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- ^ "World's largest duty-free complex opens in Hainan". Archived from the original on 2023-03-22. Retrieved 2023-06-28.
- ^ "Brendan O'Regan". The Times. 2008-02-13. Archived from the original on 2020-10-27. Retrieved 2009-09-05.
- ^ "Dufry - en". Archived from the original on 23 December 2016. Retrieved 10 July 2015.
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- ^ "El Al duty-free store". www.elal.com. Archived from the original on 2023-10-13. Retrieved 2024-02-25.
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- ^ http://www.deltadutyfree.com Archived 2016-10-08 at the Wayback Machine[permanent dead link]
- ^ "Avianca Duty Free Virtual Catalog". Archived from the original on 31 October 2020. Retrieved 10 July 2015.
- ^ Schmidt, William E. (19 November 1991). "Europeans Decide to Allow Duty-Free Zones till 1999". The New York Times. Archived from the original on 24 February 2022. Retrieved 24 February 2022.
- ^ "EUR-Lex: Tax- and duty-free sales". 17 February 1999. Archived from the original on 2023-06-07. Retrieved 2024-01-22.
- ^ "Duty Free extended to the EU from January 2021". GOV.UK. Archived from the original on 2022-02-23. Retrieved 2022-02-23.
- ^ "Thailand Tourist Information : Tips & Facts : Who Can Claim VAT Refunds?". Archived from the original on 23 July 2015. Retrieved 10 July 2015.
- ^ "Duty Free Philippines: Who can shop at DFP?". Archived from the original on 13 January 2013. Retrieved 4 May 2017.
- ^ "Duty Free Shopping in the Philippines". Archived from the original on 1 December 2017. Retrieved 4 May 2017.
- ^ "JR/Duty Free :: JR/Duty Free - The JR Story". jrdutyfree.com.au. Archived from the original on 2018-10-30. Retrieved 2015-09-26.
- ^ a b "Australian Government Department of Immigration and Border Protection". Archived from the original on 24 July 2014. Retrieved 10 July 2015.
- ^ Kaye, Ken (March 24, 2007). "Passengers lose their booze as TSA alcohol rules are ignored". Sun Sentinel. Archived from the original on May 28, 2011. Retrieved December 28, 2010.
- ^ Case No COMP/M.5123, AUTOGRILL / WORLD DUTY FREE, only the English text is available and authentic REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION