Duty-free shop
A duty-free shop or store is a retail outlet whose goods are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods will be sold to travelers who will take them out of the country, who will then pay duties and taxes in their destination country. 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 announced that in 2011 the Asia-Pacific region made 35% of global duty-free and travel retail sales, more than either Europe or the Americas, which accounted for 34% and 23% respectively. Fragrances and cosmetics, the largest category of goods, were 31% of all sales, while wines and spirits were 17%.
Some countries impose duties on all goods brought into the country, even if the goods were bought duty-free in another country, or when the value or quantity of such goods exceeds an allowed limit. Duty-free shops are often found in the international zone of international airports, sea ports, and train stations but goods can also be bought duty-free on board airplanes and passenger ships. They are not as commonly available for road or train travelers, although several border crossings between the United States and both Canada and Mexico have duty-free shops for car travelers. In some countries, any shop can participate in a reimbursement system, such as Global Blue and Premier Tax Free, wherein a sum equivalent to the tax is paid, but then the goods are presented to customs and the sum reimbursed on exit.
Duty-free are abolished for intra-EU travelers but are retained for travelers whose final destination is outside the EU. They also sell to intra-EU travelers but with appropriate taxes. The world's largest airport by duty-free sales is South Korea's Incheon Airport, with US$1.85 billion in 2016, narrowly overtaking Dubai Duty Free with 2016 sales of $1.82 billion. 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.
History
1947–1990: duty free establishment
established the world's first duty-free shop at Shannon Airport in Ireland in 1947; it remains in operation today. Designed to provide a service for trans-Atlantic airline passengers typically travelling between Europe and North America whose flights stopped for refuelling on outbound and inbound legs of their journeys, it was an immediate success and has been copied worldwide. Thirteen years later, two American entrepreneurs, Charles Feeney and Robert Warren Miller, founded what is now Duty Free Shoppers on 7 November 1960. DFS started operations in Hong Kong and spread to Europe and other places around the globe. Securing the exclusive concession for duty-free sales in Hawaii in the early 1960s was a commercial breakthrough for DFS, which enabled the company to focus on Japanese travelers. DFS continued to innovate, expanding into off-airport duty-free stores and into large downtown Galleria stores; it grew to become the world's largest travel retailer. In 1996, LVMH Moët Hennessy Louis Vuitton acquired the interests of Feeney and two other shareholders and jointly owned DFS with Miller.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. 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, El Al, Singapore Airlines, Middle East Airlines, Ukraine International Airlines, Delta, and Avianca,
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.In 1999, after the creation of the European Union, the single market and the monetary union, these outlets were abolished for intra-EU travellers but are retained for travelers whose final destination is outside the EU. They also sell to intra-EU travelers but with appropriate taxes. Some special member state territories such as Åland, Livigno and the Canary Islands, are within the EU but outside the EU tax union, and thus still continue duty-free sales for all travelers.
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.
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 King Power chain has shops where duty-free items are pre-purchased and delivered separately to the airport to be picked up on departure. For certain other purchases, a VAT refund may be claimed at the airport upon departure.
In the Philippines, there is one shopping mall called the Duty Free Philippines Fiestamall, which is located a few miles away from Ninoy Aquino International Airport as opposed to being at the airport itself. Until the opening of its upscale sister location Luxe in 2018, it was the only shopping mall of its kind in the world. The goods that are sold in this mall are often imported products which come from around the world and are not found in any other shopping malls in the country, aside from duty-free malls. Tourists, visitors and returning citizens of Philippines often pay a visit to this mall shortly after their arrival. In order to gain entry, a passport is needed to be presented and registered at the Customer Registration Counter at the entrance of the mall. The customer will then be issued a shopping card; these shopping cards must be presented to the cashier for validation of purchases. Arriving customers are given a certain tax-free allowance on purchases and anything in excess will be subject to local and national taxes. In the past, the mall used to only accept US dollars and Philippine peso but in recent years, it had begun accepting other currencies, such as: Japanese yen, Brunei dollar, Australian dollar, British pound, Canadian dollar, Euro, Swiss franc, Saudi riyal, Bahraini dinar and Thai baht. Currency exchange booths are also available inside the mall if a customer wishes to exchange currencies into Philippine pesos or US dollars. Credits cards can also be used for purchasing goods.Image:Smirnoff.jpg|thumb|right|Duty-free shops usually sell a broad range of alcoholic drinks.
In Australia, duty-free shops, once common, have all but disappeared since the introduction of GST in 2000. Retailer James Richardson operates several duty-free shops in major cities, but most duty-free shops are now located within international airports. Residents and tourists are allowed to purchase virtually any physical good within 60 days of departure, which needs to be taken on the outward flight, and claim the GST component back through the Tourist Refund Scheme when passing through customs. Consumers are now free to fully use their items prior to departure. This is in contrast prior to 2000, where all purchases had to be packed by the duty-free store in a sealed clear plastic bag, and could only be broken open by customs staff just prior to departure.
Duty-free outside EU ports
Any traveller living in a country outside the EU VAT area is entitled to shop tax-free at participating shops in the EU. Tax free shopping differs from duty-free shopping as the traveller pays the VAT on goods in the shop in the usual way, and can then request a refund when exporting the goods. There are a number of tax-free operators who can support both the stores and the traveler through this process. To qualify, the traveller must:- 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
- 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
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 that shows the receipt. 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 were looking to introduce them in 2010. This method of retail removes any security problems with the transit of liquids, as they are not carried on aircraft.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.