Duty-free shop Totally Explained

Everything about Duty-free totally explained

Duty-free shops (or stores) are retail outlets that don't apply local or national taxes and duties. They are often found in the international zone of international airports, sea ports or onboard passenger ships. They are not as commonly available for road or train travelers, although several border crossings between the United States and Canada have duty-free shops for car travelers.
These outlets were abolished for travel within the European Union (EU) in 1999, but are retained for travelers whose final destination is outside the EU. They also sell to intra-EU travellers 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.
Duty-free shopping is also available to foreign visitors in many ordinary shops in some cities. In this case, the visitors will pay the normal price, but the tax is refunded when the goods are exported. In the case of the EU, the tax is refunded when the goods leave the EU.

History

The world's first Duty Free shop was established at Shannon Airport by Dr Brendan O'Regan in Ireland in 1950 and is in service to this date. Designed to provide a service for Trans-Atlantic airline passengers typically traveling between Europe and North America whose flights stopped for refuelling on both outbound and inbound legs of their journeys, it was an immediate success and has been copied world-wide.
Duty free shopping was in its infancy when two American entrepreneurs, Charles Feeney and Robert Miller, created what is now Duty Free Shops (DFS) on November 7, 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 created a business breakthrough for DFS, and the company was positioned to focus on the emerging Japanese traveler. DFS continued to innovate, expanding into off-airport duty free stores and large downtown Galleria stores and grew to become the world’s largest travel retailer. In 1996, LVMH Möet Hennessy Louis Vuitton acquired the interests of Mr. Feeney and two other shareholders and today jointly owns DFS with Mr. Miller.

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've been in the country for less than six months can buy duty free items.(External Link

) Duty-free shops are also 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.(External Link

)

Security Considerations

Travellers 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 liquor or perfume at the last transit port, as otherwise they may have it confiscated by security when they board at the transit port, as that'll be exceeding the current limit on liquids in hand baggage.

Inwards Duty Free

Some countries, particularly Australia and New Zealand, 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.

Legal basis

It is a common feature of most tax systems that taxes are not raised on goods to be exported. To do so would place the goods at a disadvantage to those from other countries. Either the tax system allows the goods to be exported without taxes (stored prior to export in a bonded warehouse), or taxes can be claimed back when they're exported (see VAT).
   Such exemption also applies to goods supplied for use on ships and aircraft, because they're 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're travelling to, so long as they're within the traveller's Duty-free allowance. Most tax regimes also allow travellers entering a country to bring in a certain amount of goods without paying tax on them, the so-called "duty-free allowance"; because it isn't 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 can't be consumed in the airport), and they're importing into the destination country under that country's own tax rules.

Intra-EU travel

Duty-free sales were abolished between EU countries in 1999. The EU is a customs union, and travel between two EU countries is internal rather than international travel for tax purposes, meaning that duty-free sales shouldn't apply. Duty-free sales were a source of profit for airports, airlines and ferry companies, and were an indirect tax subsidy which didn't apply to other forms of transport.

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