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Duty-free shop
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Duty-free shops (or stores) are retail outlets that do not apply local or national taxes and duties. Duty-free shopping is a bit of misnomer though because shoppers may still have to pay duties in their home country on items purchased from a duty-free shop.
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Encyclopedia
Duty-free shops (or stores) are retail outlets that do not apply local or national taxes and duties. Duty-free shopping is a bit of misnomer though because shoppers may still have to pay duties in their home country on items purchased from a duty-free shop. 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 travellers, although several border crossings between the United States and Canada have duty-free shops for car travellers.
These outlets were abolished for travel within the European Union in 1999, but are retained for travellers 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 travellers.
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 travelling 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 worldwide.
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 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 created a business breakthrough for DFS, and the company was positioned to focus on emerging Japanese travellers. 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 have been in the country for less than six months can buy duty free items. 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.
In Philippines, other than shop outlets in airports there is also Duty Free mall called Duty Free Fiesta Mall which is located a few miles away from the Ninoy Aquino Airport. The goods that are sold in this mall are often imported products which come from around the world (mainly from USA, Asia and Australasia) which are not found in any other shopping malls in the country other than Duty Free malls. Most tourists, visitors and back-to-home citizens of Philippines pay a visit to these malls very often after their arrival (since, only arriving passengers can gain entry to the mall). In order to gain entry, a passport is needed to be presented and registered at the Customer Registration Counter which is located 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 sales validation of purchases. Duty Free malls before used to only accept US Dollars and Philippine peso but in recent years, Duty Free malls had begun accepting Japanese Yen, Brunei Dollar, Australian Dollar, British Pound, Canadian Dollar,Swiss Franc, Saudi Riyal, Bahrain Dinar, and Thai Baht. Stock Exchange booths are also available inside the mall if a customer wishes to exchange currencies into Philippine peso or US Dollars. Credits cards can also be used for purchasing goods.
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 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 on the same day, as long as the liquid item is sealed in a plastic bag with the receipt showing in the bag.
Inwards Duty Free
Some countries, particularly Australia, New Zealand, Norway, Iceland and the Philippines, 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.
In Israel items purchased before boarding the airplane can be stored in special storage units in order to retrieve them on your way back. Thus also solving the problems mentioned above.
Other countries such as Canada, Sweden and Switzerland have been considering duty free on arrival.
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 are exported (see VAT).
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 travelling to, so long as they are 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 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 airport), and they are 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 should not apply. Duty-free sales were a source of profit for airports, airlines and ferry companies, and were an indirect tax subsidy which did not apply to other forms of transport. Now many EU airports and airlines sell discounted products they call "Travel Value" goods, these can be delivered inbound or outbound as they are tax paid sales which do not contravene the European Duty Free abolition.
See also
- Fuel tax, jet fuel used in international flights is often sold duty-free
External links
- - Duty Free & Travel Retail News
- - Duty Free & Travel Retail News
- - Duty Free & Travel Retail News Website
- - Duty Free & Travel Retail Statistics
- - Duty Free Philippines
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