Hainan update: Offshore duty free changes a travel retail game changer
Key details of the revised offshore duty free shopping policy
1. The offshore tax-free policy refers to preferential tax policies for passengers who depart the island (excluding departing national borders) by plane, train or ship.
They can purchase within a limited value, limited quantity and limited varieties; pay at offshore duty free shops or approved online sales platforms; and collect the goods from designated areas of airports, railway stations and ports. The tax items under the offshore tax free policy include tariff, import value-added tax and consumption tax.
2. The term ‘passenger refers to domestic and foreign passengers (residents of Hainan included) who have reached the age of 16 and have purchased air tickets, train tickets or ship tickets to depart from Hainan and hold valid identity documents (resident identity cards for domestic passengers, travel documents by Hong Kong, Macao and Taiwan passengers, passports for foreign passengers), and leave Hainan Island but do not leave the country.
3. The amount of offshore tax-free shopping per person per year is RMB100,000, with no limits on the times of purchase. The types of tax free commodities and limit on the quantity of a single purchase are mentioned in the annex to this announcement.
For any value and quantity that exceeds the limits, import duties shall be levied in accordance with relevant regulations. Tax free purchase made by passengers who leave the island by plane, train or ship is recorded as one duty free shopping visit.
4. The offshore tax-free shops mentioned in this announcement refer to shops with the offshore tax-free selling qualification [licence] and operational franchise. Currently, they include:Haikou Meilan Airport duty free, Haikou Riyue Plaza, Qionghai Boao, and Sanya Haitangwan [CDF Mall]. Any business entity with the distribution qualification [i.e. licence] for duty free products can participate in duty free operations on Hainan Island in accordance with regulations.
5. Within the limits and quantities specified by the state, passengers departing the island can purchase tax free goods at a duty free shop or an approved online sales platforms. Duty free shops shall deliver the goods according to passengers’ respective departure times. Passengers shall collect the goods in the designated areas of airports, railway stations and ports, together with their shopping vouchers, and take all goods with them to leave the island.
6. The tax free commodities purchased by passengers are regarded as final products for personal use by consumers and cannot be sold again in the domestic market.
7. Individuals who resell, purchase for others or smuggle duty free commodities are regarded as violating the provisions of this announcement. Such actions shall be recorded in their credit records in accordance with laws and regulations, and they shall be prevented from making any off shore duty free purchase within a period of three years.
Those engaged in smuggling or violating customs supervision regulations shall be held accountable by the customs authority in accordance with relevant provisions. If a crime is constituted, criminal responsibility shall be investigated according to law.
Travel agencies and transportation enterprises that assist in violating the offshore tax free policy and disrupt the market shall be subject to rectification according to sectoral administration.
Offshore duty free shops that violate relevant regulations shall be punished and held accountable by the customs authority in accordance with relevant laws and administrative regulations.
8. The measures for the supervision of the offshore tax-free policy shall be separately promulgated by the General Administration of Customs.
The relevant VAT and consumption tax exemption policies applicable to the tax free goods sold in the offshore tax free shops shall be separately formulated by the Ministry of Taxation and the Ministry of Finance.
9. This announcement will be implemented from July 1, 2020. Ministry of Finance Announcement No. 14 in 2011, No. 73 in 2012, No. 8 in 2015, No. 15 in 2016, No. 7 in 2017, and No. 158 of the Ministry of Finance, General Administration of Customs and General Administration of Taxation in 2018, No. 175 in 2018 shall be abolished at the same time.