China released the Master Plan for the Construction of Hainan Free Trade Port in early June, 2020, which stipulated the off-shore duty-free shopping limit would be raised to 100,000 yuan per person per year. To put the master plan into practical implementation, further release the policy effect and build a free trade port with high standards, the Chinese Ministry of Finance, the General Administration of Customs and the State Administration of Taxation have issued an announcement on tax-free shopping policy for Hainan's off-shore passengers, which will be implemented from July 1, 2020.
Compared with previous policies, the latest announcement include main adjustments as follows: First, the tax-free shopping quota has been increased from 30,000 yuan per person per year to 100,000 yuan. Second, the category of tax-free products is increased from 38 to 45. Third, the limit of 8,000 yuan for a single tax-free commodity is removed. Fourth, with quota management adopted as the main form of administration, the types of goods that are limited by the quantity of a single purchase are substantially reduced. Fifth, proper competition is encouraged, and all business entities with tax-free product distribution qualification can equally participate in the off-shore tax-free business on Hainan Island. Sixth, intensified supervision will be conducted during and after business activities, and legal responsibilities of individuals, enterprises and off-shore tax-free shops who participate in reselling and smuggling will be defined clearly.
The whole text of Announcement on the Tax-Free Shopping Policy for Hainan's Off-shore Passengers is translated as follows:
1.The off-shore tax-free policy refers to preferential tax policies for the passengers who depart the island (excluding departing national border) by plane, train or ship, while they could purchase within limited value, limited quantity and limited varieties, pay at off-shore duty-free shops or approved online sales platforms, and collect the goods from the designated areas of airports, railway stations and ports. The tax items under the off-shore tax-free policy include tariff, import value-added tax and consumption tax.
2.The term "passenger" as mentioned in this announcement 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 off-shore tax-free shopping per person per year is RMB100,000 yuan, with no limits on the times of purchase. The types of tax-free commodities and limit on the quantity of a single purchase shall be subject to the annex to this announcement. For the 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.
4.The off-shore tax-free shops mentioned in this announcement refer to shops with the off-shore tax-free selling qualification and operate on franchising. Currently, they include: Haikou Meilan Airport duty-free shops, Haikou Riyue Plaza duty-free shops, Qionghai Boao duty-free shops and Sanya Haitangwan duty-free shops.
The business entities with the distribution qualification for duty-free products can participate in duty-free operation on Hainan Island in accordance with regulations.
5.Within the limit and quantity specified by the state, passengers departing the island could purchase tax-free goods at duty-free shop or approved online sales platforms. Duty-free shops shall deliver the goods according to passengers' departure time. Passengers shall collect the goods in the designated areas of airports, railway stations and ports with the shopping voucher, 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 could not 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 which shall be recorded in their credit records in accordance with laws and regulations, and 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 off-shore tax-free policy and disrupt the market order shall be subject to rectification according to sectoral administration.
Off-shore 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 off-shore 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 off-shore 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.
Annex: Commodity Categoryand Quantity Limit of Off-Shore Tax-Free Purchase Per Person Per Time