Chinese authorities announce key policy measures to drive duty-free consumption

CHINA. In major breaking news, key Chinese regulators today (30 October) announced a series of proactive measures designed to improve the country’s duty-free shop policy.

The changes were issued by China’s Ministry of Finance, Ministry of Commerce, Ministry of Culture and Tourism, the General Administration of Customs, and the State Administration of Taxation

The measures are intended to boost consumption, guide the return of overseas consumption [i.e. repatriate travelling shopping abroad], attract foreigners to enter the country for shopping, and promote the healthy and orderly development of the duty-free retail business.

We will bring detailed analysis in coming hours but here is an edited summary of the key points (stand-out points highlighted in red).

Readers are alerted in particular to clause 4 (2), which says:

Passengers are allowed to make reservations at downtown duty-free shops and then pick up goods at port duty-free stores.

For the city where the downtown duty-free shop is located, the passenger makes a reservation at that store and both pays and picks up the goods at the port duty-free shop when entering the country. This is regarded as shopping at the port of entry duty-free shop, and shall be implemented in accordance with the relevant policies and regulations of that store.

As we note again below, this appears to be a critical change. Under the initial revised downtown duty-free policy issued in August 2024, all purchases had to be picked up at departure ports or airports and taken out of the country, rather than be delivered to the home directly or collected upon return.]

1. Optimise the management of domestic tax refund (exemption) policies, and actively support the sale of domestic products through outbound [departures] duty-free shops at ports and downtown duty-free shops.

(1) Encourage enterprises with duty-free retail business qualifications and foreign-invested enterprises approved by the State Council to participate in the operation of duty-free shops to increase the procurement of high-quality and ‘Chinese-characteristic’ domestic items.

Such domestic goods sold through these duty-free stores shall be regarded as exports, and value-added tax and consumption tax will be refunded (exempted).

(2) Further optimise the supervision and operation procedures for domestic goods tax refunds (exemption) operated by such duty-free stores and facilitate the sale of domestic goods in stores.

1. For domestic goods purchased by travel retailers at tax-inclusive prices and entered into duty-free warehouses for the sale at duty-free stores, Customs will supervise them as per duty-free goods.
2. Relevant enterprises shall apply for tax refund procedures to the tax department in charge of export tax rebates with the export goods declaration form, VAT special invoice, tax payment certificate (export goods and services), etc. The tax rebate rate shall be implemented in accordance with the export tax rebate rate uniformly stipulated by the state.
3. The specific supervision and tax refund management measures for the sale of domestic goods in duty-free stores shall be separately formulated by the General Administration of Customs, in conjunction with the Ministry of Finance and the State Administration of Taxation.

(3) Optimise the customs clearance process of domestic goods. Domestic goods must have been listed and sold in China, and shall comply with the relevant regulations on domestic operations.

(4) Duty-free shops should increase the promotion of domestic products and enhance their influence and attractiveness. They should also introduce ‘time-honoured products’, cultural and creative items, intangible cultural heritage goods, and other characteristic and high-quality products that reflect the excellent traditional Chinese culture.

This is intended to increase the sales of domestic products in duty-free shops. In principle, the business area dedicated to domestic products shall not be less than a quarter of the duty-free retailers’ respective business areas {main story continues following the subscription message below}.

2. Further expand the business categories within duty-free shops and enrich the shopping choices of passengers (*See list of categories at the foot of the page)

(1) Expand, integrate and optimise the business categories of arrivals, departures and downtown duty-free stores by adding mobile phones, micro drones, sporting goods, health foods, over-the-counter drugs, pet food and other products.

(2) According to the actual situation, relevant departments should optimise the supervision of imported duty-free goods and speed up the progress of overseas ‘hot-selling goods’ reaching the shelves of China’s duty-free shops.

(3) Support relevant enterprises to continue to improve their bargaining power and business level; encourage more international brands to introduce their latest products and ‘hot-selling goods’ into China’s duty-free stores through joint procurement and other means – and expand the types of goods sold by the shops.

3. Relax the approval authority of duty-free shops, and support local integration and optimisation of the layout of duty-free shops according to local conditions

(1) Delegate the approval authority for the establishment of port departure duty-free stores. Also change the method of determining the business entities of port arrivals and departures duty-free shops.

1. The people’s governments of provinces (autonomous regions, municipalities directly under the Central Government, and cities separately included in the plan) (including the Xinjiang Production and Construction Corps) shall coordinate the layout and construction of departures duty-free shops at ports in the region.

The establishment of port departures duty-free shops shall be approved by the provincial finance departments where the ports are located, in conjunction with the departments of commerce, culture and tourism, customs, taxation and other departments.

2. If there are both arrivals and departures duty-free shops at the same port, bidding can be conducted separately. If the bidding conditions are not met, for example in special circumstances such as a small inbound and outbound passenger flow and a limited operating area, the provincial financial department shall approve the business entity in conjunction with the departments of commerce, culture and tourism, customs, taxation and other departments.

It should also refer to the competitive negotiation and other methods stipulated in the Government Procurement Law of the People’s Republic of China to determine the business entity.

3. The establishment of port departures duty-free stores directly under the Civil Aviation Administration of China, and the change in the determination method of determining which business entities operate arrivals and departures shop shall still be implemented in accordance with the original regulations.
4. After the business entity is determined, matters such as filing with the Ministry of Finance and other relevant departments, and applying to the customs for a duty-free shop business licence, shall still be implemented in accordance with the original regulations.

(2) Optimise the method of determining the operating area of port arrivals and departures duty-free stores.

1. The operating area of such shops shall be determined by the tenderer or port owner through negotiation with the business entity, but it must meet the requirements of customs supervision.
2. If the business area needs to be changed during the contract tenure of a store, the bidder or port owner shall negotiate with the business entity to determine it, and then the business entity shall submit an application to the customs for approval.

(3) The provincial financial departments, together with the departments of commerce, culture and tourism, customs, taxation and other departments, should integrate and optimise the layout of duty-free shops according to local conditions.

They should develop themed shopping scenes with regional characteristics, continuously improve and enhance the image of duty-free shops, and promote duty-free shops to attract inbound consumption.

4. Improve the facilitation and supervision measures of duty-free shops, and continue to improve the duty-free shopping experience of passengers

(1) Support online reservation services for port arrivals and departures stores and downtown duty-free shops.

1. Passengers can book duty-free goods in advance via the online service of the port departures or arrivals and downtown duty-free shops according to the relevant entry and exit itinerary arrangement.
2. The duty-free shop shall prepare the goods according to the passenger’s entry and exit time. The passenger him/herself shall go to the corresponding port arrivals or departures duty-free store or duty-free goods pick-up point to collect the goods according to the regulations with valid entry and exit documents and shopping vouchers.

(2) Passengers are allowed to make reservations at downtown duty-free shops and then pick up goods at port duty-free stores. For the city where the downtown duty-free shop is located, the passenger makes a reservation at that store and both pays and picks up the goods at the port duty-free shop when entering the country. This is regarded as shopping at the port of entry duty-free shop, and shall be implemented in accordance with the relevant policies and regulations of that store.

[Under the initial revised downtown duty-free policy issued in August 2024, all purchases had to be picked up at departure ports or airports and taken out of the country, rather than be delivered to the home directly or collected upon return. We will bring you further details and comment soon.]

(3) Relevant departments and duty-free retailers continue to optimise the duty-free shopping process; improve the level of facilitation; fully meet the consumer needs of passengers for duty-free shopping; strengthen the supervision of duty-free goods; maintain market order; and protect consumer rights and interests.

5. Organisation and implementation

(1) The Ministry of Finance will strengthen overall coordination with appropriate departments to promote the implementation of relevant policies as soon as possible. The Ministry of Commerce and the Ministry of Culture and Tourism have carried out the promotion of domestic ‘trendy products’ and brands, and done a good job in promoting measures such as direct sales of domestic products in duty-free stores and online ordering.

The General Administration of Customs organises customs clearance and supervision of duty-free goods. The State Administration of Taxation organises tax refunds and other work.

(2) The provincial people’s government where the duty-free shop is located shall increase the organisation and implementation of the relevant work of the region’s duty-free shop, continue to promote duty-free consumption, and do a good job in risk prevention and control.

(3) This notice will come into force on 1 November 2025. If the content of the relevant policy documents, such as the Notice of the Ministry of Finance, the Ministry of Commerce, the General Administration of Customs, the State Administration of Taxation, and the National Tourism Administration on Printing and Distributing the Interim Measures for the Administration of Duty-Free Shops at Ports (Cai Guan Guan [2016] No. 8), and other relevant policy documents is inconsistent with this Notice, this Notice shall prevail.