Province increases duty-free shopping quota, adds more product categories

Hainan will substantially increase the annual offshore duty-free shopping quota for visitors from Wednesday as part of the efforts to boost development of Hainan Free Trade Port, officials said on Tuesday.

The Ministry of Finance, the General Administration of Customs and the State Taxation Administration said in a statement on Monday that individuals will be allowed to make duty-free purchases of 100,000 yuan ($14,130) every year, compared with 30,000 yuan now.

The categories of duty-free goods will also be expanded from the current 38 varieties to 45, with some electronic products such as smartphones, laptops, game players and wine products being added to the duty-free list.

The duty-free shopping policy was introduced in 2011 to help Hainan develop as a world-class international tourism destination and the shopping quota has been upgraded since then gradually. Offshore duty-free shopping volume stood at 53.8 billion yuan and the number of buyers amounted to 16.31 million by the end of 2019, according to data from the local Customs authorities.

"The move shows that the central authorities are not only using policy tools to meet tourists' spending desire and further stimulate their purchasing power in Hainan, but also injecting fresh momentum to the province's service sector, including airlines, cruises, conferences and exhibitions, catering and hospitality businesses to drive cross-industry collaborative development," said Liang Ming, a researcher with the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

He said this is part of the country's efforts to put in place economic and trade rules that match global standards. This has sent an important signal that China is fully capable of adopting proactive policies and promoting vigorous institutional innovation while mitigating the impact caused by the COVID-19 epidemic.

In addition to helping Hainan attract more tourists from other provinces during the post-COVID-19 era, he said the increased offshore duty-free shopping quota will attract tourists from the Association of Southeast Asian Nations, Russia and other parts of the world.

"The expanded quota policy, especially the lifting of the 8,000-yuan limit on a single duty-free product, will unlock the consumption power of high-end Chinese consumers, attract Chinese residents who will otherwise go shopping overseas to buy international brands, to Hainan island," said Xie Xiangxiang, an associate professor of tourism at Hainan University.

He said duty-free shopping is expected to become the new blockbuster "growth point" for Hainan's tourism industry.

Four duty-free shops are currently in operation in Hainan, with two in Haikou, the provincial capital, one in Boao of Qionghai on the eastern coast of the island and one in Sanya, a coastal resort city at the southern tip of Hainan island.

A new duty-free shopping city is under construction on the western coast in Haikou. Spread over 926,000 square meters and entailing an investment of 12.86 billion yuan, it will be a new shopping paradise when completed in 2023, according to the city government.

Luo Zilian, head of the General Administration of Customs' Sanya branch, said Hainan has benefited from its visa-free access for 59 nations by tapping into the local tourism boom and the Hainan Free Trade Port's greater connectivity. Customs authorities will continue to upgrade supervision over e-commerce activities to help consumers purchase more duty-free products.

The Ministry of Finance said on Tuesday that companies registered in the Hainan Free Trade Port and operating businesses in areas encouraged by the government can enjoy lower corporate income tax rate of 15 percent, which is lower than the general level of 25 percent for most companies in the country.

For foreign companies' income earned through their newly increased direct investment in tourism, modern services and high-tech industries in the port, the corporate income tax will be exempt, according to the ministry.

The Ministry of Finance and the country's tax authorities also clarified that income-tax exemptions would be given to high-end and most-needed talents. All the favorable tax policies are effective until 2024 and seek to support the development of the Hainan Free Trade Port, said a statement on the finance ministry's website.