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Tax Free Incentives Give Impetus to Hainan Tourism Destination
Author:  Source:Haikou Foreign and Overseas Chinese Affairs Office   

Hainan launched an offshore duty-free policy on April 20 as part of its efforts to build the island into a tourist and shopping attraction. This is the second breakthrough since Hainan Hainan Island has introduced an exit VAT refund policy on January 1 this year.

The offshore duty-free policy means both tourists visiting the island and local residents are able to purchase tax-free commodities from designated shops before flying to other destinations in China.

The policy sets the rebate cap on commodities worth no more than 5,000 yuan ($765) for each purchase. Eligible tourists, those 18 years and older, can purchase tax-free commodities twice a year, while island residents can purchase such commodities once a year.

The offshore duty-free policy aims at domestic tourists, so it is regarded as one of the major measures to attract travelers and promote the economic development of the island. The policy is part of the province's plan to build the island into a world-recognized tourist destination, China's Ministry of Finance (MOF) said in a statement released on its website last month.

The tax-free shop in Sanya, managed by the China Duty Free Group, has a shopping area of 7,000 square meters and offers 18 types of imported commodities, including jewelry, handicrafts, watches, perfumes and cosmetics. It is the only shop of this kind in Hainan and China to carry on an offshore duty-free policy and Exit VAT refund policy till now.

Exit VAT refund policy in Hainan is not the same as the "duty-free" or "tax-free" offers available at airports, on planes, or on ships. According to the tax plan, foreign tourists or citizens from Hong Kong, Macao and Taiwan who have lived in China's mainland for no more than 183 days can receive a rebate of 11 percent of consumer goods purchased within 90 days before departing the island. The rebate covers 324 items that fall into 21 categories such as clothing, shoes, hats, cosmetics, clocks, watches, jewelry, electronics, stationery, sporting goods, medical instruments and furniture.

According to official statistics, Hainan province has five Exit VAT refund stores: Shengsheng Department Store and Minsheng Department Store in Haikou, and Summer Day Department Store,Yifang Department Store and the International Shopping center in Sanya, the most famous tourist destination on the island.

"These two policies have some similarities to the promotion of Hainan international tourism Island construction, but there are a lot of differences between them." Lv Yong, Deputy Director of the Provincial Financial Department said. From the background, the departure tax is a common practice in the world, implemented in dozens of countries, regardless of experience or specific practices and is relatively mature, with the benefit of the experience of a large number of ready references. The tax-free policy implemented in the Okinawa Islands, Jeju Island and a few areas worldwide, has little experience for reference, and it is still being explored.
Others Comments:
The program's launch makes Hainan the fourth island in the world to implement a tax-rebate scheme. While offering a better shopping environment for tourists, the program will also boost the development of the island province as an international tourist destination.---Ms.Du Liyin, Director of the Sanya Tourism and Development Commission.

The three policies can be conceived as a goods-for-services or consumption for development experiment. They are aimed at stimulating consumption in return for development of the local tourism industry and other related services.
China Duty Free Group, the exclusive duty free operator in Hainan, needs to introduce into Hainan competition of different brands of duty free products, and at the same time build up its own competitive edge compared with other countries' duty free operators.
--- Xu Li,Director of the policy review division of Beijing WTO Affairs Center

"I think its more at ease to buy things in the franchise stores designated by the government."Mr. Duan, Tourist

"The tax policy of the Islands was finally extended to the domestic people who come to Hainan, there are more than 1.3 billion Chinese, much more than foreigners visited Hainan! Mr. Wang , University student

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