South Korea hikes duty free purchase limit to $5,600

By Luke Barras-hill |

Shilla-Gimpo-main

The Shilla Duty Free at Gimpo International Airport.

The South Korean Government has legislated to raise the duty free departure purchase limit for Koreans from US$3,000 to US$5,000, TRBusiness understands.

Official documents from the Ministry of Economy and Finance seen by this publication and verified by a well-informed Korean industry source reveals a partial revision to the Customs Act Enforcement Rules, which kicked in earlier this month (1 September).

“The amended provisions of Article 69-3 shall apply from the sale after the enforcement of these rules,” the docuements show.

This means the total duty free purchase allowance per person, factoring in an arrivals purchase limit of $600, increases from $3,600 to $5,600.

TAX EXEMPTION LIMIT ‘UNAFFECTED’

However, the amendment is understood to have not affected the current tax exemption limit, which remains at $600.

“The Ministry of Economy and Finance is still studying raising the tax exemption limit. It will continue to have a close watch on how arrival shops run and will likely make a decision at the end of this year,” said the source.

The Ministry of Economy and Finance was not immediately available for comment when approached.

This policy shift will surely be saluted by the Korean duty free industry including powerhouses Lotte Duty Free and The Shilla Duty Free.

TRBusiness learned of plans to up the departure purchase limit, which also covers downtown and online shops, in July after it had been mooted the month prior. It was previously understood that amendments to the purchase limit were due to be implemented ‘later in the year’, with December a possibility.

Korean industry sources broadly welcomed the move at the time of the initial rumours.

Lotte-Seoul-Incheon-T2

Lotte Duty Free at Seoul Incheon Airport Terminal 2.

“The increase in [the] duty free purchase limit and duty free limit for Koreans is long overdue,” said one source. “In particular, the purchase limit has not been increased since 1988.

“We welcome the government’s proposal and strongly believe that this move will significantly improve duty free sales in Korea.”

Another source said at the time: “It’s been a long-time discussion; if you compare the (South Korea) limits they are not very high compared to other countries. [The retailers] will be very happy and will welcome this ‘normalisation’ as it will improve the environment.”

Some though are sceptical with regards to the actual impact on spending given the current tax exemption levels.

“We are a little sceptical about whether this measure will fuel domestic consumption because the tax burden for Korean domestic travellers remains unchanged,” said one source. “We are all hoping that the government action leads to the further discussion of increasing tax exemption.”

Stay close to TRBusiness for more on this story…

 

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