DEFINITION of 'Duty Free'

Goods that international travelers can purchase without paying the usual taxes on imported goods. Duty free stores sell items such as fancy jewelry and watches, perfumes and cologne, makeup, chocolates, clothing, electronics, cigarettes and name-brand liquor. Travelers who are about to leave the country can purchase these items, which may be priced lower than usual since vendors do not have to pay import taxes under these circumstances. As a result, the duty free stores can charge less than they would if they were selling the same goods to consumers who were not leaving the country.


International airports, border towns, ports, cruise ships and international flights tend to have duty free stores. International travelers can also avoid paying sales or value-added taxes on duty free goods. Duty free stores advertise that their prices are 10% to 50% lower than usual domestic prices, depending on the item. The duty free store will package up your purchase and you’ll receive it as you board the plane because the exemption is meant for items that will be used or consumed outside the country.

Duty free regulations vary depending on your country of residence, travel destination, length of stay, items purchased, their country of manufacture and how much you paid for them. You’ll often need to declare your duty-free purchase on the customs form of the country you’re bringing your purchase into. Keep your receipt to prove how much you paid so that any taxes you’re assessed will be for the correct amount. If your purchase qualifies for a personal exemption, you will owe little or no tax.

If you’re purchasing duty free items to save money, make sure you understand the laws that apply to your situation so you don’t end up with an unexpected tax expense. Merely buying an item from a duty-free store doesn’t automatically mean you won’t have to pay a duty on your purchase when you arrive at your destination. For example, if you were traveling from Paris to the United States, you would be limited to bringing $800 in total duty-free merchandise per month into the United States, or $1,600 per household if you’re traveling with family.

There are further restrictions on certain categories of goods, most commonly alcohol and tobacco. For example, if you purchased 300 cigarettes at a duty free store in Japan and brought them back to the United Kingdom, you might have to pay a customs duty on 100 of those cigarettes since the personal tobacco allowance for travelers is only 200 cigarettes.

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