So, what exactly is “Duty Free” and what is “Tax Free”?

Published by The Duty Free Advisor: Editor on 2010-08-11

"Duty Free"

Real Duty Free started in Shannon, Ireland many years ago, as it was the last airport stop across the Atlantic, so planes had to re-fuel there. The Irish were innovative and opened a shop to sell goods to passengers and flight crew before they moved on across The Atlantic.

"Duty" refers to the name given to "Excise Duty" which was a tax on things like Liquors and Tobaccos (and once on Perfumes too) as they contained alcohol.

The Irish persuaded their Government to allow the sales for departing passengers "Duty Free", so as they left Shannon Airport they could buy without paying the Liquor or Tobacco tax due to the Irish Government, as they were exporting the goods outside Ireland.

This practice spread around the world and "Duty Free shops" opened in most airports and eventually on Ferries and Cruise Ships. But the original principal was that goods had to be exported and so purchased "outbound" from the Country of departure.

As time went on, some Countries allowed "Duty Free on Arrival" too. Why, because until you passed though Customs, you were deemed to be outside the Country of your arrival and so still exporting goods. Of course, the moment you walked through Customs, you were then importing them, but technically you bought them outside that Country before you arrived.

So, what exactly is "Duty Free" and what is "Tax Free" ?

"Tax Free"

"Tax Free" is slightly different as it generally refers to the Sales Tax or Value Added Tax on goods. Some goods like Watches, Gifts, Perfumes and Cosmetics do not generally attract "Excise Duties" like Liquors or Tobaccos, so they only have local Tax on them. This is why there can be a differential between "Tax Free" and "Duty "Free" and in some places you will see shops with the two different signs.

But of course it all depends where you live and where you are travelling to, if you live in a "high duty" Country like Scandinavia, prices on Liquors can seem very cheap when you go to Africa or South America, but if you live in Spain, where liquor duties are quite low, then prices, even Duty Free can seem higher to you.

However, "Duty Free on Arrival" Countries tend to have very competitive prices, so not only can you save yourself the complication of time and the transit of your purchases, but also money.

Why do some Countries have two prices in Duty Free Shops ?

This is very common in Europe and is now known as "Travel Value".

Duty Free was abolished by The EU Commission some years ago and all sales between EU Countries has been terminated. In order to retain value for travellers, the Industry developed the concept of "Travel Value". This was designed to assist travellers who still wanted to buy gifts on the journey and to continue to make travelling an exciting shopping experience.

So, airport shops in Europe launched special shops with competitive prices enabling travellers to take advantage of good prices. It could be likened to an Outlet Mall concept, but for those travelling within The EU these goods are neither Tax, nor Duty Free, they are just competitively priced.

Because these "Travel Value" goods, which are sold within The EU, are neither Tax nor Duty Free, they can be sold on arrival into EU destinations or on departure too and this is why you can find such shops opening all over The European Community airports.

The reason why you will see two different prices when visiting these shops is because it depends on where you are travelling to, if for example, you are leaving from Spain to England (within the EU) you can only buy at the higher (Excise Duty Paid) price, but, if you leave London (or any other EU Country) for anywhere outside The EU, you can then buy at The Excise "Duty Free" price, which is normally cheaper as you save the Excise Duty or Sales Tax. You cannot normally buy "duty free goods on arrival" when you arrive in European (EU) States from far afield like America or Asia, but of course, you can buy from these airports when you leave and bring them with you.

Customs or Duty-Free Allowances can be even more complicated to understand, but the general rule is that they apply to the country you are arriving at and not the country you depart from. Your final destination is the most important point to consider. Different countries have different rules and regulation and some rules can depend on your mode of transport too!  

All these details can be found on our sister site when checking an airport and then the red customs button. You will also find details related to security and baggage rules.

check before you fly, sail or drive at............................   Time on your side!