STA Issues Measures on VAT & Consumption Tax Exemption for Hainan Off-Island Duty-Free Sales

Announcement of the State Administration of Taxation [2020] No. 16 

According to the provisions of the "Announcement of the Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation on the Duty‑Free Shopping Policy for Outbound Tourists in Hainan" (2020 No. 33), after consultation with the Ministry of Finance, the State Administration of Taxation has formulated the "Measures for the Administration of VAT and Consumption Tax Exemption for the Sale of Outbound Duty‑Free Goods by Hainan Outbound Duty‑Free Shops", which are hereby promulgated.

This announcement is hereby made.

State Administration of Taxation

September 29, 2020

Measures for the Administration of VAT and Consumption Tax Exemption for the Sale of Outbound Duty‑Free Goods by Hainan Outbound Duty‑Free Shops

Article 1 These Measures are formulated in accordance with the "Law of the People's Republic of China on the Administration of Tax Collection" and the "Notice of the Ministry of Finance and the State Administration of Taxation on Policies Regarding VAT and Consumption Tax on Export Goods and Labour Services" (Cai Shui [2012] No. 39) and other relevant provisions, in order to regulate the VAT and consumption tax administration for the sale of outbound duty‑free goods by Hainan outbound duty‑free shops (hereinafter referred to as "outbound duty‑free shops") and to promote the construction of Hainan Free Trade Port.

Article 2 The sale of outbound duty‑free goods by outbound duty‑free shops shall be exempt from VAT and consumption tax in accordance with the provisions of these Measures.

Article 3 Outbound duty‑free shops shall file monthly VAT and consumption tax returns. When filing tax returns for the first time, they shall provide the following materials to the competent tax authority:

(1) Basic information about the business entity operating the outbound duty‑free shop.

(2) Relevant materials proving that the outbound duty‑free shop has been established with state approval (including duty‑free shops approved by the People's Government of Hainan Province in accordance with relevant regulations and filed with relevant state ministries and commissions).

Article 4 If the content of the report submitted by the outbound duty‑free shop under Article 3(1) of these Measures changes, it shall report the relevant situation to the competent tax authority within the tax declaration period of the following month and provide relevant materials.

If the qualification period for implementing the outbound duty‑free policy expires or the outbound duty‑free business qualification is revoked, the outbound duty‑free shop shall report the relevant situation to the competent tax authority within fifteen days after the expiration or revocation.

Article 5 For the sale of non‑outbound duty‑free goods, outbound duty‑free shops shall declare and pay VAT and consumption tax to the competent tax authority in accordance with current regulations.

Article 6 If an outbound duty‑free shop also engages in items subject to VAT and consumption tax, it shall separately account for the sales of outbound duty‑free goods and taxable items; if not accounted for separately, the exemption shall not apply.

Article 7 Outbound duty‑free shops shall issue ordinary VAT invoices for the sale of outbound duty‑free goods and shall not issue special VAT invoices.

Article 8 Outbound duty‑free shops shall provide to the tax authorities, in a complete, accurate, and real‑time manner, the names and sales prices of the outbound duty‑free goods sold, the information of outbound tourists purchasing the goods, and other materials required by the tax authorities, in accordance with the reporting format and transmission method prescribed by the State Administration of Taxation and the Hainan Provincial Tax Service.

Article 9 For outbound duty‑free shops that had already engaged in the sale of outbound duty‑free goods before the implementation of these Measures, they shall provide the relevant materials as required in Article 3 when filing tax returns in the month following the implementation of these Measures.

Article 10 These Measures shall take effect from November 1, 2020.