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Sometimes, you stop at a duty-free shop thinking you'll find a bargain. Or maybe you're just waiting for your flight and want to kill time. Other times, you find things you can't buy back home.
But before you open your wallet, consider research by travel website The Points Guy on duty-free shopping that reveals significant price fluctuations for the same item in duty-free shops worldwide.
This study shows that duty-free products can be up to 30% more expensive at one airport, and the price for the same item can vary between different stores (even within the same airport). For example, at John F. Kennedy Airport in New York City, a 1-liter bottle of Bacardi Gold rum ranges from $14 to $23.
This study collected and compared duty-free prices for 13 popular items (Bombay Sapphire gin, Johnny Walker Blue Label Scotch whisky, Estee Lauder Advanced Night Repair skin cream, and Marlboro cigarettes, etc.) at 50 airports across 6 continents.
What is Duty Free?
Customs duties are tariffs or taxes levied on goods transported across international borders, according to the U.S. Department of Homeland Security's Customs and Border Protection agency.
The "tax" you are exempt from is the import tax applied to local retail sales in the country where the duty-free shop is located. This is usually a combination of value-added tax (VAT) and sales tax.
Shopping expert Andrew Schrange, co-founder of the personal finance community website Money Crashers, explains that "tax-free" means that these local taxes are not applied to retail items purchased in special economic zones that are exempt from sales tax and value-added tax (VAT).
While duty-free shops are common at airports, you can also find Duty Free signs at land border crossings and on cruise ships in international waters.
How did Duty Free shopping begin?
With the opening of the world's first duty-free shop in the transit area of Shannon Airport in 1947, Ireland pioneered this business model. The Irish government passed the Airport Customs Exemption Act that year, exempting transit passengers, cargo, and aircraft from standard customs procedures. This concept was subsequently adopted internationally.
How much duty-free merchandise can you buy?
Americans can spend up to $800 abroad without paying taxes upon returning to the United States, a practice known as a "personal exemption," according to the U.S. Department of Homeland Security's Customs and Border Protection agency. (For international travelers, limits on how much you can spend and how much you can bring back vary greatly—be sure to check each country's regulations carefully before shopping.)
Subsequent items worth $1,000 brought into the U.S. are subject to a fixed 3% surcharge. If the value of the purchase exceeds $1,800, the remaining tax is determined based on the Harmonized Tariff Schedule. Family members traveling together may pool their individual exemptions.
In addition to monetary limits, there are also restrictions on the amount of alcohol and tobacco you can bring into the country. Americans are permitted to consume 1 liter (33.8 liquid ounces) of alcohol and 200 cigarettes or 100 cigars.
Some states may allow you to bring in more than 1 liter of alcohol, although you will have to pay customs duties and Internal Revenue Service tax on any excess bottles. Other states may limit the amount of alcohol you can bring in without a permit.
Does duty-free shopping really save you money?
As a general rule, it's best to know the prices in your home country and in the country where you're shopping. Tax-free prices don't always mean great deals.
"Because duty-free retailers aren't required to offer tax savings to customers, many people price goods only slightly below local prices," Schrange said. "Prices vary by store and jurisdiction, but shoppers shouldn't expect deep discounts," he added.
However, depending on the local tax structure, the savings could be significant for certain items – up to 20% or even 30%, in jurisdictions with high VAT rates. "The savings are particularly substantial for items like alcohol and tobacco, as these tend to be taxed at higher rates," he added.
Some countries have limits on the amount of money you can spend before paying taxes, and these taxes may need to be paid once you're home. You can usually find out by checking with the customs authorities in the country you're visiting.
Where are the best places to shop duty-free?
According to research by The Points Guy, you'll find the best-priced duty-free shops for wine in the Caribbean, cosmetics and perfumes in Europe, and tobacco products in Asia. Overall, the airport with the cheapest duty-free goods is Kuala Lumpur, Malaysia (KUL), and the most expensive is Santorini, Greece (JTR).
What are the best deals at duty-free shops?
While alcohol and tobacco are often better value at duty-free shops, according to Schrange, "There are no real bargains. Prices vary from city to city and by product. Duty-free items can be good value but can also be quite inconvenient. Think about it, is saving $4 on a bottle of vodka worth carrying it through two more airports and a car ride home?"
Look for items that aren't too large in size or volume. And pay attention to items that are discounted by up to 30% off the regular price.
What should you skip at duty-free shops?
"Cosmetics and other luxury goods like clothing don't necessarily justify their price, and in many cases, duty-free shops are even more expensive than supermarkets or flea markets in the city," Schrange said.
That's because clothing is often taxed lightly. "You can find better deals in the city, especially if you're traveling in a country with many street vendors and where bargaining is allowed." He also advised tourists to avoid buying souvenirs, "If you want to bring home jewelry or local souvenirs, buy them before you get to the airport."
If you want to buy souvenirs, don't buy them at the airport; buy them locally.
How can I be sure I'm getting a good deal?
Schrange advises shoppers to use Google and a currency converter to compare prices.
At the same time, you should also buy local products because they can be cheaper, while imported goods are less likely to be a bargain.
Once again, knowing the prices of goods in your home country is key to success: if you live where alcohol is heavily taxed, like Singapore or Iceland, duty-free shopping can save you a significant amount of money.
Shoppers should use Google and a currency converter to compare prices.
Schrange also suggests checking reputable sources like Duty Free Addict before shopping to ensure you get a fair price.
Can I bring in liquids duty-free?
You can carry more than 3.4 ounces of alcohol in your carry-on bag when returning to the U.S. – even if you have a connecting flight. Just keep your receipts and seal your purchases in a tamper-proof plastic bag.
If your flight is cancelled, what should you do with your duty-free alcohol?
Most duty-free shoppers depart within an hour of their purchase. In the rare event that your flight is cancelled after your purchase, the official rule from Heinemann, the operator of several duty-free shops across Europe, is that you must return the duty-free goods or declare them upon import. However, this also depends on the regulations of the airport and country you are departing from, as well as your final destination.
How should I pay for duty-free items?
"Buyers should use credit cards when shopping abroad to get the best rates," Schrange suggests. If you pay with cash, use any local currency you have left at the airport.
