SOUTH KOREA. The travel retail sector received a big boost today as the Ministry of Economy and Finance outlined a series of new policies to boost consumer consumption with a particular focus on boosting the country’s COVID-stricken tourism industry.
The government will offer a variety of benefits to outbound travellers, including abolishing the upper value ceiling of US$5,000 (KRW5.97 million) for purchases at Korean duty free stores by outbound nationals from some time in March 2022. The government described the move as an attempt to convert overseas spending into domestic consumption.
A Lotte Duty Free spokesman described the development as “Electrifying news!”. He added: “The $5,000 duty free purchase limit (for outbound Korean tourists) is now abolished.
“It will benefit Korean travellers as they can now buy high-priced luxury fashion products, jewellery etc. at Korean duty free shops. It will definitely boost domestic consumption and also help Korean travel retailers build up their competitiveness when overseas travel returns to normal.”
Korean daigou resellers to benefit
While the change is good news for Korean duty free retailers, Korean travellers must still pay duty on goods valued at over US$600 on their return to Korea.
As reported, the value allowance for departing Koreans was raised from US$3,000, to US$5,000 in 2019 and, as mentioned, will now be scrapped. However, that is a separate allowance from the US$600 inbound duty free purchase limit (which applies at Korean arrival duty free stores).
“The duty free exemption limit is still US$600. This means we have to report purchases of over U$600 to the Customs when coming back to Korea,” one Korean travel retail source told The Moodie Davitt Report. “I guess Koreans can leave Korea with daigou trade purchases now. Until now only foreigners such as the Chinese can purchase daigou [high-value] products.”
Deputy Prime Minister and Finance Minister Hong Nam-ki unveiled the government’s economic policy directions for 2022 at the Government Complex in Seoul today. South Korea aims to attain full-fledged normalisation of the COVID-hit economy in 2022.
Specialist Korean business media TR&DF described the scrapping of the value allowance as “a long-cherished dream of the duty free shop industry”.
TN&DF commented: “From next year, when the purchase limit will be abolished, there will be no restrictions on purchases as long as tax is paid through voluntary declaration upon entry. The way for Koreans to purchase luxury watches and luxury brand products, which are now super expensive duty free products, has been opened”.
In addition, so-called ‘flights to nowhere’ will be extended from the current cut-off date of 31 December 2021 until June 2022 and the number of international flight routes (currently 70 routes across 31 countries) will be significantly raised, The Korea Herald reported. Before the pandemic, 4,712 flights were in operation covering 255 routes and 45 countries, the title reported.
The ministry also said it would expand tax benefits for inbound tourists when they purchase goods in the nation.
