What is duty free shopping

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shoppers at duty free store
Travelers on the hunt for duty free bargains
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Shopping at duty free stores can be a bargain - or not

Mention to someone that you're thinking about taking a cruise or a trip outside the United States and the first thing you're most likely to hear them say after "Don't drink the water!" is "Don't forget to stop at the duty free shop!"

Duty free shopping is often considered to be one of the perks of international travel, yet many people have no idea what it is or whether it truly is the bargain it's rumored to be.

A "duty" is a local import tax on goods brought in from another country. For example, a candy store in France may have to charge a duty on chocolates imported from Switzerland. These countries may waive the duty of the goods are never used in that country. This is the reason why duty free shops are usually found in international airports, train stations or cruise ship docks where passengers are leaving for foreign destinations. In theory, these shops pass the savings on to the customer, although that isn't always the case.

Some countries, particularly those in the European Union, charge a sales tax called a "value-added tax" or VAT. Duty free shops may advertise that they are also tax-free, meaning that the VAT will not be applied to goods purchased there and taken out of the country.

So, is duty free shopping the "bargain" many claim it to be? As with all deals that sound too good to be true, it depends. As I mentioned, many stores don't pass the savings on to the customer because they know duty free shoppers think they're automatically going to save money. It pays to check the prices at home before you leave on goods you might buy at a duty free shop.

It's also a good idea to find out if your own country has a limit on the total value of the goods you're bringing in that were bought at a duty free shop. The U.S. has an $800 limit per person - duty must be paid on anything over that amount and it's your responsibility to keep and provide to customs all of the receipts.

Some countries limit the amount of goods that can be purchased duty free, especially goods that are heavily taxed like cigarettes and tobacco products and alcoholic beverages. Buy more than the limit and you'll pay the duty and taxes anyway.

So, is duty free shopping worth doing? Yes, if you do some research and comparison shopping ahead of time or know the prices with tax back home of the goods you're thinking about buying on the trip. Yes, if your home currency is stronger than the currency of the country you're in. Yes, if it's an expensive item like electronics and the tax savings is significant. Yes, if you're under the $800 limit. Yes, if you have local currency to spend - use that money in the duty free shop and you'll avoid the fee charged for changing the currency back to your own. And of course, yes if you like bragging to your friends about how much money you saved on your international vacation by shopping at a duty free store.

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