As China’s government continues to pursue the goal of “repatriating” Chinese consumers’ luxury shopping, Bank of China is teaming up with international tax refund company Global Blue to start a value-added tax (VAT) refund program in China available to both international visitors and returning Chinese travelers.
One of the first tax refund programs in mainland China, the partnership offers a 9 percent VAT refund to international visitors in Shanghai. In addition, returning Chinese travelers from abroad can now receive tax refunds for items bought overseas at 10 Bank of China locations across the country.
For foreign visitors, eligibility is available to anyone with a non-Chinese passport who has been in the country for less than 183 consecutive days, including visitors from Hong Kong, Taiwan, or Macau. The tax break counts for any items bought in one store on the same day exceeding RMB500 (US$72.40).
Around 200 stores in Shanghai have signed up, including luxury brands such as Chanel, Hermès, Tiffany, and Louis Vuitton, as well as department stores Takashimaya, Pacific, Parkson, and Bailian.
“The VAT refund service represents a great opportunity for merchants in Shanghai to attract high-spending international travelers and encourage higher spend in-store,” says Global Blue CEO Jacques Stern.
The new program comes at a time when the Chinese government has worked on developing more duty-free retail options both in airports and city centers to cut down on the massive amount of Chinese luxury spending it’s been losing out on abroad. In August this year, a state-owned duty-free mall was opened in downtown Shanghai, with shoppers eligible to make duty-free purchases if they are international visitors or Chinese citizens who have recently traveled abroad. The mall followed the 2014 opening of the world’s largest duty-free mall in Hainan. The government has also revised its tariff policies this year and made more efforts to crack down on daigou sellers smuggling goods into the country to sell at a tax-free rate.
As a result, Chinese luxury consumption in mainland China is on an uptick, according to Bain & Company, which predicts that domestic luxury spending will have increased 2 percent in 2016, up from negative 2 percent in 2015. At the same time, Chinese visitor number growth and spending in Europe have slowed this year, with experts stating that both the Chinese government’s new polices and concerns over terrorist attacks have both played a part.
To secure their refund in Shanghai, shoppers need to get a VAT receipt with their purchase and turn in along with the government’s tax refund application form. Global Blue’s involvement will include getting retailers to sign up, training sales staff, and providing consultation on the refund process. It will also work on promotion of the program to consumers through work with the local government’s tourism office as well as digital campaigns and point-of-sale materials.