Must I Pay Customs Duty on Alcoholic Beverages Purchased in Duty Free Shops?

Duty free items are still subject to tax and duty in your home country.
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Perhaps. First, let's take a look at what "duty free shop" really means. You can find duty free shops in airports, on cruise ships and near international borders. Items you purchase in duty free shops have been priced to exclude customs duty and taxes in that particular country based on the fact that you are buying those  items and taking them home with you. This does not relieve you of the obligation to pay customs duty and taxes when you bring those items into your country of residence.

Duty Free Example

For example, a US resident who buys two liters of alcohol in a duty free shop at London's Heathrow Airport will pay less than the United Kingdom market price for those items because the Value Added Tax (VAT) and any applicable UK customs duty (on imported wine, for example) will not be included in the sales price. The duty free shop will package that US resident's purchase in a way that prevents the US resident buyer from consuming the alcohol while still in the airport.

Let's move on to the end of the trip. As you return to your home country, you will have to fill out a customs form, itemizing (or "declaring") all the goods you acquired or altered while you were on your journey. As part of this declaration process, you must state the value of these goods. If the value of all the items you declare exceeds your personal exemption, you will have to pay customs duty and taxes on the excess. For example, if you are a US citizen and you bring $2,000 worth of items into the United States from Europe, you will have to pay customs duty and taxes on at least $1,200 because your personal exemption from customs duty and taxes is only $800.

Alcoholic Beverages and Customs Duty

Alcoholic beverages, however, are a special case. In the United States, customs regulations state that adults over age 21 may bring one liter (33.8 ounces) of alcoholic beverages into the US duty free, regardless of whether or not it was purchased in a duty free shop. You may bring more if you wish, but you will have to pay customs duty and taxes on the value of all the alcohol you bring home except for that first one liter bottle. If your port of entry is in a state that has more restrictive import rules, those rules take precedence.

Also, if you are traveling with your family, you can combine your exemptions. This process can work in your favor because each person gets the $800 exemption mentioned above.

Canadian citizens and residents over age 19 (18 in Alberta, Manitoba and Quebec) may bring up to 1.5 liters of wine, 8.5 liters of beer or ale, OR 1.14 liters of alcoholic beverages into Canada duty free. Provincial and territorial restrictions take precedence, so you should check the regulations that apply to your particular port of entry. Exemptions on customs duty vary based on how long you were out of the country. Unlike in the US, Canadian family members traveling together cannot combine exemptions.

British travelers age 17 or over entering the UK from a non-European Union (EU) country may bring one liter of spirits (over 22% alcohol by volume) or two liters of fortified or sparkling wine (less than 22% alcohol by volume) with them. You may also split these allowances and bring in half the allowed amount of each. Your duty free allowance from non-EU countries also includes four liters of still wine and 16 liters of beer, in addition to the allowances for spirits and / or fortified or sparkling wine.

The Bottom Line

Check your country's alcoholic beverage importation policy before you leave home. Write down local prices for liquors you think you would like to bring home with you and carry that list when you visit duty free shops. This way, you will be able to tell if the discounts available at duty free shops are deep enough to save you money even if you have to pay customs duty when you return home.

Sources:

US Customs and Border Patrol. Know Before You Go.

Canada Border Services Agency. I Declare.