Date 01/14/2014


  1. In general. Except as provided in subsection 4.12.2, no individual or entity shall
    be exempt from any tax imposed by this section.
  2. Imported  articles.    The  exemptions  for  bona  fide  travelers,  returning  residents,
    diplomats,  temporary  imports,  grant  aid  projects,  Duty-free  Store  at  the  Palau
    International  Airport,  shall  apply  to  imported  articles  for  purposes  of  these
  3.  Transfer  of  exempt  goods  to  other  persons.    If  any  article  imported  under  an
    exemption described in subsection 4.12.2 is sold or contracted for sale during the
    1-year period following the date of the importation, or if during such period a
    major  part  of  the  possession  or  use  of  the  article  passes  from  the  person  who
    benefited from the exemption to a person not a family member living with the
    importer, then the exemption shall cease to apply as of the time the article was
    imported. In such a case, both the importer and the new owner, potential owner,
    Page 20 of 20 or user or possessor shall be jointly and severally liable for an amount equal to
    two  times  the  import  duties  and  excise  taxes  that  would  have  been  applied  if
    there had been no exemption.
  4. Personal  Exemptions.  Goods  transported  during  travel  or  imported  into  the
    Republic, which are not intended for a commercial purpose and are considered
    goods for personal consumption or use, are normally not taxed, unless otherwise
    required by law. However, a determination by Customs, whenever made, that the
    goods or equipment were subsequently used otherwise than as declared, shall be
    dealt with as fraud. Imported goods not taxed at the time of import and used for a
    commercial purpose shall be subsequently taxed. An administrative penalty not
    exceeding $1,000 shall be imposed by the Director on offenders. And/or RPPL 6-
    20: Section 3702, shall apply.
  5. Grant-aid  assistance:  40  PNCA  §2001  states  that  any  nationals  or  citizens  of
    foreign countries, supplying products, goods, machinery, materials, or services in
    connection with a project financed entirely by grant-aid assistance whose terms
    require exemption from internal taxes or fiscal levies as condition precedent to
    awarding  such  grant-aid  projects  provided  by  the  government  of  any  donor
    nation, shall be exempt from taxation under Title 40 PNCA Division 2, sections
    1001-1901,  as  amended,  with  respect  to  such  activities.  The  Director  shall
    administer  the  application  of  this  provision  to  such  nationals  or  citizens  of
    foreign  countries  seeking  for  or  have  been  granted  an  exemption  as  provided
    herein  and  shall  ensure  that  such  exemptions  are  properly  monitored,  fully
    documented, and certified.
  6. Diplomats  Upon  the  request  of  the  Ministry  of  State,  imports  exempt  under
    international  agreements,  international  humanitarian  assistance  and  under  the
    Vienna  Convention  on  Diplomatic  Relations,  Article  36:  Section  2,  shall  be
    exempt from any tax imposed by this section.
    Under  the  Vienna  Convention  on  Diplomatic  Relations,  it  states  that  "The
    personal baggage of a diplomatic agent shall be exempt from inspection, unless
    there are serious grounds for presuming that it contains articles not covered by
    the exemptions mentioned in paragraph 1 of this article, or articles the import or
    export  of  which  is  prohibited  by  the  law  or  controlled  by  the  quarantine
    regulations of the receiving State. Such inspection shall be conducted only in the
    presence of the diplomatic agent or of his authorized representative".
  7. Duty Free Imports In accordance with 28 PNCA Foreign Relations and Trade,
    Chapter 6 Duty-Free Stores,
    • All  foreign  merchandise  of  every  description,  except  such  as  is
      prohibited by law, may be imported into the Republic for resale at and
      from the duty-free retail concessions. All sales of merchandise from
      such duty-free retail concessions shall be restricted to the crew and
      passengers  of  any  common  carrier  engaged  in  foreign  commerce,
      whether ocean going or air, for consumption or use outside the limits
      of the Republic by said crew of passengers.
    • Any  person  who  operates  a  duty-free  retail  concession  shall  be
      eligible for refunds of all taxes paid by him upon merchandise sold at
      Page 21 of 21 and from the duty-free retail concession and such merchandise shall
      be exempt from all sales taxes.
    • Any  person  who  violates  28  PNCA  §  610  shall  be  guilty  of  a
      misdemeanor  and  upon  conviction  thereof  shall  be  fined  not  more
      than $500.00, or imprisoned for not more than three months, or both.
    • A block cash guarantee or bank guarantee covering the total amount
      of import tax payable on the goods imported into the duty-free shop
      must be furnished at the commencement of the operation.
    • Each  duty-free  shop  owner  must  store  duty-free  imports  in  a
      warehouse (bond) exclusively used for that purpose. The bond may
      be located at the airport or down town Koror.
    • The  warehouse  shall  be  under  the  dual  control  of  the  Division  of
      Customs and the bond owner. Operations of the warehouse shall be
      as laid out in the Duty-free Warehouse procedure.
    • Customs  is  responsible  for  ensuring  that  controls  are  sufficient  to
      protect the revenue. Other conditions and rules may also apply to the