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Shop in Shenzhen have started offering immediate tax rebates for foreign buyers under a pilot scheme which could further hit Hong Kong's retail market.

The new measure allows foreign travellers to immediately get a cash tax refund in participating stores upon presenting their invoice and relevant application form, according to a Shenzhen government-run news portal.

For example, a bag priced at 16,200 yuan (HK$17,646) has a rebate of 1,458 yuan, which could be seen as a 9 percent discount.

Shenzhen is the sixth mainland city to launch the pilot, after Beijing, Shanghai, Guangzhou, Hangzhou and Chengdu. The Shenzhen government picked 23 stores at The Mixc in Luohu District as the first test group for the instant tax refund, covering brands like Louis Vuitton and Salvatore Ferragamo.

Each foreign visitor is permitted to spend as much as 110,000 yuan in the same participating store every day.

For the first 11 months of the year, the city bordering Hong Kong sold 22.35 million yuan worth of goods eligible for a tax rebate. The cumulative refund amounted to 2.26 million yuan with 262 applications.

This comes when many people living in Hong Kong are heading north for goods and services, which are cheaper and more diverse in Shenzhen. In October, 5.35 million Hongkongers headed north and spent about 3.6 billion yuan in the neighboring city.

Shenzhen woos foreign shoppers with tax rebates