Goodbye to Tax-Free Shopping for Tourists?

Japan is considering overhauling its tax-free shopping scheme for foreign visitors in response to a growing number of cases of tax-free items being resold overseas for profit at tax-inclusive prices.

At present, visitors who stay in Japan for less than six months can purchase merchandise with the consumption tax already deducted. The government is now considering shifting to a scheme where they pay tax-inclusive prices and apply for refunds afterward.

Formal government discussions on the tax-free shopping rule may start later this year when an annual tax system review for fiscal 2024 begins.

tax-free shop
A store offering tax-free perks for tourists

In the European Union, for instance, tourists pay prices including value-added tax and get a refund after complying with required formalities.

In Japan, travelers are exempted from paying the consumption tax when purchasing goods totaling 5,000 yen ($36) or more as long as they intend to use the items in their home countries.

But there have been cases where travelers purchased massive amounts of tax-free items for resale purposes, the sources said.

Last year, Apple Inc.’s Japan branch was slapped with 14 billion yen in additional taxes after authorities found it sold iPhones and other items in bulk without charging the consumption tax to foreign visitors suspected of purchasing the products for resale purposes.

Purchasing records at tax-free stores are shared with customs, and the consumption tax is collected from travelers who do not carry tax-free items they bought with them at the time of departure.

According to the Finance Ministry, it is usually difficult to collect the tax from such travelers because they often do not have the money to make the payment when they are departing the country.

The government has ramped up efforts to prevent illicit tax-free purchases, such as by requiring from businesses that have purchased tax-free items for resale purposes to pay the consumption tax.

Source: Kyodo News

Related Articles

Investors/Business, General
Information, News
The average price of newly constructed apartments in Tokyo's 23 special wards reached an all-time high at 114.83 million yen, marking a 39.4% increase. Factors include rising construction costs, increased building activity, and high demand driven by low interest rates.
Information, News
It has been more than a year since COVID-19 transformed the world, forcing changes in lifestyle, imposing restrictions across businesses -- without warning, without bias. In the investment world, the priority became “flight to safety,” which has historically always favored the land of the rising sun. Japan stands as a self-sustaining market with deep domestic demand, less reliant on foreign trade. A country with relatively stable currency. A national environment unlikely to be affected by geopolitical risk. Here is how various sectors of the Japanese property market have maintained their stability over the last year -
Information, News
The government’s current wood utilization strategy targets buildings with up to three stories, but it will expand the coverage to structures with four or more stories in response to technological innovation, the sources said.
The Olympic Games could act as a “show window” for Tokyo’s real estate, whether spectators are allowed or not. The approaching Games, as well as the increasing pace of Japan’s Covid vaccination campaign, is helping to fuel expectations for the country’s real estate investment trusts.