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

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