Japanese Government Plans Overhaul of Tax-Free Shopping Policy for Tourists

The Japanese government and ruling party are preparing a fundamental revision of the tax-free shopping system for tourists. This decision comes in response to recent incidents where tax-free goods have been resold domestically by tourists. To prevent such activities, the government plans to implement changes requiring tourists to confirm that they are carrying purchased goods upon departure from Japan before receiving a refund of the consumption tax exemption.

New System to Be Incorporated into 2025 Tax Reform Guidelines

According to the plan, the new tax-free shopping system will be outlined in the 2025 tax reform guidelines, which will be finalized at the end of this year. The details, including the timeline for implementation and procedural design, will be specified in these guidelines. The revised system will enforce stricter regulations to ensure that the tax exemption is applied solely to goods genuinely exported from Japan, and not to items being resold illegally within the country.

Current Tax-Free System Has Loopholes

Under the existing system, tourists can purchase goods at tax-free stores at prices excluding consumption tax by simply presenting their passports. Customs authorities then verify whether the purchased goods are exported based on shopping records provided by the stores. However, in practice, many tourists do not voluntarily undergo customs checks upon departure. In one case, 57 tourists purchased tax-free goods totaling over ¥100 million, but only one person took the goods out of Japan, while the remaining 56 failed to pay the required consumption tax, leading to a total outstanding tax liability of approximately ¥1.85 billion.

New System May Refund Tax Upon Departure

To address this issue, the Japanese government is considering a new approach to the tax-free shopping policy. Under the proposed changes, tourists would initially pay the full price, including consumption tax, for goods purchased at tax-free stores. Upon departure, customs would verify the purchase records and confirm that the tourists are carrying the goods before refunding the corresponding consumption tax. This potential new method also raises questions about handling refunds made via credit cards or electronic payments.

Key Points Summary

• The Japanese government plans to revise the tax-free shopping system for tourists to prevent domestic resale of goods.
• The new system will be detailed in the 2025 tax reform guidelines and subsequently implemented.
• Loopholes in the current system have allowed some tourists to evade consumption tax.
• The government aims to refund consumption tax only after confirming goods are taken out of Japan to prevent tax losses.