Japan | To Require Visitors to Pay the Consumption Tax at the time of Purchase and Refunds Processed Upon Departure for Fiscal Year 2026

 

Japan, one of the world's great powers, a member of the G7 boasting the third largest economy in the world by nominal GDP, the fourth largest by purchasing power parity and the world's second largest developed economy plans to change its excise tax exemption system for tourists and replace it with a refund – based system, the change planned for fiscal year 2026,  will require tourists to pay consumption time of purchase and refunds to be processed upon departure.

The change in the tourist consumption tax in the Asiatic country aims to prevent fraud, as in the case with the ewsale of tax – exempt items within Japan.

Under the current system, tourists can purchase duty - free items by presenting their passports at duty - free shops, however, concern about fraudulent practices, such as the resale of tax - expempt goods within Japan, have led the government and ruling parties to propose the new system.

The refund process will involve customs inspections at departure points, such as airports, to confirm that the purchased items have left Japan and will be issued in cash or via a pre - registered credit card.

Japanese government sources said that the new system is expected to prevent scalping or other fraudulent conduct in Japan.

The proposed changes will also remove distinctions between the considered general items such as clothing and consumable such as cosmetics and food.

Currently, a limit of ¥500,000 approximately $3.300 applies to consumables for tax exemptions, this limit along with packaging rules, is expected to be removed to ease administrative burdens on duty - free shops.

The ruling parties' fiscal commission aim to finalize the details of the system in their fiscal reform guidelines for fiscal year 2025 by the end of 2024.

Following the encactment of related legislation, the Japanese government will prepare the necessary management system for duty – free sales under the new framework.

The current system is facing scrutiny for allowing loopholes, in fiscal year 2022, a custom survey found that only 15.2% of duty – free purchase exceeding ¥100 million, or about $660.000 could be verified as being made outside Japan and most offenders left without paying the required tax.

This reform aligns with the tax refund practices of Europe and other regions, ensuring greater oversight and maintaininig convenience for visitors.

Link - https://www.expreso.info/index.php/noticias/internacional/103898_japon_obligara_los_turistas_pagar_impuestos_en_las_tiendas