Japan will overhaul its consumption tax exemption system for foreign tourists starting in November, switching from an immediate discount at stores to a refund issued upon departure. The change marks the first fundamental revision in about 70 years to a system that had waived the tax at the point of purchase.
The Japanese government will move the tax exemption program for foreign visitors to a refund system in November, the Nihon Keizai Shimbun reported on the 22nd.
The overhaul is intended to curb illegal resale, in which goods bought at a discount under the exemption are resold within Japan.
Under the new system, tourists will have to pay prices including consumption tax at about 64,000 duty-free stores across Japan. They can then recover the tax amount when leaving the country, after customs officials at airports or seaports confirm that the purchased goods are being taken abroad.
Refunds will be handled either in cash during the departure process or by canceling the charge on a credit card registered in advance.
Until now, Japan had deducted the consumption tax immediately when foreign tourists bought goods at duty-free stores. The procedure is changing fundamentally for the first time since the system was introduced in 1952, about 70 years ago.
Some rules will be eased at the same time to make shopping more convenient for tourists. A cap of 500,000 yen (about 4.2 million won) per person per day on tax-free purchases of consumables such as medicines and cosmetics will be abolished.
A requirement to pack consumables in special transparent bags will also be scrapped.
Japan's retail industry is concerned that the change could dampen tourist spending. Shoppers who previously received the exemption at the register will now have to pay the full tax-inclusive amount upfront and go through a separate refund procedure when they leave.
Fees that may arise during the refund process are another variable. Industry officials expect short-term sales to fall by about 10% to 20%, particularly at department stores and luxury watch retailers, where foreign tourists account for a large share of purchases.
Novarca, a Japanese marketing firm, projected that department store duty-free sales would drop about 10% simply from the exit of operators who illegally resell tax-free goods.
Spending patterns in which tourists use the money saved on taxes to buy other products are also expected to change. Tourists had often spent an amount equivalent to the consumption tax discount they received on the spot at department store food halls and other outlets, but such linked spending could decline, according to the analysis.
The government has set a goal of raising the number of foreign visitors to 60 million by 2030, with spending of 15 trillion yen, from 42.68 million in 2025 and spending of 9.5 trillion yen. It plans to manage the new system so that it does not become an obstacle to tourist spending.