Want to buy over 500,000 yen in booze and cosmetics without paying a single yen in tax? Japan Tourism Agency wants you to do it too!
We’re in the middle of a golden age for foreign tourist shopping in Japan. Not only is the yen at its lowest value in generations, allowing overseas travelers to stretch the power of their foreign currency, tourists can largely bypass Japan’s sales/consumption tax (which ranges from 8 to 10 percent) as long as they’re taking the items with them when they leave Japan.
The savings aren’t unlimited, though. For the purposes of foreigner tax exemptions, purchases are grouped into two categories. For general purchases, things like clothing, electronics, and terrifying face-hugging anime plushies, as long as your purchase comes to 5,000 yen (US$33) or more, you’re always eligible for the exemption. For consumables, such as cosmetics, pre-packaged food and drinks, medicine and supplements, though, the tax exemption tops out after you hit 500,000 yen in total consumable purchases for your stay in Japan, after which you have to start paying tax for any additional purchases in the category.
However, the Japan Tourism Agency, part of the Ministry of Land, Infrastructure, Transport and Tourism, wants to completely remove the upper limit on foreign shopper tax exemptions for consumables, and has submitted a proposal to abolish it in less than a year’s time.
The rationale behind the 500,000-yen limit is that consumables are more attractive to would-be fraudsters plotting to buy the items at the no-tax price and then resell them while they’re in Japan at a mark-up that’s still cheaper than the with-tax price. It’s easier to quickly unload consumable staples that buyers would stock up on, like, for instance, mascara or skin cream, than, say, cameras or clothing.
500,000 yen may already seem like more than enough for personal consumable shopping in a single trip to Japan, but the Japan Tourism Agency appears to have its eyes on luxury-shopping foreign tourists who’re looking to purchase high-end items while they’re in Japan. Alcoholic beverages are included in the consumables category, for example, and while you’d have to buy a whole lot of cans of Ebisu beer to hit that 500,000-yen limit, if you’re a drinker with deep pockets looking to buy a couple bottles of high-end Japanese whisky, you could rack up a 500,000-yen tally pretty quickly.
▼ It wasn’t all that long ago that Suntory was selling a single bottle that cost 3 million yen.
So does the Japan Tourism Agency’s proposal, which it has included in its latest list of tax reform requests, mean that the Japanese government has decided its resell fears were overblown? Not really. If anything, it’s the opposite that’s occurring. See, the reason it’s called a tax exemption, not a refund, is that foreign shoppers who qualify aren’t required to pay the tax at the time of purchase. This is in contrast to the tax refund systems for foreign tourists in some other countries, where travelers must initially pay the same tax that locals do and then later process a refund request at the airport or border control as they leave the country.
Technically, the authorities in Japan do have the power to inspect travelers’ luggage at the airport pre-departure to confirm that they are indeed taking their tax-free purchases out of the country with them, and consumables purchased tax-free are required to be sealed at the time of purchase in such a way that inspectors can see if the packages have been opened while in Japan. In practice, though, such inspections are rarely performed. However, the Japanese government is expected to switch from a foreign shopper tax exemption to a tax refund one soon, and with stricter enforcement at the departure end, the Japan Tourism Agency feels there’s no longer a need to limit the tax savings on consumables, since the tax will already have been paid at the time of purchase and the absence of the goods at departure will mean no refund on them.
The Japan Tourism Agency’s proposals are included in its reform requests for the next Japanese fiscal year, which begins in spring.
Source: Yahoo! Japan News/Kyodo, The Mainichi, Rakuten Travel
Top image: Pakutaso
Insert image: Suntory
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