executive impact

Tax-free shopping gets a boost

8 Comments
By Chris Betros

The Japan Shopping Tourism Organization (JSTO) has announced that starting Oct 1, 2014, Japan will be expanding the tax exemption benefits allotted to foreign tourists (anyone who has lived in Japan less than six months) from general goods to also include consumables and other items. These tax-free stores are different from duty-free shops which deal with custom or border taxes.

Currently, Japan has 5,777 “export sales” stores (tax-free shops) with most being located in the Tokyo and Osaka areas; however, the Japan Tourism Agency is looking to expand the number to 10,000 and focus on regional areas to increase the sales of local specialty goods.

Compared with the European Union, Japan’s system has the advantage of having the product sold at the tax-free price at the time of purchase instead of collecting a refund upon departure; or later in the case of credit card purchases. With those refund procedures and agency fees eliminated, the tourist can purchase products at a lower price, encouraging added consumption. From Oct 1, the tax-free system will be expanded from general goods such as home electrical appliances, clothing (kimonos) and handbags to also include consumables including groceries, beverages (sake, alcohol), medicine, cosmetics, etc. The monetary range for consumables falls between 5,001 yen and 500,000 yen purchased on the same day in the same store for one non-resident.

Japan Today editor Chris Betros speaks with JSTO Senior Managing Director Kenichi Niitsu to hear more.

How are you getting the word out to foreign tourists in the lead-up to Oct 1?

After we announced the new tax-free system at a press conference in July, we got a lot of inquiries from overseas about the tax system. We have been doing PR overseas through the Japanese government, and through JSTO members such as airlines.

What is the difference between tax-free and duty-free?

Not only foreign tourists, but also Japanese people misunderstand this as both are terms used to describe goods that are sold without certain taxes on the requirement that the goods will be sold to travelers who will take them out of the country. Duty-free is limited to goods such as leather goods, alcohol, tobacco, cosmetics, etc, and is only available at airports, ports and special outlets. Tax-free stores, which will be in locations all over Japan, eliminate the 8% consumption tax (commonly called VAT in Europe).

The first tax-free system started after the war for U.S. army personnel. However, this new tax system is for foreign guests, geared toward sightseeing. Tax-free shopping is more wide-ranging and will mean significant savings for foreign travelers.

How does it work?

If you are a foreign visitor, you go into a store with the label saying tax-free in the window. You show your passport. The vendor fills out a form which is attached to your passport. Then you receive the 8% discount. In the case of consumables, you have to take them home. You can’t consume them in Japan. The document must remain in your passport until you leave Japan.

How many tax-free stores are there in Japan?

Last year, there were 4,600 stores. This year, the number will go up to 5,800. Next year, we expect to add another 2,000. What products do you anticipate will be popular among foreign tourists after Oct 1?

I think the most important products will be Japanese sweets and snacks. I also think the new system will be good for regional areas that have specialty food and marine products that you can only get in those areas.

What advice would you give to merchants who are not used to dealing with foreigners?

Don’t be afraid of foreigners. Most of them are interested in Japan, That’s why they are here. Don’t worry if you can’t speak foreign languages. Just smile and speak to them in Japanese. You’ll manage somehow.

© Japan Today

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8 Comments
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Foreigners should be made to pay sells tax. That's the best argument for a sales tax, in fact, so as to help subsidize the economy on the backs of the tourists.

0 ( +3 / -4 )

This is to help boost tourism.

0 ( +1 / -1 )

"Compared with the European Union, Japan’s system has the advantage of having the product sold at the tax-free price at the time of purchase instead of collecting a refund upon departure"

Didn't anyone else notice the obvious falsity of this claim of superiority? What about the Japanese who live abroad? I'm a Brit, but am not resident in Britain, so when I go back to the UK, I do lots of shopping and I don't have to "show your [my] passport" or have anyone "fill[s] out a form which is attached to your [my] passport." I simply keep the receipts and, of course, the goods, and when I leave the country I show both to the authorities and get my money back.

Mr. Nitsu, could you please answer the following question? Under the typically heavy-handed Japanese system that is about to be introduced over here, how does a non-resident Japanese get his/her tax back?

-3 ( +1 / -4 )

I think getting the discount up front is a great idea, back in Cda the govt doesn't make it easy for tourists to get their money back when they leave, unless its changed lately, hell I don't even bother anymore after the last time I did it after buying a camera all the walking around the airport to try & find the customs office which was very well hidden!

So now I don't really bother buying much when I go home other than food/drinks for the most part!

2 ( +2 / -0 )

Mr. Nitsu, could you please answer the following question? Under the typically heavy-handed Japanese system that is about to be introduced over here, how does a non-resident Japanese get his/her tax back?

As TOURISTS never pay the 8% tax in the first place, TOURISTS can never get it "back". I thought the article was pretty clear on that. Being a "non-resident Japanese" means you're at least a permanent resident elsewhere, right? If you're currently a Japanese citizen and you want to be treated as a tourist in Japan, you better become a citizen of some other country.

1 ( +1 / -0 )

Fadamor,

What do you mean, "TOURISTS never pay the 8% tax"? They pay it on almost everything they buy in Japan (except at some special stores in places like Akihabara). Has anyone ever heard of a TOURIST (your capitals) saying to a checkout person, "Please discount that total by 8%. I'm a tourist." It would certainly be fun to try.

-2 ( +0 / -2 )

Seems misguided. People come here to have a good time and are ready to spend money. They don't really care about the tax, and may pay even more back home. What they DONT want to do is have to worry about wasting their time on forms.

Sounds like bureaucratic overkill.

2 ( +2 / -0 )

so if a tourist come to japan visits a friend, then buys a load of goods for there friend and then throws away the receipts, is there going to be any comeback? i don't think so and whos going to check? I think the money should be redeemed at the airport, not at the stores.

0 ( +0 / -0 )

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