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6 March 20231 minute read

Japanese National Tax Agency tightening compliance on tax-free shop scheme

Country-specific update: Japan

The Japanese tax authorities have increased scrutiny with respect to Japanese Consumption Tax (JCT) exempt sales made by retail business operators licensed as “export goods selling place”.

Recently, major retailers were issued corrective statements by the Japanese tax authorities for failing to meet the requirements for exempting sales of goods to non-residents. This resulted in additional JCT liabilities for these retail business operators. The JCT Act allows non-residents of Japan to purchase goods, tax-free, at stores licensed as “export goods selling place” for JCT purposes under the conditions that the purchased goods are for personal use and will be taken out of Japan. Many countries with similar tax-free programs usually refund the tax amount upon departure from the country. However, to reduce the tourists' burden, Japan requires each store to carry out the necessary checks for exempting their supplies directly at the store.


Key takeaway

As the number of visitors increased in recent years, selling tax-free goods for personal use to non-residents became an important sales strategy in Japan. However, since the Japanese tax authorities have raised scrutiny, compliance with the proper procedures is essential.