News Japan changing regulations of duty-free sales

The Japanese government has decided to tighten regulations regarding tax-exempt products purchased at duty-free stores. The goal is to prevent foreign visitors from reselling these goods within Japan for illicit profits. The proposed revisions are expected to be finalized by the end of the year and implemented as early as fiscal year 2025. Currently, visitors who spend more than 5,000 JPY (USD 32.40) on duty-free items for personal use are exempt from consumption tax. However, the resale of these duty-free purchases within Japan is strictly prohibited. Despite the existing system, such resale has occurred frequently, leading to criticism of its leniency, impracticality, and susceptibility to exploitation.

The changes will require visitors to pay the full price for goods--including the consumption tax—at the duty-free shops, and these purchases will be recorded electronically in their passports. Upon departure at airports or seaports in Japan, the passports will be scanned to confirm the purchases, and customs officials will refund the consumption tax to the departing travelers. Since opening the suitcases of every tax-free shopper is impractical, customs officials will only inspect luggage for purchases that exceed a certain amount, which will be determined later, the sources said. Currently, tourists are not charged the consumption tax on purchases at duty-free shops. If they want to resell the goods, they must pay the 10-percent tax.

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In fiscal 2022, 3.71 million people from abroad bought tax-free goods. Of them, 54,000 each spent more than 1 million yen and 2,200 each spent over 10 million yen.

That same year, customs inspected the baggage of 57 of the 374 people who had purchased more than 100 million yen in tax-free goods. Officials found that only one had actually packed the products.

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2,200 people spent more than 10 mill yen in tax-free - that's almost $65.000!! That's insane! That amount alone should have alarm bells going off all over the place. Not to mention the 374 people who spent > 100 mill yen. That cannot be for personal consumption, surely.

The "black market" is very tempting. I could buy Johnny Walker whiskey on base for $3.50 and sell it off base for about 9000Y. A full carton of American cigarettes on base was about $3.00 and again , would get you about 9000Y off base. This was when $1 US = 360Y. About 3 weeks before I was due leave Japan , I got a visit from a couple Japanese tax agents warning me to knock it off.

Grandpa Frank said:

About 3 weeks before I was due leave Japan , I got a visit from a couple Japanese tax agents warning me to knock it off

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So that's how overseas servicemen save up for their retirement xD
Was it a polite「止めてください」or more of an "or else prison"?

It helped me learn about how the police worked back then , LOL. A Japanese fellow that worked at the bar where I worked got caught with drugs. I was told when the police interrogate someone , it is so frightening , the person will turn their mom in for any possible crimes. This guy told about each person in the bar was up to no good. Everyone who worked in the bar and even the owner of the bar got questioned. No one else got arrested , but the bar had to close for one month. I shared an apartment with one of the other bar workers. One morning about 5AM , the door was kicked in and about 5 cops came in. They were a bit shocked that I was there. They searched for drugs I guess ,found nothing and left. The guy who caused all this when he was caught with drugs went to prison for about 5 years. I guess I was lucky that they went easy on me.

The Japan Tourism Agency is pushing to remove the spending cap on tax-free shopping for foreign tourists as part of the 2025 tax reforms. This move aims to stimulate inbound tourism and boost the economy. Currently, foreign visitors are exempt from consumption tax on goods purchased for personal use at duty-free shops. However, there is a daily limit of 500,000 yen per shopper per store for consumable items like food, beverages, cosmetics, and medicine. As of March 2024, the number of participating stores nationwide has increased by 5.1% to 59,485.

The duty-free program has expanded over the years as part of Japan's push to bolster its tourism sector, including consumable items in 2014 and a lower threshold for qualifying purchases. It led to a trend dubbed "explosive buying" before the global spread of COVID-19. However, it has also increased visitors purchasing items tax-free and reselling them for a profit. To prevent this, the government is looking to have shoppers pay the consumption tax up front, then have it refunded at the time of departure[ after presenting the purchased goods. The change could encourage more stores to participate in the program since they would no longer be responsible for checking shoppers' identities and whether they qualify for tax-free purchases.

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Shopping is a significant driver of inbound spending in Japan, accounting for 26.5% of total expenditure in 2023. This is significantly higher than the 18% share in the United States. In the third quarter of 2023, shopping's share of inbound spending in Japan increased to 28.9%, while the share of entertainment spending declined to 4.7%.

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