Japan To Scrap Tax-Free Purchase Limits As New Refund System Takes Effect

Japan will overhaul its tax-free shopping system for foreign visitors on Nov 1, requiring them to pay consumption tax upfront and claim refunds upon departure in a bid to curb abuse by travelers who resell goods before leaving thecountry.

Foreign visitors can currently purchase goods tax-free at stores. Under the new refund system, they will scan their passports at dedicated terminals at airports and ports to receive refunds in cash or on their credit cards upon departure.Travelers flagged for additional checks may be asked to present their purchases for inspection. Major airports will also offer smartphone-based procedures to help ease congestion.

Tokyo Customs on Thursday showed reporters preparations at Tokyo’s Haneda airport, where 22 terminals have been installed to identify purchases requiring further checks. The airport has also set aside space for baggage inspections.

The new system will also eliminate the daily purchase limit of 500,000 yen on consumables such as alcohol and cosmetics. Special packaging designed to prevent resale will no longer be required, simplifying the rules for tax-free purchases.

Some retailers, however, worry the change could discourage shoppers from making additional purchases with the money they save on taxes.