Tax-Free Shopping in Japan: Simplified VAT Refunds for International Tourists

Heading to Japan as a tourist or maybe on a business trip? Tax-free procedures in Japan have been completely digitized. The previous cumbersome paper-based tax-free procedures have been abolished and are now carried out digitally.

Since October 2021, tax-free sales require electronic tax-free procedures. This article provides an overview of the basic tax-free digital procedure, the differences from the previous tax-free procedure, and the steps to proceed with tax-free electronic procedures. We will also introduce points to consider when choosing an electronic tax-free service and compare different electronic tax-free systems.

Overview: What is electronic tax exemption?

The electronic tax-free procedure is a system in which paper-based procedures for tax-free sales are abolished and information on tax-free sales is provided to the National Tax Agency on the Internet. We will explain in detail about the tax-free electronic procedure here.

1. In the conventional tax-free sales procedure, when a tax-free shop (export goods sales point) made a tax-free sale to a foreign tourist, they had to prepare paper documents called a "Purchaser's Pledge" and a "Purchase Record Ticket". The preparation of these documents was a large burden for tax-free shops and foreign visitors to Japan, making it inconvenient for them to make tax-free sales or purchase tax-free goods.

2. With the tax-free electronicization, it is no longer necessary to create and store paper "Purchaser Pledges" and "Purchase Records", and it is now possible to create and send electronic data, making it easier to sell tax-free. Even after the tax-free electronicization, it is still necessary to store purchase records of tax-free goods.

3. With the introduction of electronic tax-free procedures, businesses operating duty-free shops (shops selling export goods) can now instantly provide purchase records of purchasers, such as foreign tourists (records of purchases of duty-free goods and information such as the purchaser's passport) to the Commissioner of the National Tax Agency in electronic form via the Internet or other means.

4. Duty-free shops must store the electronic data created after sending it to the National Tax Agency database for approximately seven years. (If a duty-free shop wishes to store the data on paper, paper storage is also possible.) Purchase records of these duty-free goods must be stored for each individual duty-free shop. PIE VAT provides safe and secure support for storing purchase records associated with the electronic tax exemption system.

Advantages and disadvantages of electronic tax exemption The tax-free procedure has been digitized, which has brought benefits to foreign tourists and tax-free shops, but it has also created some burdens. By using the tax-free sales system PIE VAT, you can digitize your tax-free procedure without any burden.

Understanding Tax Free Shopping

First up, tax free shopping is an underutilized secret weapon that can take your international shopping adventures to the next level. This perk allows eligible tourists traveling abroad to score refunds on sales taxes and VAT paid on goods purchased overseas. We're talking potential savings of 10-25% off your initial spend, depending on the destination.

Here's a quick primer on how it works:

• Tax free shopping applies to purchases made at approved retailers across an entire country.

• To claim your refunds, there are typically minimum purchase requirements that must be met.

• You'll pay the full taxes upfront at the time of purchase. Then, you can claim money back when exiting the country by presenting your validated forms and receipts to customs.

• Tax free policies are offered in over 60 countries globally, spanning top destinations across Europe, Asia, the Americas, and the Middle East. Popular spots include France, Italy, Germany, Singapore, Thailand, UAE, Japan, UK and more.

Read our full guide on tax free shopping here.

Exploring Duty Free Shopping

Now that you're primed on tax free shopping, let's explore its close cousin - duty free shopping. This perk focuses on specialized goods exempt from import duties and taxes in places such as Japan.

Here's an overview:

• Duty free shopping is only available at international airports and ports, unlike tax free policies that apply countrywide.

• Savings are realized instantly at the time of purchase, with selected merchandise exempt from duties and taxes.

• It typically applies exclusively to specific categories like perfume, alcohol, tobacco, luxury items. Retail selections are limited compared to tax free.

• There are no minimum spend requirements to shop duty free. However, selections are restricted.

• Duty free retailers are operated by private companies under concession agreements, distinct from tax free which is run by refund agencies.

• Purchases are delivered right at the airport, rather than allowing shoppers to buy items citywide over a trip.

By concentrating duty free shops at ports of entry and exit, this aims to drive tourism revenue through attractive discounts on in-demand goods. You can read more on Duty Free and Tax Free in our article.

Benefits of electronic tax-free shopping: Advantages for tax-free shops

The electronic tax-free system has made it easier for both tax-free shops and foreign tourists to enjoy tax-free shopping. We can expect to see an increase in the amount of spending by foreign tourists in Japan in the future.

Benefits of Duty Free Shops

1. Duty-free sales procedures such as paperwork are no longer necessary, greatly streamlining the process of tax-free sales. PIE VAT supports tax-free electronicization free of charge.

2. Since duty-free shopping will now be easier than before, it is expected that sales of duty-free goods from foreign tourists will increase.

Do you want to partner with Pie VAT in Japan? If you own a store in Japan enter your details here.

Benefits for tourists

1. The electronic tax-free procedure will make it easier to purchase tax-free goods.

2. The electronic tax exemption procedure will increase the number of tax-free shops, allowing you to enjoy tax-free shopping at more shops.

What burden has increased on duty-free shops due to the electronic tax exemption system?

PIE VAT allows for electronic tax exemption without any disadvantages. After tax-free shopping was digitized, tax-free shops are now required to explain necessary matters to tax-free shoppers in foreign languages. They must explain the following three points. The second and third points require the consent of the tax-free shopper.

1. Duty-free items are purchased by individuals to take from Japan and use abroad.

2. When leaving the country with duty-free items, you must present your passport at customs.

3. If it is discovered that you have not taken any goods purchased as duty-free goods out of the country within six months, you will be subject to consumption tax when you leave the country. It is difficult to provide complex explanations in foreign languages ​​such as English and Chinese. Don't worry. PIE VAT's tax-free electronic app for foreign tourists is designed to provide explanations within the app and obtain the consent of foreign tourists.