Be privileged and pay 8% less: Consumption tax exemption for tourists

photo by bradhoc

Travelling is full of entertainments such as sightseeing, great foods, experiencing cultures. Among other things, shopping is the best part of travelling for many of us. In Japan, so many little gadgets catch your eyes and tempt you: traditional craft works, electric appliances, foods, cosmetics and more. One downside is, they are all subject to consumption tax. However, more shops are providing a tax refund service in recent years.

About consumption tax in Japan

As at February 2016, the consumption tax rate in Japan is 8% flat. It might seem to be rather low when comparing with the equivalent tax in other countries. VAT in European countries, for example. Unlike VAT in Europe, however, consumption tax is added to most of goods and services purchased in Japan except for very few items such as exports, rents, insurance payments. That is, items purchased by tourists are most likely subject to consumption tax and total sum of tax paid would be a sizable expense in the end. It is worth going through all the tax exemption procedures to reduce your expense.

Tax-free Shop sign

In recent years, more department stores, large electronics retailers, general retailers and convenience store chains are offering a tax refund service to correspond a increasing number of tourists from overseas. All shops who offer a tax refund have the sign shown above at the front of the premise. They allow you shop free of the 8% consumption tax.

Eligibility Criteria

The consumption tax exemption is open to all “non-residents in Japan who paid for the goods themselves”, and must not be claimed by an agent. You are a “non-resident in Japan” if you are:

a foreign national who reside outside of Japan, and your total stay in Japan since your first arrival does not exceed 6months, or
a Japanese citizen who reside outside of Japan, and your stay in Japan does not exceed 6months

Conditions of consumption tax exemption

Tax-free items

General goods: home appliances, bags, shoes, wrist watches, jewelries, clothing, craftworks etc.
※Total spending in a single business must exceed 10,000 JPY excluding tax. Total purchase of general goods and consumables must NOT be combined.
Consumables: cosmetics, foods, beverages, liquor, medicines etc.
※Total spending in a single business must exceed 5,000 JPY but no greater than 500,000 JPY excluding tax. Total purchase of general goods and consumables must NOT be combined.

Conditions

Items must be purchased for personal use only. Items are subject to consumption tax if they are purchased for commercial use.
Items must be taken out of Japan at the end of your stay.
Consumables must be taken out of Japan unopen within 30 days from purchase. Consumables used within Japan before departure will be subject to consumption tax.
Some shops in shopping complexes such as department stores do not offer a tax exemption service. Make sure to check tax exemption availability before purchase. Also, transaction fees may apply in some shops. Tax exemption procedures must be completed on the same day of purchase.

What to bring

Passport of the person who paid for the goods with a stamp indicating the day of arrival.
※No photocopy accepted, original passport only. If you are Japanese citizen, a proof of overseas residency is required (e.g. valid visa in overseas countries).
Proof of the date of purchase
Purchase receipt (if you are getting a refund)
Credit card used for the payment, if purchased by credit card
※The name on the passport and the credit card must be the same. No business credit card accepted.

Tax exemption procedures

There are two ways to claim a tax exemption. Every shop exempt consumption tax by either of followings.

Make a payment for tax deducted amount at the pay desk of the shop
Make a payment for tax included amount at the pay desk of the shop, and claim a refund for the consumption tax

In any of these cases, you must present your passport and sign on the written oath. Also, a purchase proof document will be attached on your passport. Do not remove this document from your passport as it is to be submitted at the customs when you leave Japan. To complete tax exemption procedures, you need to

Make a payment for the items, claim a tax exemption and get the items packed up
Sign on the written oath and a purchase proof document is attached on the passport
Hand in the purchase proof document at the customs when leaving Japan

Let’s go shopping!

Since the new consumption tax exemption system came into effect on October 1, 2014, the range of tax-free items has been expanded and the minimum purchase of tax-free items has been lowered. The procedures takes a little time but once it is done, you get a deduction or refund of consumption tax. This system can be a great help as we tend to spend large sum of money on goods while we travel other countries. Make sure you carry your passport with you during your stay in Japan and enjoy shopping free of tax!