Japan: Expanded range of Duty-free goods for foreigner tourist

Consumption tax is levied on goods purchased and consumed in Japan at the prevailing rate of 8%.

Previously, duty-free goods were limited to durable consumer goods (examples are electric appliances and devices, clothing and bags) excluding general consumer goods which could be consumed in Japan (such as confectioneries, medicine, cosmetic products, food and beverage). In a recent survey conducted by Japan National Tourism Organization (JNTO), the top five most-purchased consumer goods by foreign tourists are confectioneries, medicine, food and beverage, clothing and bags, and digital cameras and watches. In view that the top three most-purchased consumer goods i.e. confectioneries, medicine, food and beverage are not duty-free durable consumer goods, the government had on October 1, introduced a new tax exemption rule to expand the duty-free goods to include general consumer goods such as medicine, food, cigarette and cosmetic products. The new rule stipulates that purchase of duty-free goods for a foreign tourist is limited to 500,000 yen per day; and, the foreign tourist must leave Japan with the duty-free goods purchased within 30 days. 

After 3.11 tsunami disaster in 2011, the number of foreign tourists have dropped significantly. According to the survey on the foreign tourist consuming index conducted by JNTO, the average spending made by a foreign tourist in the 2nd quarter of this year was 49,763 yen/person, the highest spending contributors are Chinese tourists: 120,245 yen/person, which was 2.3 times of Hong Kong tourists, 2.6 times of Taiwanese tourists, 5 times of American tourists and 5.9 times of South Korean tourists. The number of Chinese tourists visiting Japan was 531,258 persons and the total spending was 63.9billion yen. However, the number of tourists from ASEAN countries has shown great improvement. The main reasons are due to the devaluation of Japan’s currency and the relaxing visa requirements for the ASEAN tourists. 

The tax refund of the 2nd quarter of this year was approximately 5.1billion yen which is calculated based on the spending of 63.9billion yen made by Chinese tourists. Unlike the tax refund rules of most western countries of which the foreign tourists have to apply for refund at the airport. The tax refund rule in Japan is very simple, foreign tourists are exempted from paying the consumption tax at the duty-free shops by showing the documents required. This enables foreign tourists to have more cash in hand to spend on other products. 

The government wishes to increase the number of foreign tourists by implement this new tax exemption rule, in order to further boosting the economic growth and reduce the negative impact from increasing the consumption tax rate in Japan.

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