Duty-free shops nationwide must send digital records of customer information and purchase transactions to the National Tax Agency starting this month.
The system addresses problems with duty-free goods being resold domestically, with sellers profiting from the consumption tax portion. The national tax authorities plan to analyze the digital records to ramp up investigations.
Digital records sent to the agency by Tokyo department stores show many purchases by Chinese students at the 490,000 yen level.
For example, a 21-year-old student visited department stores around a dozen times over a period of about one month immediately after arriving in Japan last autumn, spending about 10 million yen on luxury watches and other products. The student also made 10 purchases worth about 495,000 yen of the same cosmetics or other products.
Under the system, duty-free shops scan a customer's passport and send the data along with purchase records to the agency. The information is shared with customs to facilitate departure procedures.
The system could reduce the administrative burden for duty-free shops, and allow customers to make purchases faster.
Duty-free purchases are only permitted during the first six months after entering the country, and come with conditions such as that they must be taken out of the country as souvenirs or gifts.
The products cannot be resold. If reselling is discovered in an investigation, the national tax authorities will collect consumption tax on the products.
The spending limit on consumables such as cosmetics and food is 500,000 yen per purchase. This is why so many of the purchases were in the 490,000 yen range.
"A Chinese man repeatedly bought large quantities of the same cosmetics. He said he was going to use them himself, but I was suspicious," an official of a Tokyo department store said, speaking about multiple sales the store had made to him around July of duty-free goods in the 490,000 yen range.
An official of another duty-free shop reported seeing international students giving duty-free purchases to other men and women near the store in exchange for cash.
"It's obviously unnatural for international students to make repeated purchases of expensive duty-free products," the official said. "There are probably brokers who give the students a commission and resell the purchased products."
Japanese also making purchases
In the past, duty-free shops affixed a receipt with the name and number of products purchased to the customer's passport, which was checked by customs agents upon departure. However, if a receipt was destroyed, tax authorities had trouble knowing what had been purchased.
The digital system was introduced in April last year and became mandatory on Oct. 1.
Data accumulated over the past 18 months indicates that not only foreign visitors but also Japanese citizens who live overseas have made large duty-free purchases during visits home.
A Japanese woman in her 50s who had been in Southeast Asia bought about 100 million yen in luxury watches and cosmetics at department stores in Tokyo since April last year. At least 10 other Japanese have made duty-free purchases worth tens of millions of yen in a year.
Not only foreigners, but also non-resident Japanese, such as workers stationed overseas, can purchase duty-free goods because the consumption tax only applies to purchases and asset transfers made domestically.
However, a tax official said, "Some Japanese repeatedly leave Japan after the six-month duty-free period ends, and then come back and make more duty-free purchases."
In light of this situation, the government is considering tightening the duty-free requirements for international students and non-resident Japanese in its planned tax reforms this winter. Discussions involving the Finance Ministry, Japan Tourism Agency and other entities are expected to begin soon.
Pandemic delays digital implementation
There were about 55,000 duty-free shops nationwide as of the end of March, according to the tourism agency.
Of these, only about 60% had reported implementing the new digital system as of the end of August. Stores that do not set up the system are unable to sell duty-free items starting this month.
The delays are partly due to the sharp decline in visitors to Japan due to the pandemic. Last year there were 4.12 million visitors to Japan, down 87% from the 31.88 million in 2019.
In addition, when introducing the system, each store must pay to install a data transmission system or sign up with a service provider, which has made cost an issue.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
