Japan to Implement New Tourist Tax Refund System

Japan, a dearly beloved country for many travellers, is set to overhaul its current consumption tax exemption model for foreign tourists, moving towards a new tourist tax refund system. This shift, anticipated to take effect in 2026, aims to enhance tax collection and control fraudulent activities.

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A new era of tourist tax refund system is set to take place

Image credit: Hideyuki KAMON | Flickr

Under the proposed system, international visitors will now be required to pay the consumption tax upfront at duty-free stores. Refunds will then be processed at departure points such as airports. This change is designed to curb the misuse of the current tax-exempt system, where tourists can purchase items at duty-free without immediate tax payment.

The new system will involve customs inspections at departure points to verify purchased items are indeed leaving Japan. Refunds will be issued either in cash or directly to a pre-registered credit card. This new tourist tax refund system is expected to significantly reduce the risk of tax evasion and ensure that the government receives the appropriate revenue from tourist purchases.

Japan simplifies the duty-free process

To further streamline the duty-free shopping experience, the government plans to eliminate the distinction between general items and consumables. This means that the current ¥500,000 spending limit on consumables, along with associated packaging rules, will be lifted. This simplification is expected to benefit both tourists and retailers.

Japan’s move to a refund-based system aligns with international practices in Europe and other regions. By adopting this approach, Japan seeks to maintain a competitive edge in the global tourism market while ensuring robust tax compliance.