In a move aimed at enhancing convenience for international visitors and reducing administrative burdens on retailers, the Japanese government has approved significant revisions to the country’s tax-free shopping system as part of its 2025 fiscal tax reform plan. The changes, proposed by the Ministry of Land, Infrastructure, Transport and Tourism, seek to both modernize the process and prevent misuse of the system.
One of the most notable updates is the shift to a “refund-based system” for tax-free purchases made by foreign tourists. Under this new model, instead of receiving tax exemptions at the point of sale, travelers will pay consumption tax when making purchases and then receive a refund after clearing customs before departure. This system is scheduled to take effect for purchases made on or after November 1, 2026.
Key elements of the revised tax-free system include:
- Abolishment of Special Packaging for Consumables: The requirement for consumables (such as cosmetics and food) to be specially packaged will be eliminated.
- Removal of the ¥500,000 Spending Cap: The previous limit on tax-free purchases of consumables will be scrapped, aligning them with general merchandise rules.
- Simplification for Retailers: Retailers will no longer need to determine whether items qualify as tax-free. This responsibility will be removed under the refund-based approach.
- Clarification of Eligibility Period: Only goods purchased within 90 days before departure, and before customs inspection, will qualify for tax refunds.
Starting April 1, 2025, Japan will also lift restrictions that excluded tax-free items from being shipped separately by travelers—an important step toward accommodating diverse travel styles.
Under the new refund system, the flow will be as follows:
- Tourists will make taxable purchases at stores and retailers will input purchase data into Japan’s Tax-Free Sales Management System (TFSMS).
- Before leaving Japan, travelers will present their purchases for inspection at customs.
- Customs will verify the items and update the TFSMS with the inspection results.
- If confirmed, the applicable tax amount will be refunded to the traveler.
These reforms reflect Japan’s broader commitment to improving the inbound tourism experience and aligning its infrastructure with international standards, all while preventing tax abuse and ensuring smoother operations for merchants. As the number of foreign visitors continues to surge, the government is moving proactively to ensure a seamless and transparent tax-free shopping environment.