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Updated on October 31, 2014

Tax Exemption

by Shirley Lau
October 31, 2014

Foreign travellers in Tokyo welcome the revised rules on consumption tax exemption that took effect on October 1, but not all of them are aware of the change, which is designed to boost tourist spending and reinvigorate the Japanese economy.

Under the new rules of the Consumption Tax Exemption Program for Foreign Visitors, non-resident foreigners in Japan are exempt from paying taxes on purchases of 5,000 yen or more at participating retailers. The range of goods covered by the program has been broadened to include consumables such as foodstuffs, beverages, medicines and cosmetics. Prior to the revision, the minimum spending eligible for tax exemption was 10,000 yen and the types of tax-exempt goods were limited to non-consumable products.

The move came months after the Japanese consumption tax was raised from 5 to 8 percent in April. Since then, sales revenue for department stores across Japan has reportedly gone down.

At Mitsukoshi Department Store on the Ginza, "Tax-free Shop" signs are displayed at the information counter to indicate its participation in the scheme. On October 1, some foreign shoppers at the long-established store expressed delight at the new policy.

"I've been told about the exemption by a local friend. I've just bought a variety of chocolate and cakes and cosmetic products – moisturizers, eye cream, facial masks and the likes. The salesgirl told me I could get tax refund – right away. That's fantastic," said Kim Song-ha, 28, a fashionable public relations executive from Seoul. "I don't think there are many countries where tourists can get a tax exemption for food products. And to get the refund immediately saves me a lot of time having to queue up at a tax refund counter at the airport, where the people working behind the counter are invariably poker-faced."

But not every traveller is aware of the change. Li Yue, 38, a well-groomed housewife hailing from Shanghai, said no one had told her or her fellow travellers in her tour group about the concession. "Is there such a thing? We've never heard of it," she said, holding four big shopping bags from different department stores. "This is my second time to Tokyo. The falling yen has already made everything cheaper for us. This refund is like a windfall."

Asked if she would visit Japan more often because of the exemption, Ms Li said: "Eight percent is not bad, but then there are only so many consumables you can buy. It's not like you can get back a lot in absolute terms. I won't come to Tokyo just because of a little windfall. But I and my friends will come here more often anyway."

"We often visit Hong Kong to shop for designer products. But I heard Hong Kong is very chaotic now, and they don't like people from mainland China. Tokyo seems a better choice," Ms Li said.

Tourist arrivals to Japan hit a record high of more than 10 million in 2013. Among these foreigners, Chinese visitors to Tokyo were by far the biggest spenders, spending an average of 122,684 yen on gifts compared with the other foreign visitor average of 46,546 yen. More than 69 percent of them shopped in the Ginza, an area with a high concentration of luxury brand shops.

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