Japan Tax-Free Abuse: 56 of 57 Big Buyers Had No Goods

Bottom line: nearly 90% of ¥100 million buyers left without a customs check

There are two sets of figures: government materials, and press reports based on interviews with the National Tax Agency. The government figures cover a longer period and a larger group.

*Government figures count people cumulatively and are a mechanical tally of purchase records sent to the NTA's tax-free sales management system. [MOF, NTA, METI and Japan Tourism Agency, "Review of the tax-free system for foreign travellers (draft)", Jan 2025]

The materials stress that "not all buyers of over ¥100 million are acting fraudulently," but state that for almost everyone who was checked, export of the goods could not be confirmed. They add that "most of them do not have the funds to pay, and almost all leave the country with the tax in arrears."

Why it slipped through: the check was voluntary and departure could not be stopped

Under the old system, shops sold goods at the pre-tax price and customs checked the goods when the traveller left. Because the exemption was granted at the till, the shop could not see any lost tax if the goods were resold in Japan.

• Tax-free shop: checks the passport, sells at the pre-tax price and sends the purchase record to the NTA's system
• At departure: travellers must show their passport to customs, but people committing large-scale fraud avoided this and escaped checks
• If caught: anyone without the goods is charged the exempted consumption tax on the spot
• If unpaid: the check is voluntary and refusing it is not grounds to stop departure. Leaving the country leaves the tax in arrears

The FY2018 tax reform decided to digitise tax-free procedures (from April 2020), letting the NTA see who bought what, where and for how much. The Ministry of Finance's explanation says this revealed that cases in which large volumes of tax-free goods were suspected of being diverted within Japan were "occurring frequently". [MOF, Explanation of the FY2025 Tax Reform: Consumption Tax Act]

How much tax was lost: ¥10 million on every ¥100 million

On ¥100 million of goods bought tax-free, the consumption tax normally due at the standard 10% rate is ¥10 million. Anyone buying the same goods in a Japanese shop pays it.

By headcount, the 690 are just 0.004% of the 19.59 million cumulative tax-free shoppers who left during the same two years. Yet they account for 9.3% of the ¥2.4979 trillion in total tax-free purchases. The gap in the system was concentrated in a very small number of high-value buyers.

The tax-free system is a policy tool the government created to expand inbound tourist spending. According to press reports, the 57 people checked in FY2022 alone left over ¥1.8 billion in tax unpaid. For residents who pay 10% every day, it looks like tax is collected where it is easy and missed where it is hard. The 1 November change is meant to close that gap.

What changes on 1 November: pay tax first, get it back at departure

For purchases from 1 November 2026, tax-free shops will charge the tax-inclusive price. Travellers have the export confirmed by customs when they leave within 90 days of purchase, and the shop then refunds the consumption tax. [NTA Q&A on the refund method (overview)]

• If goods are resold in Japan, the tax has already been paid, so nothing is lost; the buyer simply gets no refund
• For items of ¥1 million or more before tax, the purchase record will include identifying details such as serial numbers (to prevent swapping)
• Gold and platinum coins, as well as bullion, are now explicitly excluded from tax-free purchase

The traveller's procedure, how the refund is calculated (¥9,091 back on ¥100,000 including tax) and the removal of the cap are covered in Tax-free shopping moves to a refund system.

Businesses: beware of buying tax-free goods — no input tax credit if you knew

Tax-free goods diverted within Japan end up being bought by some business. Since 1 April 2024, if you buy goods knowing they were bought tax-free, you cannot claim the input tax credit on that purchase. This applies even to second-hand dealers using the special rule that allows credits without an invoice. [NTA: Restriction on input tax credit for purchases known to be tax-free goods]

The NTA gives these as signs that goods may have been bought tax-free:

• ID shows the seller does not live in Japan
• The item is in tax-free packaging, or shows signs of it
• The same goods are brought in in large quantities or regularly
• A companion, not the person shown on the ID, leads the transaction
• The supplier recruits tax-free shopping "runners" on social media

As countermeasures the NTA suggests careful ID checks, confirming and recording where the supplier got the goods, paying by bank transfer to the seller's own account rather than in cash, and in some cases avoiding the purchase altogether. Goods bought under the old system may still be brought in after November, so second-hand buyers and resellers should set a checking procedure. How input tax credits work is explained in Simplified vs standard consumption tax.

Summary

• In FY2022, of 374 people who bought over ¥100 million tax-free, customs checked 57 and 56 no longer had the goods (press reports)
• From April 2022 to March 2024 there were 690 such buyers with ¥233.2 billion in purchases; nearly 90% were not caught, and almost all who were charged fell into arrears (government materials)
• At 10%, the exempted consumption tax on ¥233.2 billion is about ¥23.3 billion, though not all of it is fraud
• From purchases on 1 November 2026, shoppers pay tax at the till and get it back after the export check
• Since April 2024, businesses that knowingly buy tax-free goods cannot claim the input tax credit

Sources

• MOF, NTA, METI and Japan Tourism Agency: Review of the tax-free system for foreign travellers (draft), January 2025
• MOF: Explanation of the FY2025 Tax Reform, Consumption Tax Act
• NTA: Q&A on export goods shops (refund method, overview)
• NTA: Restriction on input tax credit for purchases known to be tax-free goods (revised May 2025)
• TV Asahi network (ANN): Tax-free system under review over resale abuse; arrears over ¥1.8 billion (22 October 2026)
• Okinawa Times (Kyodo): FY2022 customs checks of ¥100 million tax-free buyers found goods in about 2% of cases (31 December 2023)

The figures 374, 57, 56 and about ¥1.85 billion come from press reports based on interviews with the NTA and others, and have not been confirmed in published government materials. Published materials confirm the 690 cumulative buyers and ¥233.2 billion for April 2022 to March 2024, and the shares caught, charged and in arrears. This article is general information and does not refer to any particular individual or nationality. For individual tax decisions, consult a tax office or tax accountant.