Japan will fully implement a new departure tax refund system from Sunday (1 November), ending its long-standing practice of granting immediate tax exemptions in shops. Travellers will instead pay tax-inclusive prices when shopping and receive refunds after completing verification procedures on departure.

About 200 tax refund verification terminals have been installed at 36 international airports and ports across Japan. The changes aim to crack down on offenders who exploit tax-free shopping loopholes to resell high-value tax-free goods within Japan for profit.

Tourist arrivals in Japan have surged, exceeding 40 million for the first time last year, up 15.8% year on year. The yen’s continued weakness has made Japan a popular shopping destination for international travellers.

Analysts note that Japan’s existing system of immediate in-store tax refunds has become relatively rare worldwide, but its convenience has remained a key draw for foreign tourists to spend.

Under the new system, visitors seeking tax refunds must scan their passports at airport self-service terminals to complete verification before leaving Japan. Haneda Airport in Tokyo has reportedly added 22 verification terminals in the public areas before security screening in Terminals 2 and 3 to accommodate tens of thousands of travellers seeking refunds each day.

With two days to go before the new system takes effect, Tokyo’s Ginza district, lined with luxury boutiques, is already packed with tourists.

A drugstore employee told Lianhe Zaobao (LHZB): “Many tourists have deliberately brought forward their shopping because, from 1 November, they will no longer be able to get an immediate tax refund in shops. Many worry that the new system will be less convenient than before.”

A Chinese tourist shopping at a luxury handbag boutique in the Ginza Mitsukoshi department store said: “We came to Japan specifically to shop before the new system takes effect. Once tax refunds have to be processed at the airport, we’ll have to get there earlier. It’s just too much trouble.”

According to the Japan Tax-Free Shop Association, refunds will be available in cash or through cashless payments.

Tourists choosing cashless refunds can register their bank account or credit card details when shopping and receive refunds from the tax-free shops after leaving Japan. Those choosing cash refunds must first complete the procedures at a terminal, then collect their money from a tax refund counter at the airport.

Tourists can also complete the procedures on their smartphones by connecting to a dedicated Wi-Fi network at the airport and registering their personal details on the government’s Visit Japan Web website.

Besides Haneda Airport, seven other airports, including Narita Airport and Kansai International Airport, support this service.

The new system will also abolish the separate treatment of “general goods” and “consumables”. General goods such as clothing, accessories, home appliances, watches and jewellery, and consumables such as cosmetics and food, will be subject to the same tax exemption rules.

Tourists will qualify for tax exemptions when their purchases of eligible goods at a single shop total at least 5,000 yen (about S$40.68). The existing tax-free purchase limit for consumables of 500,000 yen per person per day at a single shop will also be abolished.

Japanese authorities began preparing for the new system two years ago, primarily due to growing abuse of the tax exemption system for profit.

Previously, even when customs officers discovered that departing travellers were not taking their tax-free purchases out of Japan, recovering the tax was often difficult because the travellers refused to pay it.

According to official figures, billions of yen in such taxes go unrecovered each year.