Japan reforms tax-free shopping: Consumption tax to be paid at purchase from 2026

JAPAN. The Japanese government has enacted a sweeping reform of its tax-free shopping system, which will align the country with the tax refund regimes for visiting shoppers used in Europe and in other Asia Pacific countries. 

The law, passed by the Parliament on 31 March, will take effect on 1 November 2026. It enables a transition from the current Consumption Tax-off model to a Consumption Tax-on* scheme. In a major departure from the current rules, this means that shoppers must initially pay the consumption tax and later claim their tax refund. Today, eligible shoppers receive the tax-free price at point of purchase. 

The current Consumption Tax rate is 10%, with an 8% lower rate for food and other essentials.

The reform introduces a three-step process for tax refunds: 

• Consumption tax payment at purchase – International shoppers will initially pay the tax at the point of sale. 
• Customs validation required – Travellers must complete Customs validation at designated exit points using self-service kiosks. 
• Refund issued upon export proof – The consumption tax refund will be processed only after Customs confirms export validation. 

To qualify for tax-free shopping, international visitors must spend at least JPY5,000 (US$34) on eligible goods (including fashion & accessories, cosmetics, gold and jewellery, leather goods) and depart Japan within 90 days of purchase. 

The updated tax-free shopping framework aims to maintain Japan’s attractiveness to global travellers while improving security and efficiency in the system. It also aims to curb the resale of tax-free goods within the country. 

Economic impact of tax-free shopping 

According to tourism shopping tax refund company Global Blue, Japan’s tax-free spend recovery reached 287% in 2024 compared to 2019, driven by increasing tourist arrivals. 

Mainland Chinese tourists account for about half of Japan’s tax-free spending (source: Global Blue data 2024), and benefit from favourable foreign exchange rates, streamlined visa processes and exclusive shopping experiences.  

“Tax-free shopping has become a key driver in Japan’s retail boom,” noted Global Blue. In 2024, international tourists spent approximately JPY2.4 trillion (US$16 billion) on shopping, contributing heavily to the total JPY8.1 trillion (US$54 billion) spent overall by visitors.  

This spending boost has positively impacted the Japanese tourism industry, supporting hospitality, dining and cultural experiences while creating jobs in related sectors. 

The move aims to enhance security, reduce risk of fraud and ensure sustainability of the system. By implementing the Consumption Tax-on model, the government seeks to improve monitoring and maintain a transparent shopping experience for both retailers and international visitors. 

The shift to a Consumption Tax-on system will require retailers to update their tax processing procedures. They will also be responsible for storing transaction data and ensuring compliance with export verification requirements. 

*Note: In Japan, consumption tax is an indirect value-added tax on most goods or services transactions, similar to Value Added Tax (VAT) in other states.