1. Introduction
Japan continues to see a rapid increase in inbound tourists, making it one of the most important markets for global retail and luxury brands. On November 1, 2026, Japan will implement a major overhaul of its tax-free shopping scheme for foreign visitors, introducing a new “Refund Method.”
This newsletter explains the key impacts of the reform, optimized for foreign companies already operating in Japan as well as those considering entering the Japanese market.
2. Current System
Under the current scheme, eligible foreign visitors can present their passport at participating stores and receive an immediate tax exemption at the time of purchase. For example, for a purchase of JPY 10,000, the 10% consumption tax is deducted at checkout, and the traveler pays the tax-free amount on the spot.
3. Reasons for the Reform
The upcoming reform aims to address several issues that have emerged under the existing tax-free system. One major concern has been the rise of fraudulent domestic resale, where goods purchased tax-free are later resold within Japan.
Additionally, administrative and system-related burdens—including documentation and system configurations required for tax-free processing—have placed significant pressure on retailers.
Furthermore, the refund-based model is already widely adopted in Europe, Asia, and other international markets, and Japan seeks to align with these global standards to enhance transparency and reliability.
4. Key Changes
- Effective November 1, 2026: Shift from “purchase-time exemption” to the “Refund Method”
- Travelers will pay tax-inclusive prices and receive a refund upon departure
- Abolition of special packaging requirements and category distinctions for consumables
- Discontinuation of the "separate shipment" system (direct-to-recipient shipping will remain)
- For high-value items (JPY 1,000,000 or more), serial numbers or other identifying information
will be required
will be required
5. Implications for Foreign Companies
The reform will have several impacts on foreign retailers in Japan. First, system modifications will be unavoidable. Since tax-free treatment will shift from the point of purchase to a refund at departure, retailers must update their POS systems, tax-free management tools, and electronic data transmission functions. Companies using a global unified POS platform may require additional localization, which could increase implementation time and cost.
On the other hand, the reform will simplify store operations. The removal of packaging requirements, the consolidation of product categories, and the discontinuation of the separate shipment scheme will significantly reduce the workload associated with tax-free procedures at the store level.
Additionally, luxury brands and retailers handling watches, jewelry, and other high-value items must comply with the new requirement to electronically record serial numbers. This will necessitate alignment between sales operations and inventory management systems.
6. Conclusion
This newsletter is intended to provide a strategic overview of the upcoming reform and does not constitute professional advice.
Please avoid making decisions based solely on this information without consulting a qualified specialist.
If you have any questions or would like assistance, please feel free to contact us through the link below.
References
National Tax Agency (Japan): Revision of the Export Sales Outlet System – Introduction of the Refund Method
(Accessed: November 25, 2025)
J-TaxFree: Overview of the New Tax-Free Scheme “Refund Method”
https://j-taxfree.jp/tax-free/refund/x Free
https://j-taxfree.jp/tax-free/refund/x Free
(Accessed: November 25, 2025)
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