The regulations on taxes and fees in Japan are quite different, so many foreigners find it difficult to understand the tax system when shopping in Japan, and many foreigners feel that the things they buy are expensive because of too much extra cost added. However, is that really the case? In this article, we will show you the regulations on consumption tax in Japan.

What is the consumption tax? The process of increasing consumption tax in Japan

Consumption tax (VAT) is a tax you need to pay when you purchase goods or services. In most countries, the current consumption tax is 10% and is usually calculated directly into the cost of each product or service. That is, with the shelf price of each product displayed in supermarkets, this tax is already included. In contrast, in some stores in Japan, the consumption tax is often separated from the product cost and will be summed up in a separate row in the receipt.

Next, let’s take a look at the process of increasing consumption tax in Japan!

March 1989: Applied the 3% consumption tax system
April 1997: Increased tax from 3% to 5%
April 2014: Increased tax from 5% to 8%
October 2015: Planned to increase tax from 8% to 10% but was delayed later
October 2019: Officially increased tax from 8% to 10% 

“VAT relief” in Japan

“VAT relief” means that certain products or places belonging to specialized categories will be charged at a cheaper tax rate, only 8%. Those categories include:

Periodicals (Newspapers or magazines published 2 or more times a week)
Takeaway 
Grocery store
Drugstore
Shopping mall

In case you buy food and drink at a convenience store and use the Eat-in Space, the “VAT relief” is not be applicable.

VAT relief does not apply to food and drink at the store

Consumption tax exemption for foreign tourists

The consumption tax exemption for foreign tourists began in October 2014, and was reformed in May 2016 to make shopping more convenient for tourists. Anyone who comes to Japan with a short-term visa is exempt from tax at stores with Tax-free signs. Tax-exempt category includes:

Household goods
Consumables (such as paper, pens, gifts, clothes, etc.)

The total amount of “Household goods” and “Consumables” purchased in one day or in the same store must be over 5,000 yen to gain the tax exemption. You can choose to pay for “Household goods” and “Consumables” separately or collectively. Consumables will be put in specialized packages (with labels in case of opening), you must not open the package before bringing it outside of Japan.

Hopefully, the above article has provided you with the basic knowledge about consumption tax in Japan. Please enjoy your time with Japan!