Takashimaya Department Store Faces Tax Backlash
The Takashimaya department store in Osaka is facing a significant tax bill after being accused of improperly offering tax-free sales to foreign customers during the COVID-19 pandemic. The Osaka Regional Taxation Bureau has ordered Takashimaya to pay 570 million yen ($3.8 million) in back taxes, including an additional tax for underreporting sales.
Takashimaya disputes the decision, claiming that it properly processed the tax-exempt transactions. However, the bureau's investigation revealed that many of the customers who made tax-free purchases resided in Japan, suggesting that the sales did not meet the conditions for tax exemption.
Consumption tax-free sales are only permitted when customers take the goods out of the country and don't intend to resell them. During the pandemic, when foreign travel to Japan was severely restricted, Takashimaya's Nihonbashi store in Tokyo and Osaka store saw a surge in luxury brand purchases by Chinese customers who were exempt from paying consumption tax.
Takashimaya maintains that it properly checked the visas or other documents of these customers to ensure they resided overseas. However, the bureau's findings suggest that many of these customers were permanent residents of Japan, making them ineligible for tax-free purchases.
This incident highlights the challenges faced by retailers in verifying the eligibility of foreign customers for tax-free sales, especially during periods of restricted travel. It also raises concerns about potential abuse of the tax-free system by individuals residing in the country.
Other major department stores across Japan have also been asked to pay back taxes for improper tax-free sales to foreign customers, indicating a broader issue within the industry.