Faiza Ahmed Ali

BUS-20S-013 (BBA-6A)
Business Taxation Assignment
Submitted to: Ma'am Sundus

Tax-Free Tourism (shopping, TFS):

Tax-free shopping is the practice of buying products outside of your own nation
while claiming a refund of the sales tax (GST or VAT) that was received by the
store (retailer) on those commodities. Tax fee shopping allows people to get sales
tax back when shopping internationally.
TFS cannot be claimed on every type of international purchase, there are certain
limitations by country’s laws and regulations, for instance restrictions on the
person who can claim the refund (eligibility criteria), type of products (goods only
not services) on which you can claim a refund like it can be claimed only on goods
that are exported, duration of your stay in a particular country and minimum
spends on products etc. Hence the process and policies of refund varies from
country to country.
Tax Free Shopping includes an oversea consumer purchasing products in a retail
store with VAT included in the purchasing price, and then proceeds to collect tax
free form at the store. The customs at the time of shopper leaving the country will
check the form and the receipt of the purchased goods. Once the form, receipt and
other requirements (vary country to country) are fulfilled and validated then the
VAT is refunded to the customer.

Impact of Tax-Free Tourism on Economies:

Tax-free shopping is a significant aspect of the international travel experience. For
the countries who have this scheme implemented have following impact on
economies.
 TFS promotes tourism in the country in which it is implemented. As tourists
are getting an incentive to get a refund of VAT on their purchases. As
tourism increases it increases economic revenue, creates vast numbers of
 employment, improves a country's infrastructure, and promotes a sense of
cultural interaction between tourists and natives. The importance of tourism
has expanded enormously because of its expanding contribution to long-term
economic growth. It promotes economic growth by increasing foreign
exchange reserves, boosting investments in new infrastructure, human
capital, increasing competition, and therefore increasing income and GDP.
 It is observed that tourists want to shop lots when visiting foreign countries
but due to high prices they sometimes don’t buy it. When TFS is
implemented in a country, tourists tend to spend more than usual because of
the VAT refund.
 Though they are getting the refund back that is subject to certain limitations
country to country. Tourists are attracted to it and apart from spending on
shopping they also spend on their living, eating, services and other expenses.
Which increases the country’s revenue and ultimately the economy.
Overall tax-free tourism has following impacts on country’s economy in which the
provision is implemented:
 Tourism spending in Country increases.
 Impact on the number of visitors
 Increase in spending due to additional visitors
 Impact on visitors’ spending
 The gross GDP impacts.
This is usually done as a strategy for economic development. As a result, countries
across the world provide tax-free shopping to international visitors. Tourists
benefit from it, and countries can generate income as well if more visitors and
expenditure are generated because of tax-free shopping.

Process of Refund:
As per the sources (Wikipedia) tax-free shopping is currently available in about 54
countries of the world. Every country has its own criteria and process of refund.
But the basic process is:
 When paying for your purchases, ask store staff for a tax-free Form. Your
personal details will be filled out on the tax-free Form and if you match the
criteria of the refund policy, the form along with required documents will be
sent to customs.
  At the airport or port, go to the Customs desk and present your completed
Tax-Free Form, passport, receipts and purchases to get a stamp on your
form. Goods should be kept available for inspection, unused and with the
original receipts.
 Present your stamped, completed Tax Free Form and your travel passport to
the nearby desk or office (mostly at currency exchange) to receive the refund
in cash or on your credit card.

Tax-free Shopping in Japan:

VAT tax exemption is only available in selected places and situations, such as
duty-free shops in airports, specific brands, certain electronics stores and
department stores, and a few other shops (duty-free shops) that have been allowed
by the tax office to offer items for export.
Who cannot shop tax-free in Japan:
 Those who have been in Japan for more than six months.
 Those currently working in Japan.
 Those who used an automatic gate at the airport and do not have an entry
stamp on their passport.
 Those who do not meet the required purchase amount for refund.
Who can shop tax-free in Japan:
Tax-free shopping is only allowed to non-residents (Non-resident refers to
foreigners who have been in Japan for less than six months, and Japanese nationals
who left the country to live abroad for two years or more and have only returned to
Japan temporarily for less than six months).
Criteria for products:
Products eligible for tax refund are those for personal use and consumption by non-
residents, not for business or resale. It is also required to take items out of the
country before use. General goods such as home appliances, clothes, bags, and
watches the total of goods purchased at one store on the same day must be at least
5,000 yen (tax excluded). For consumables, such as food, cosmetics, and
pharmaceuticals, total purchase amount must be within the range of 5,000-500,000
yen in one day at a single store and must be packaged in a specific way as to not be
consumed in Japan.
Moreover, in the case of department stores and shopping malls with a tax-free
counter, you may be eligible for tax relief if your total purchase from various
places is 5,000 yen or more. However, depending on the product category, some
items may not be qualified for tax free status, even if the minimum purchase
amount is met.
Process for Refund:
 At the store, show the original passport or they will tell to visit the tax-free
counter. You will be asked to fill tax-free form to confirm your photo, name,
nationality, date of birth, the status of residence, date of entry into Japan, and
passport number.
 The store of purchase creates the purchase record information data and sends
it to the National Tax Agency and custom office electronically.
 If the purchase total is less than the minimum required amount for tax
exemption due to returns or exchanges, the tax exemption will be canceled
for all products, and you will have to pay the full amount, including VAT.
 Show your passport to the customs officer, as the purchase record
information will be sent electronically. The buyer of the tax-free items must
carry them when leaving Japan.
 After proper inspection and passing through customs, the tax refund process
is completed. The amount is refunded in cash or on your credit card.