Tax authorities in Tokyo, Japan have imposed a $98 million (13 billion yen) back taxes on Apple for alleged duty-free abuses by resellers. Nikkie Asia reports that a few Apple Stores in the country failed to tax suspicious resellers who purchased iPhones and other devices in bulk.
To promote tourism in the country, Japan has a tax-free shopping policy that exempts visitors, staying less than six months, to purchase various goods without paying a 10% consumption tax.
However, the law does not apply to bulk purchases for resale purposes and the stores are responsible for spotting and charging the 10% consumption tax from resellers.
Apple stops offering tax-free shopping in Japan, voluntarily
According to a source, multiple bulk purchases of iPhones were discovered at Apple stores by foreign shoppers. “At least one transaction involved an individual buying hundreds of handsets at once, suggesting that the store missed taxing a possible reseller” and incorrectly exempted them from consumption tax.
The tech giant has to cover the unpaid taxes for failing to tax bulk purchases which resulted in lost tax revenue the country needs to fund its social security programs.
Apple’s sales in Japan totaled $26 billion in fiscal 2022, according to the company’s latest annual report.
The unusually large back tax charge underscores a glaring loophole in Japan’s unique tax-free shopping rules.
Tax-exempt purchases of consumables such as cosmetics or pharmaceuticals are limited to 500,000 yen, but no cap exists for general goods like home electronics.
Now, Apple Japan has filed an amended tax return and in June, it stopped offering tax-free shopping.
Tax authorities in Japan have levied 86.9 billion yen this year on companies that failed to report 24,000 cases of consumption tax payments.
Japan in April 2020 set up a system to share data electronically between the National Tax Agency and customs authorities. Tax authorities have ordered some sectors not to allow exemptions on transactions that appear suspicious.