Apple Japan Hit With 14-B Yen Back Taxes Over Duty-Free Sales

Apple Inc.'s Japan branch was slapped with 14 billion yen ($105 million) in additional taxes after authorities found bulk sales of iPhones and other items to foreign visitors were incorrectly exempted from consumption tax, a source close to the matter said, Kyodo News reported.

Photo Insert: An Apple store in Japan

The Tokyo Regional Taxation Bureau found Apple Japan's approximately 140-billion-yen tax-exempt sales over two years through September 2021 were the result of fraudulent duty-free purchases to be resold for commercial purposes, the source said.

Tax-free shopping is only allowed for foreign visitors who buy souvenirs or daily goods within six months of entering Japan and take them abroad. Although products are subject to taxation if purchased to resell, it is up to the stores to determine the nature of purchases.

The taxation bureau, which started its investigation last year, found multiple unusual transactions, including a tourist buying several hundred devices at an Apple store, according to the source.

The 14 billion yen, which covers additional tax on underreported sales, is believed to be the highest additional consumption tax charged on record for tax-free sales. Certain goods like iPhones are said to be cheaper in Japan than abroad.

The tax bureau suspects vendors are seeking to take advantage of the country's duty-free system by soliciting visitors to Japan to purchase the products and then sell them overseas, turning a profit by bypassing consumption tax.

Among such cases, a group of seven Chinese nationals, who used tourist and other visas to visit Japan from 2020, were charged by the Osaka Regional Taxation Bureau with a penalty of around 760 million yen, the equivalent of the consumption tax on their purchases of 7.7-billion-yen worth of luxury brand goods.

It was determined the merchandise, which included watches and handbags, was intended for resale.

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