Apple Japan charged ¥14 billion in back taxes

The Yomiuri Shimbun

16:48 JST, December 27, 2022

Tax authorities have charged Apple Japan about ¥14 billion in back taxes over sales of iPhones and other devices that were incorrectly exempted from consumption tax for two years through Sept. 30, 2021, it has been learned.

According to sources, the Tokyo Regional Taxation Bureau conducted tax inspections at the company’s stores and found many irregular tax-free purchases made apparently for resale purposes.

Transactions worth about ¥140 billion did not meet the conditions for tax-free sales, according to the sources.

The amount Apple has been ordered to pay in back taxes is thought to be one of the largest ever charged in connection with transactions incorrectly exempted from consumption tax.

There have been several cases involving tax-free purchases for resale purposes of cosmetics and other such items popular overseas. The latest case indicates iPhones have also been targeted by resellers.

Apple Inc. unit Apple Japan operates 10 retail outlets in Japan.

The Tokyo Regional Taxation Bureau started conducting tax inspections of the stores last year and uncovered suspicious tax-free transactions, including one in which Chinese tourists bought several hundred iPhones over several visits.

The prices of iPhones are cheaper in Japan compared to other countries. It is believed resellers sought visitors to Japan via social media and offered them rewards to purchase devices tax-free. The resellers then made a profit by selling the devices overseas.

Consumption tax is levied on goods and services consumed in Japan. Foreign tourists can purchase souvenirs and other goods to be consumed overseas tax-free, but purchases for resale purposes are not eligible for the exemption.

Based on the discovery of irregular, bulk tax-free purchases, the bureau informed Apple that consumption tax had been incorrectly exempted from about ¥140 billion in sales over two years and ordered the company to pay about ¥14 billion in back taxes.

Apple Japan subsequently suspended tax-free sales at Apple Stores. The company is considering measures to prevent suspicious bulk purchases, according to the sources.

Apple Japan did not confirm whether it had been charged back taxes when asked by The Yomiuri Shimbun. Regarding the suspension of tax-free sales, the company said, “We apologize for the inconvenience. ”

Retailers have been obliged to process tax-free transactions electronically since October 2021, and the National Tax Agency now receives data on products sold and the passport numbers of the purchasers.

According to the sources, the data helped tax authorities uncover irregular tax-free transactions at Apple Stores.

Measures needed

By Toru Asami / Yomiuri Shimbun Staff Writer

Sales of iPhones and other Apple devices were incorrectly exempted from consumption tax on multiple occasions, it has been learned.

Apple Japan has stopped tax-free sales and is believed to be creating a system to prevent such purchases for resale purposes. The company’s response is appropriate given the possibility that the products were being used to earn money illegitimately.

Popular products such as cosmetics and watches are said to have been purchased tax-free for resale purposes.

“The important thing is not to allow irregular bulk purchases,” a source in the tax authorities said.

The government should take measures, such as revoking the license for tax-free sales from stores that repeatedly break the rules.

A tax refund system at ports similar to services offered in many countries should also be considered. Under such a system, tourists would get a tax refund when leaving the country, not when making purchases.