Tax Break Planned to Entice International Auctions to Japan

The Yomiuri Shimbun

16:15 JST, November 29, 2020

The Finance Ministry plans to introduce a tax break that would enable international auctions to be held more easily in Japan, it has been learned.

The ministry will soon amend a notice based on the Customs Law to stipulate a tax exemption for auctioned art and other goods. By bringing more auctions to Japan, the ministry aims to boost spending by affluent foreign nationals as well as promote culture and the economy through activities such as related art events.

Currently, when auctions are held at domestic hotels or other venues, auctioned items brought from overseas are subject to a consumption tax of 10% of their market value.

Payment of customs duties is also required for many auctioned items.

If the items are taken outside Japan, the consumption tax may be refunded but not the customs duties.

International auctions have been rarely held in Japan, as winning bids for famous art pieces have often been huge, imposing a heavy tax burden on the buyers.

In contrast, no sales tax or customs duty is imposed in state-designated bonded areas. Japan has about 5,000 such areas, including warehouses near airports and ports.

These areas have been designated as temporary storage places for oil and other imported goods that have not yet been processed by customs. Duty-free shops at airports also fall under this category.

The ministry plans to soon revise the Customs Law-based notice that defines bonded areas to include “storage of art and other items” in a list of examples for the use of the areas. After the revision, tax payments will not be required if auction organizers apply for a venue to be recognized as a bonded area and customs authorities approve.

In Asia, auction giants Christie’s of Britain and Sotheby’s of the United States often hold their auctions in Hong Kong. The location makes it easier for wealthy Chinese people to participate in the auctions, and there is no tax burden there. However, moves have emerged recently to consider holding auctions in Japan, as the political situation in Hong Kong has become tense.

The global market for trade in art and similar goods exceeds 7 trillion yen a year, comparable to the market for mobile games. The United States has a market share of about 40%, while Britain and China each account for about 20%. Japan’s share stands at only about 3%.