Tokyo officials are demanding Apple Japan pay $98 million in back taxes after the company mistakenly exempted resellers and international tourists from a consumption tax. According to recent reports, Apple ceased offering tax-free purchases in June after mistakenly exempting large orders of iPhones and other products.
The $98 million tax back is based on Apple Japan’s $26 billion in sales for the fiscal year 2022, and it is believed that Apple has filed to modify its tax back. Visitors to Japan who are staying for less than six months can shop tax-free, but resellers are not excused from paying taxes.
Apple Japan is asked for a tax back due to duty-free tax avoidance
International customers made large-scale iPhone purchases at various Apple locations. At least one transaction had a single person purchasing hundreds of handsets all at once, which may indicate that the retailer failed to tax a potential reseller. Visitors to Japan who are staying for less than six months are permitted to purchase items like souvenirs or everyday items without paying the country’s 10 percent consumption tax, but this exemption does not apply to purchases made for resale.
It’s suspected that Apple Japan submitted a revised tax back. In June, the business voluntarily stopped providing tax-free shopping.
According to the journal, Tokyo’s tax officials have since last year reduced tax demands against at least two other significant retailers for a similar reason. The tax liability for Apple Japan, which is 13 billion yen, is in perspective given that there are over 100 billion yen in outstanding consumption taxes.
Apple Japan sales totaled $26 million this year
In fiscal 2022, Apple Japan’s sales in Japan reached a total of $26 billion, per the most recent annual report from the business. The egregiously enormous tax back charge highlights a flaw in Japan’s special tax-free shopping regulations. According to Statista Apple’s worldwide total net sales have increased by $386,1 million within 18 years.
There is a 500,000 yen maximum on tax-free purchases of consumables like cosmetics and medicines, but there is no cap on tax-free purchases of general products like home gadgets. Any purchases that fall through the gaps and don’t fulfill the requirements are the responsibility of the stores to pay any unpaid taxes on.
Approximately 24,000 instances of businesses failing to declare consumption tax payments in the year ending in June were discovered by tax authorities through a survey. The amount of back taxes assessed reached a new high of 86.9 billion yen, an increase of 11% from five years prior.
Japan’s tax policy on electronic products
Tokyo’s tax office has assessed outstanding consumption taxes totaling more than 100 million yen on three major department store chains since last year.
Since 2012, Japan has prioritized inbound tourism and consumption as a key component of its growth plan, increasing the number of airline slots and duty-free shops. According to the Japan Department Stores Association, tax-free purchases, a gauge of the buying propensity of foreign tourists, reached a third consecutive annual record in 2019 with over 340 billion yen. However, erroneous exemptions cost the government money, money that is otherwise required to pay for social security programs.
Other countries normally require tourists to disclose purchases when they depart the country and refund taxes at that time, in contrast to Japan’s practice. Although there is a lot of paperwork involved, there is less chance that taxes will be missed as a result.
While government organizations handle the process in other nations, retailers often send refunds to EU members after checking with customs.
A system for electronic data sharing between the National Tax Agency and customs officials was established in Japan in April 2020. Some industries have been told by tax authorities not to grant exemptions for transactions that seem questionable.
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.
Leaving aside the tax back problem, things are getting better for the tech giant. As we approach the end of 2022, we look forward to seeing what we will see in the new year at Apple, which we have talked about a lot lately with Apple’s Tesla integration, the new Ventura OS, and the Apple watch OS update.