Photo/Illutration A building that houses the Osaka Regional Taxation Bureau in Osaka’s Chuo Ward (Asahi Shimbun file photo)

OSAKA--Tax authorities here ordered Hankyu Hanshin Department Stores Inc. to pay consumption taxes of around 200 million yen ($1.43 million) for improper duty-free sales to foreign customers who did not qualify for the exemption. 

The Osaka Regional Taxation Bureau’s investigation determined that some duty-free transactions made at the Osaka-based company’s stores did not meet the exemption requirements for the tax, according to sources familiar with the matter.

These transactions included bulk purchases of cosmetics by Chinese customers that officials believe were made with the intent to resell.

Tax-free shopping is only available to foreigners who have been in Japan for less than six months.

The stores apparently failed to thoroughly check their customers’ passports to determine if they were eligible for the exemption of the 10-percent consumption tax.

The operator of Hankyu and Hanshin stores has already amended its tax return and made the additional payment.

The company made total duty-free sales of 49.3 billion yen in the three fiscal years to March 2022.

Bureau officials determined that around 2 billion yen of the total should not have been exempt from the consumption tax, the sources said.

The bureau then ordered the company to pay additional consumption taxes of around 200 million yen. The additional payment includes a penalty for making an initial incorrect tax declaration.

The company told The Asahi Shimbun that it will take steps to prevent a recurrence.

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