Japan Considers Crypto Tax Reforms

Japan’s Financial Services Agency and the Ministry of Economy, Trade, and Industry are planning to review the corporate taxation method for crypto assets and virtual currencies that companies own for the purpose of nurturing newly established companies or startups, or emerging companies.

According to local media reports, the aim of considering crypto tax reform is to reduce the burden on newly established companies and prevent promising startups from flowing overseas. The crypto tax reform has been added to the agenda for 2023 tax reform.

As recently as last month, the Japan Cryptoasset Business Association and the Japan Virtual and Crypto assets Exchange Association, two of the country’s top crypto lobbying organizations, submitted a proposal to the Financial Services Agency, which aims to lower tax regulations and establish a better environment for domestic digital asset businesses.

Tax Reform Will Not Hinder Growth of Crypto Companies

At the government’s Digital Society Initiative Conference held in April, Rakuten Group Chairman and President Hiroshi Mikitani said, “Most people go to Singapore because it’s stupid to start a business in Japan,” according to local media.

President Mikitani has stressed the need to review the tax system, as the government intends to avoid hindering the growth of startups and prevent outflow to overseas.

Under the current tax system in Japan, unrealized gains are taxed because the company’s holdings are taxed based on the market value at the end of the period. Hence, due to the heavy financial burden, some companies moved their base to places such as Singapore, where there are fewer regulations.

However, under the new system being considered by the Financial Services Agency and others, crypto assets owned by companies that issue them will be excluded from the market valuation at the end of the term and will be taxed only when profits are generated from sales.

On the Flipside

  • Currently, in Japan, profit from cryptocurrency holdings, including unrealized gains, is subject to corporate tax of about 30%, and individual crypto investors could be taxed up to 50%.
  • Recently, The Bank of Japan (BoJ) announced the cancellation of its central bank digital currency (CBDC) project due to a lack of interest from the public.

Why You Should Care

Japan’s Prime Minister Kishida has positioned 2022 as “the first year of creating startups” and has indicated his intention to strengthen support. He stated that the implementation plan for the “new capitalism” compiled by the government in June will set out a five-year plan by the end of 2022 to foster startups.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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Author

Akriti is a Zurich-based reporter, focused on the political, regulatory, and legislative developments around crypto. She is a business journalist with over six years of experience working as a correspondent for organizations like Channel NewsAsia and Bloomberg TV India. In that time, Akriti has covered news in the finance, pharma, and state sectors.