Based on local news outlet Yomiuri, Japan’s Financial Services Agency wants to amend the virtual currency taxation system for corporate entities ahead of the nation’s 2023 tax reform. Industry experts believe that the current scheme is limiting domestic innovation in the virtual currency industry.
The proposed change features the removal of capital gain liabilities for undisposed corporate crypto assets at the end of every taxation year, and changing the classification of the virtual assets so that the maximum capital gains tax that is applicable is reduced to 20% from 55%.
Under Japan’s current taxation laws, the unrealized capital gains on virtual currencies are recognized as income at the end of every fiscal year (on March 31), resulting in income tax liabilities.
Furthermore, both individual and corporate crypto earnings of more than 200,000 JPY ($1,463) in any available fiscal year are classified as “miscellaneous income,” which is taxed at a rate that ranges from 15% to 55%, with the local inhabitant’s tax rate included. Comparably, profits earned from stock and forex trading are just subjected to a tax of 20% at the biggest levels.
Foreign permanent residents of Japan are also primarily subjected to the nominal rates of 55% upwards. All cryptocurrency-income generating activities, like decentralized finance (DeFi) lending, Bitcoin mining, or plain crypto trading are taxed based on miscellaneous income. It is also not quite possible to conduct any capital losses that result from cryptocurrency operations in the coming years.
Buy Bitcoin NowExperts say that the high tax liabilities faced by Japanese crypto startups play an integral role in shifting their corporate domiciles abroad. One such firm, Astar Network, a decentralized network hub on Polkadot, decided to issue its tokens overseas earlier this year to avoid strict tax payments and is now headquartered in Singapore.
もしこれが動けば、まだまだ道半ばですがweb3業界にとって良いモーメンタムになると思います。業界団体の方々など関係者の方々の声がやっと政治に届いた事例になると思います。引き続きみんなで業界盛り上げていきたい。 https://t.co/8DOWSfQqBQ
— 渡辺創太 @スターテイル (@Sota_Web3) August 24, 2022
Expressing his comments on this proposed tax reform, Astar’s founder Sota Watanabe stated that it might be a “good momentum for the Web3 industry, although it’s still in the middle of the road.”
