The Japanese government has announced that it will assess the crypto tax rules applicable to corporations in fiscal year 2023. The Financial Services Agency and the Ministry of Economy, Trade and Industry (METI) will assess how such corporations digital assets will use digital assets to propel the growth of startups.
The FY2023 tax reform request targeted addressing key issues that advocacy groups have said are barriers to crypto adoption in Japan. The two prominent crypto advocacy groups in Japan, the Japan Crypto-Asset Business Association and the Japan Crypto-Asset Exchange Association (JVCEA) had issued this demand calling for lower tax rates for individual investors on the income of the cryptography.
This proposal was mainly to address the need for improved personal income tax reporting and the overall importance of digital assets in Japan’s Web3 industry. It’s part of the proposal after advocacy groups compared Japan’s system of taxing digital assets with that of other countries.
Changes in the crypto taxation system
Tax regulators said the updated taxation structure will take into account that businesses that own cryptocurrency assets should be taxed when they generate profits from sales.
Regulators have assured that the agencies do not want to be an obstacle to the growth of the industry as a whole or even discourage digital asset companies from doing business in the country.
The proposal seeks a separate 20% tax for individual investors with an option to carry losses forward for the next three years from the following year. The proposal also mentioned the same tax structure to be applied to the crypto derivatives market.
The separate 20% tax on income from digital assets with an exemption on unrealized gains will help become a great relief for digital asset investors in Japan.
Right now, investors in Japan have to pay up to 55% on their crypto investments.
The tax reform proposal comes after the internal memo on digital asset tax reforms was delayed in submission to the Japan Financial Services Agency (FSA). The change in the reform aims to ease the country’s tax policy through which many companies were leaving Japan and operating in Singapore and the United Arab Emirates, as they had easier regulation.
Rigorous tax policies
Currently, Japan imposes a 30% corporate tax on cryptocurrencies. This has indeed caused a brain drain from the digital asset industry in Japan.
Advocacy groups have mentioned that due to such strict policies, Japan has pushed companies out of the country.
The reasons were directed towards the lack of consistency within the system and also the need to establish and stabilize the web3 industry and also to create a better environment for tax returns.