Japanese Regulator Wants to Reform Crypto Tax Laws for Businesses and Investors

Japan’s main financial regulator, the Financial Services Agency (FSA), has indicated that it is ready to reform the country’s tax laws that govern how companies and their investors are taxed on their interactions with crypto.

The reforms are a response to the growth momentum in the pro-IT sector initiated by Prime Minister Fumio Kishida, who has repeatedly said that web3-related industries have the power to trigger an economic recovery. Kishida has also spoken out in favor of overhauling crypto-related tax laws this year.

Critics, including high-profile politicians – some in government – ​​have suggested that many Japanese companies are looking to relocate overseas due to restrictive tax laws, which seek to levy crypto as a form of income – rather than a capital gain for individuals. For businesses, crypto is often levied under corporate tax laws.

The law also stipulates that companies must pay taxes on so-called “paper gains” – the upward changes in the value of tokens relative to fiat. This means that, for example, if a company were to issue a token that then increased in value over the course of a year – even if the same company does not sell its tokens for fiat – it would be required to pay a tax on the increase in token value.

In other countries, companies might only have to pay taxes when they “realize” the value of their coin holdings, i.e. sell them for fiat.

By CoinPost media and Bloomberg, The FSA has also indicated that it wants to allow individual investors in crypto companies to benefit from tax breaks. Retail investors will also be encouraged by the news that the FSA wants to allow them access to the Nippon Individual Savings Account (NISA) tax relief program – which could allow them to exempt up to USD 2,900 of assets. capital gains tax.

The cloud of this silver lining, from a crypto perspective, is that it is unclear if this will apply to crypto investments outside of the security token space.

The FSA’s requests are not binding and the regulator’s proposals will have to be examined by a parliamentary tax committee which will not meet for several months. However, the FSA is arguably the biggest influence on crypto policy in the country, with the possible exception of the Prime Minister – a fact which means that the proposals will most likely be accepted.

Private sector bodies – including self-regulatory body Japan Virtual Currency Exchange Association (JVCEA) – earlier this month called for urgent tax reform. The JVCEA and its partners have also called on Tokyo to simplify the tax reporting process for crypto investors.
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