The Japanese government has announced that it shall be evaluating the crypto tax rules which are applicable for corporations in the fiscal year of 2023. The Financial Services Agency and the Ministry of Economy, Trade and Industry (METI) will be carrying out the assessment of how these digital asset corporations will employ digital assets for propelling the growth of startups.
The 2023 financial year tax reform request has targeted solving key issues that the advocacy groups have stated to be roadblocks for crypto adoption in Japan. The two eminent crypto advocacy groups in Japan, The Japan Crypto-Asset Business Association and the Japan Crypto-Asset Exchange Association (JVCEA) had released this request calling to lower the tax rates for individual investors on crypto earnings.
This proposal has been primarily meant to address the need to better individual tax filing and the overall importance of digital assets in the Web3 industry of Japan. This has been a part of the proposal after the advocacy groups compared Japan’s digital asset taxation system with that of other nations.
Changes In The Crypto Taxation System
Tax regulators have said that the updated taxation structure will take into account if the companies that possess cryptocurrency assets should be taxed when they generate profit from sales.
Regulators ensured that the agencies do not want to be a hindrance to the growth of the industry as a whole or even discourage digital asset companies from working within the country.
The proposal aims at a separate 20% tax for individual investors with an option to take forward losses for the next three years from the following year. The proposal has also mentioned the same tax structure to be applied to the crypto derivatives market.
The 20% separate tax on digital asset earnings with an exemption on the unrealised gains will help become a big relief for the digital asset investors in Japan.
At the moment investors in Japan have to pay up to 55% on their crypto investments.
The tax reform proposal comes after the internal memo for digital asset tax reforms was delayed in submission to Japan’s Financial Services Agency (FSA). The change in the reform is to ease the taxation policy of the country owing to which many companies were moving out of Japan and operating in Singapore and the United Arab Emirates as they have easier regulation.
Stringent Taxation Policies
At the current moment, Japan imposed a 30% corporate tax on cryptocurrencies. This has indeed caused a brain drain from the digital asset industry in Japan.
The advocacy groups have mentioned that due to such stringent policies Japan has been causing businesses to leave the country.
The reasons have been directed to lack of consistency within the system and also the need to establish and stabilise the Web3 industry and also create a better environment for tax filings.