Japan is taking significant steps toward a more equitable tax regime for cryptocurrency, signaling a potential shift in how digital assets are treated in the country. The Financial Services Agency (FSA) has proposed a reform that could reduce the tax burden on crypto profits, aligning it more closely with traditional financial assets.
FSA Pushes For A 20% Flat Tax Rate On Crypto Profits
The FSA’s proposal, outlined in an August 30 tax reform request, advocates for treating cryptocurrencies like traditional financial assets. The suggested reform aims to introduce a flat 20% tax rate on crypto profits, a substantial reduction from the current system where earnings over $1,377 (200,000 Japanese yen) are taxed at rates that can be significantly higher. This change would mirror the tax treatment of stock trading profits, which are capped at 20%, making the tax code more consistent across different investment forms.
Corporate Holders Could Also Benefit
The FSA’s proposal doesn’t just focus on individual investors; it also addresses corporate holders of crypto assets. Currently, corporations in Japan are subject to a flat 30% tax on their cryptocurrency holdings, regardless of whether they sell the assets at a profit. The proposed changes would offer much-needed relief to corporate investors, potentially making Japan a more attractive market for businesses dealing in digital assets.
Changing tax laws in Japan is no simple task. The process involves multiple layers of government approval, beginning with the submission of tax reform requests by various ministries to the ruling political party. These requests are then reviewed by the tax system research committee before being debated by the national legislature. Both the House of Representatives and the House of Councilors must approve any reforms before they become law.
Despite the complexity, there is growing momentum for change. The Japan Blockchain Association (JBA) has been a vocal advocate for tax reform in the crypto sector, pushing for a flat 20% tax rate and a three-year loss carryover deduction. Although these efforts have yet to result in concrete policy changes, the FSA’s latest proposal could be a turning point.
Japan’s Growing Crypto Market
The proposed tax reforms come at a time when Japan’s crypto market is poised for significant growth. A study by Bitget predicts that the number of daily crypto traders in Japan will rise from 350,000 to around 500,000 by the end of the year. This surge would place Japan’s market size between those of Turkey and Indonesia, highlighting the country’s growing prominence in the global crypto landscape.
Gracy Chen, CEO of Bitget, described Japan as a “dynamic and rapidly evolving landscape” for cryptocurrency, emphasizing the country’s high awareness and enthusiasm for digital assets. The entrance of major players like Sony Group into the crypto market, following its acquisition of Amber Japan, further underscores the sector’s potential.
Also Read: TRON Joins Japan Cryptoasset Business Association (JCBA)
The FSA’s proposal marks a significant step toward modernizing Japan’s tax code and making the country more competitive in the global crypto market. If approved, the reforms could stimulate further growth and innovation in the sector, positioning Japan as a leader in the adoption of digital assets.
As Japan’s crypto industry continues to expand, the proposed tax changes could be a crucial factor in determining the future landscape of cryptocurrency in the country. Whether these reforms will pass through the complex legislative process remains to be seen, but the momentum for change is undeniable.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
About The Author
