The Government of Japan has announced that it shall be reviewing and introducing changes in the crypto tax laws that are applicable for corporates in the fiscal year of 2023.
The Financial Services Agency and the Ministry of Economy, Trade and Industry (METI) will together evaluate the way in which these digital asset firms will engage digital assets for accelerating the growth of startups.
Reformation in Tax rules:
- The updated taxation framework will see whether the firms possessing cryptocurrency assets should be taxed when they earn profit from sales.
- Tax Regulators have made sure that the agencies do not want to hinder the development of the industry as a whole or even make it difficult for digital asset companies to operate within the nation.
- A separate 20% tax for individual investors with an alternative to carry forward losses for the next three years from the following year is also proposed. This will provide a relief to the digital asset investors in Japan as currently the tax rate is 55%.
- Easy taxation rules are called for due to the current brain drain in the digital industry of Japan which has caused businesses to move out and operate in Singapore and the UAE instead.
- The same tax structure must be applied to the crypto derivatives market as per the proposal.
The tax reform request aims to provide a solution to issues that as per the advocacy groups are critical hindrances for crypto adoption in Japan.
Note that the two prominent crypto advocacy groups in Japan, The Japan Crypto-Asset Business Association and the Japan Crypto-Asset Exchange Association (JVCEA) had first requested a call to reduce the tax rates for individual investors on their crypto earnings.
This proposal will address issues like better individual tax filing and thus, the general importance of digital assets in the Web3 industry of Japan.
The proposal included these points after the advocacy groups did a comparative study of Japan’s digital asset taxation system with that of other countries.