Correction: The article has been updated to reflect that the proposed tax reform still needs to pass the national legislature, also known as the Japan National Diet.
The Japanese government is pushing ahead with a tax reform that would save firms from paying taxes on “unrealized gains” from cryptocurrency holdings after the cabinet reportedly approved a revision to the national tax regime for digital assets.
According to local reports, Japan’s government unveiled the new tax reform on Dec. 22 following a cabinet meeting, with the new changes potentially set for April 1, 2024 — the start of Japan’s financial year. The bill, however, would need to be submitted to lawmakers in January and would need to be approved by both the House of Representatives and the House of Councilors.
The bill, however, still needs to be submitted to lawmakers in January and would need to be approved by both the House of Representatives and the House of Councilors.
Previously, cryptocurrencies held by corporations received from third parties needed to be reported — based on the difference between market value and book value, regardless of whether the firm sold the cryptocurrency.
However, under the tax reform, corporations will only be taxed on profits from the sale of cryptocurrencies, similar to what retail investors must comply with under Japanese tax laws.
First earlier this year Japan allowed VCs to invest in crypto and now this along with allowing fair value account for companies with crypto. Crazy they even allowed taxes on unrealized profits in the first place but could be new potential flows too pic.twitter.com/oJGq1iVMG1
— guleid (@riddle245) December 24, 2023
The government first shared the details of its 2024 tax reform outline in a document published on Dec. 14.
However, the country’s Financial Services Agency initially submitted the plan to scrap unrealized cryptocurrency profits on Aug. 31.
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The eased tax rules could allow more companies to pursue Web3-related endeavors in Japan.
Breaking: Japan ends crypto tax on unrealized profit
— MartyParty (@martypartymusic) December 24, 2023
HUGE NEWS.
Progress has already been made, with stablecoin issuer Circle — the team behind USD Coin (USDC) — recently teaming up with Tokyo-based financial services firm SBI Holdings to boost stablecoin adoption and Web3 services in Japan.
It comes as Japan’s tax authorities found 548 cases of cryptocurrency-related tax violations from 615 investigations in 2022, up 35% from 2021.
However, the average value of undeclared cryptocurrency holdings fell 19% from 36.5 million Japanese yen ($245,000) in 2021 to 30.7 million yen ($206,000) in 2022.
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Update Dec. 25 at 11:16 am UTC): This article has been updated to reflect that the bill still needs to pass both the lower and upper house of the Japan National Diet to become law.