Japan Revamps Crypto Tax Laws: No More Taxes on Unrealized Crypto Profits from April 2024
Summary:
Starting April 2024, Japan will no longer tax corporations on "unrealized profits" from cryptocurrency holdings, following a change in the national digital assets tax regime. The reform, announced on December 22, requires corporations to pay taxes only on actual profits from cryptocurrency sales, aligning with the obligations of retail investors. This move could encourage more companies to venture into Web3-related activities in Japan. The announcement comes as Japan’s tax authorities reported an increase in cryptocurrency-related tax violations in 2022.
Starting from April next year, Japan's corporations will no longer be obligated to pay taxes on "unrealized profits" derived from their cryptocurrency possessions, following an approved alteration in Japan's tax guidelines specific to digital assets. In a meeting held on the 22nd of December, the Japanese government announced this tax reform which is expected to be operational from the 1st of April, 2024 -- the onset of the country's fiscal year. Earlier, companies were required to disclose cryptocurrencies procured from other parties, differentiating market rates from book rates. The tax obligation stood irrespective of whether they liquidated their cryptocurrencies or not. The revised tax structure, however, mandates taxation only on the actual gains from cryptocurrency sales, resembling the obligations of retail investors under the Japanese taxation structure.
Further details of this tax reform for 2024 were originally provided by the government in a document that was made public on December 14. However, the first proposition to remove taxes from unrealized gains from cryptocurrency was submitted on August 31 by Japan's Financial Services Agency. The relaxed tax regulations might potentially encourage more businesses to explore Web3-associated interests within Japan.
A notable development in this regard has been the recent collaboration between Circle, the organization behind USD Coin (USDC) and SBI Holdings, a finance services company based in Tokyo. This venture aims to promote the acceptance of stablecoins and Web3 services in the country. Interestingly, in 2022, Japan's tax entities have identified 548 instances of tax infractions related to cryptocurrencies through a total of 615 investigations. This represents a jump of 35% from 2021's numbers. However, the average worth of undisclosed crypto holdings saw a decline of 19%; from 36.5 million yen ($245,000) in the previous year, it came down to 30.7 million yen ($206,000) this year.
Published At
12/25/2023 6:35:45 AM
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