Japan Proposes Amendments to Tax Code for Digital Assets

Japan’s Financial Services Agency (FSA) has put forth proposed amendments to the country’s tax code regarding profits made from digital assets. The FSA’s move to change the tax code aligns with calls from industry executives and experts for cryptocurrency reform.

One of the key amendments proposed the FSA is the elimination of the “unrealized gains” tax on digital asset firms. Currently, legal entities in Japan are taxed based on the crypto assets they hold, even if they have not been converted into fiat currency at a profit. This differs from other jurisdictions where paper profits are not taxable until they are actually sold.

The FSA justifies this amendment stating that it brings Japan in line with global standards and aims to alleviate the burden on firms, preventing a potential mass exodus from the country’s web3 space. The Ministry of Economy, Trade and Industry has reportedly supported the FSA’s proposed changes.

Japan’s tax code has been a hindrance to its goal of becoming a major crypto hub, despite its high level of crypto awareness and profitability. The recent reforms in Hong Kong have demonstrated the positive impact of favorable regulations, attracting a significant number of firms to Asia.

The Japanese Blockchain Association has been a leading advocate for amending the tax code. They have proposed several changes, including the elimination of taxes on third-party-issued tokens and the equal taxation of virtual currencies and stocks. These proposals aim to promote investment and drive the growth of the blockchain sector in Japan.

Additionally, the association suggests a separate tax on self-assessment of 20% and the removal of taxes when exchanging two crypto assets.

Overall, the proposed amendments to Japan’s tax code for digital assets signal a positive step towards creating a more favorable environment for cryptocurrencies and blockchain technology. These changes could potentially position Japan as a more attractive destination for crypto-related businesses and startups.

Sources: The Financial Services Agency (FSA), The Ministry of Economy, Trade and Industry, The Japanese Blockchain Association