Japan to Reduce Crypto Ownership Taxes for Local Companies

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Japan is considering tax law revisions to provide tax relief for companies holding cryptocurrencies.

If approved, the tax reduction will be calculated based on the difference between the market value and the book value, with the difference recorded from April 1 to March 31 (Japan's annual fiscal cycle). According to a report from Nikkei Asia, the proposed revision has specific criteria for assessment and inclusion, with one requirement being that companies must hold cryptocurrencies issued by third parties.

Currently, companies in Japan are required to pay a fixed tax of 30% on the cryptocurrencies they hold, regardless of whether the ownership generates capital gains.
Under the proposed tax code, crypto assets held by domestic companies for purposes other than short-term trading will be exempt from corporate tax on unrealized gains. Additionally, crypto assets and tokens owned by the same company that issued them will not be subject to this tax. The company will only incur taxes if it decides to sell the crypto.

Tax Reduction Efforts in Japan

This reform is proposed as part of broader efforts to reduce taxation in Japan overall. The aim is to prevent startups from choosing tax-friendlier locations such as Singapore, Dubai, and other places over Tokyo.

Image : Person Holding Paper Source : Photo by Kelly Sikkema on Unsplash

These changes are expected to support companies holding crypto as part of their business models, including venture capital firms and non-fungible token (NFT) business operators holding crypto for payment reasons.

Reports indicate that the reform of Japan's corporate tax code and the specific framework for crypto are initiatives of the Japan Cryptocurrency Business Association and the Japan Blockchain Association (JCBA).

JCBA also advocates for reducing tax rates on crypto-to-cash conversions and proposes a simultaneous tax for traders looking to convert their crypto assets into cash. Additionally, the association recommends reducing the remaining taxes applied to profits and losses.

These tax policy changes signify a significant shift in Japan's approach to regulating crypto assets. Japan is one of the few countries implementing strict crypto regulations to create a more conducive environment for crypto-related businesses.

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