According to CoinPost, in the 2025 (Reiwa 7) tax reform, the review of the cryptocurrency (digital asset) taxation system has finally taken the first concrete step. The tax reform outline jointly formulated by the Liberal Democratic Party and Komeito has, for the first time, included 'the review of the cryptocurrency taxation system' as a topic, which is expected to improve the long-standing issues of high taxation and insufficient regulation. The following will provide a detailed analysis of the background, specific content, and future outlook of this reform.
What is the tax reform outline?
The tax reform outline is a document prepared by the ruling party at the end of each year, serving as a blueprint for the tax system reform of the following year. The contents recorded in the outline will be discussed and legislated in the regular National Diet session of the following year. In particular, the review of the cryptocurrency taxation system has been a focal point of discussion for many years, and whether it can be successfully included in the outline is seen as an important milestone.
The current state and challenges of cryptocurrency taxation
In the current cryptocurrency taxation system, transaction profits are classified as 'miscellaneous income', subject to a high tax rate of up to 55%. Moreover, even exchanges between cryptocurrencies incur tax obligations. At the same time, losses cannot be offset across years, leading to numerous issues, including:
Loss of startups and talented individuals overseas
Decline in international competitiveness in the Web3 field
These challenges have long been criticized, and there is an urgent need for improvement.
The significance of the clearly stated 'tax system review' in the outline
In this tax reform outline, cryptocurrency is positioned as a 'financial product that contributes to the formation of national assets'. The outline points out that investor protection measures and relevant regulations for listed stocks should be referenced to review the taxation system for cryptocurrency transactions. It mainly includes the following points:
Introducing a separate taxation system for reporting on cryptocurrency transactions
Improving regulations and tax reporting obligations
Strengthening legal frameworks for investor protection
This documentation makes the adjustment of cryptocurrency tax rates and the review of loss-offsetting rules a realistic possibility.
Emergency recommendations from Member Hirai and the response from the Financial Bureau
Member Hirai Takuya of the Liberal Democratic Party's Digital Headquarters presented a report titled 'Emergency Recommendations for Developing Cryptocurrency as a Boost to the National Economy' to the Financial Bureau. The recommendations include the following three core points:
Including the gains and losses from cryptocurrency transactions in the separate taxation reporting category
Improving the relevant regulatory framework
Strengthening cybersecurity protections
It is reported that Finance Minister Kato Katsunobu has expressed support for this recommendation, and the future advancement of related system design is worth looking forward to.
Impact on investors and future outlook
The review of the cryptocurrency taxation system may bring significant improvements for investors. If a separate taxation reporting system is introduced, the tax burden on investors will be greatly reduced compared to the current miscellaneous income tax rate. Furthermore, the introduction of a loss-offsetting system will provide investors with a more favorable long-term trading environment.
The documentation of this outline greatly enhances the possibility that the review of the cryptocurrency taxation system will become a specific policy package during the 2025 tax reform.
Progress on the issue of the '1.03 million yen annual income threshold'
The issue of the '1.03 million yen annual income threshold', which has also attracted attention, has proposed solutions in this amendment. The tax-exempt income limit will be raised to 1.23 million yen, and the leader of the Constitutional Democratic Party, Tamaki Yuichiro, further called for a target increase to 1.78 million yen. This topic will remain a focus of future discussions.
Japan's industrial upgrade starts with tax reform
The inclusion of the cryptocurrency taxation system review in this tax reform outline is undoubtedly a groundbreaking advancement for Japan's cryptocurrency industry. With the improvement of regulations and the reduction of tax burdens, the domestic market is expected to become more vibrant and promote innovative development. Next, the specific system design by the Financial Bureau and the National Tax Agency will be crucial, and how the 2025 tax reform will be implemented will be worth continuous attention.
This article mentions the 'cryptocurrency taxation system review' in the 2025 tax reform in Japan, clarifying the introduction of separate taxation, first appearing in Chain News ABMedia.