Starting in 2024, Japan is likely to eliminate crypto taxes on unrealized gains on cryptocurrency investments, which will bring a major shift for investors.
At a recent cabinet meeting on December 22, the Japanese government finalized the outline of crypto tax reforms for fiscal year 2024. The reform comes with a major amendment affecting businesses holding crypto assets. The amendment eliminates the period-end mark-to-market valuation tax that previously applied to companies holding crypto-assets (virtual currencies) issued by third parties.
As a result, companies will now only be taxed on profits from virtual currency and token sales, in line with the tax regime for individual investors. The amendment aims to reduce the tax burden on businesses involved in holding and operating crypto assets.
Japan ends cryptocurrency tax on unrealized profits
This amendment changes the scope of application of period-end mark-to-market in corporate tax law. Previously, companies recorded profits or losses based on the difference between the market value and book value of cryptoassets at the end of the fiscal year. The new policy does not include mark-to-market valuations if the asset is assumed to be held on an ongoing basis.
The tax reform comes in part in response to a 2024 tax reform request submitted by the Japan Cryptoasset Business Association (JCBA). This change will promote the development of Web3, support domestic startups to leverage blockchain technology, and attract international projects.
Last year's tax reform exempted only virtual currencies issued by companies themselves from mark-to-market taxes. However, growing calls for equal treatment of cryptocurrencies issued by other companies influenced this year’s revision.
Will this boost cryptocurrency adoption in Japan?
The 2024 tax reform outline also includes plans to reduce income tax and resident tax by 40,000 yen per person from June 2024, corporate tax cuts and the establishment of a new tax system for strategic sectors and innovation. This is likely to result in a sharp decline in national and local government revenue, reaching 3,874.3 billion yen, the third largest decline since fiscal 1989.
The bill requires approval by the House and Senate.
This tax reform marks a key step towards the introduction of separate taxation (20%) and loss carryforward deductions, fulfilling the wishes of cryptocurrency investors. However, discussions on the calculation of gains and losses from crypto-asset transactions, including the imposition of a one-time tax when converting crypto-assets into fiat currency and the consideration of “carrying forward” deductions for three years from the following year, are still to be discussed. future deliberations. Developments in the corporate tax regime are expected to stimulate active discussions on further tax reform in the crypto-asset sector.
Japan has always adopted a crypto-friendly attitude and therefore remains a top destination for cryptocurrency companies. The country has been undertaking major reforms in a timely manner. Earlier this year, Japan allowed venture capital firms to invest directly in cryptocurrencies. #日本 #加密税改
