The tax exemption being considered by the Japanese government will apply to companies in the crypto industry that operate cryptocurrencies for purposes other than short-term trading.
Recently, members of the Japanese parliament discussed the possibility of exempting cryptocurrency companies from paying taxes on unrealized profits from these digital assets.
According to a report published by Nikkei, the Japanese government's initiative, which is currently being discussed with the aim of exempting cryptocurrency companies from paying taxes, seeks to encourage these companies to establish, develop and grow in the country.
The Japanese newspaper noted that Japan is one of the few countries that tax companies based on the market valuations of their cryptocurrency holdings; a tax policy that has been driving companies operating crypto-asset businesses out to friendlier jurisdictions such as Dubai, Singapore and Switzerland.
A more friendly tax policy
However, Japan is considering exempting from taxes only companies that hold cryptocurrencies for purposes other than short-term trading, such as venture capital companies that operate with cryptoassets or that operate Non-Fungible Token (NFT) Business and who possess cryptocurrencies for payment purposes. Likewise, the Cryptocurrency and token issuers, who are also holders of cryptocurrencies and digital assets, would not pay taxes, as announced in the aforementioned report.
The tax break discussed in Japan's tax reform plan would be calculated based on market valuations at the end of the fiscal year, Nikkei reported.
This tax reform plan is part of Japan’s efforts to boost the development of the Web3 industry, in order to accelerate its technological growth and innovation.
Japan is encouraging the development of the crypto industry
In June of this year, Japan’s Tax Bureau issued a statement explaining that cryptocurrency creators in the country would not be subject to capital gains taxes on unrealized profits, highlighting the need to create new policies that do not hinder innovation in emerging sectors such as cryptocurrencies and Web3.
The Financial Services Agency (FSA), Japan’s top financial regulator, also recently submitted requests for legislation changes to change the way Japan taxes crypto businesses in the country. On the other hand, the Japan New Economy Association argued that Japan’s current tax regime is “too high” and “discourages innovation and investment” in the cryptocurrency sector.
According to the association, which represents more than 100 leading companies in technology, finance and e-commerce, cryptocurrencies should be treated as foreign currencies for tax purposes, which would entail a tax rate of 20% instead of the current 55%. The same association also called on the government to simplify the tax reporting process for cryptocurrency users and to establish a clear and favorable regulatory framework for the development and expansion of this growing industry.
In addition to tax reforms, Japan is also considering legislation that could allow companies to raise capital by issuing and selling tokens. It has also authorized the creation of a digital securities market and has been whitelisting new cryptocurrencies for regulated trading on authorized exchanges in the country. All of this, with the aim of boosting its technological leadership through the growth of the crypto industry and Web3.
Continue reading: Japan authorizes the launch of a digital securities market
