The Japanese government has recently taken a step forward in promoting the growth of the cryptocurrency sector in the country by announcing important tax exemptions. In a notice from Japan’s National Tax Agency, it was clarified that crypto issuers will no longer have to pay capital gains taxes on unrealized gains, marking a significant change for the industry.
The decision comes following the approval of a proposal by the country’s ruling Liberal Democratic Party (LDP) tax committee last December, to exempt crypto startups issuing their own tokens from paying corporate taxes on unrealized gains. This move is considered an essential step to support innovation and growth in the industry and to encourage startups to remain in Japan.
In recent years, Japan has witnessed an exodus of cryptocurrency startups due to significant tax burdens. This trend was particularly concerning as the nation has been aiming to adopt more progressive and flexible regulations, encouraging innovation in the blockchain and crypto sectors. The tax exemption is an attempt to reverse this trend and foster innovation in the country.
However, it is worth mentioning that the newly introduced tax exemption is only a partial revision of an earlier requirement. Before this change, token issuers were subjected to a capital gains tax of around 35% on their own tokens, as well as on unrealized gains. The new exemption applies to unrealized gains from holding applicable cryptocurrency continuously from the date of issuance or from taking specific technical measures to prevent its transfer to other persons.
Despite the progress, Japan’s industry associations continue to push for additional tax reforms. Some argue that cryptocurrency gains should be taxed at the same rate as stocks, which would create an even playing field for both industries. Additionally, there is a push for individuals to be taxed only when crypto gains are converted to fiat currency. These proposals signal that there is still room for further improvement in Japan’s tax laws surrounding blockchain and cryptocurrencies.
In conclusion, the recent decision by the Japanese National Tax Agency to exempt crypto issuers from certain capital gains taxes represents a significant development for the industry. Notwithstanding, additional reforms are still sought by industry associations to create a more favorable environment for crypto startups and further stimulate innovation within the country. As the regulations evolve, Japan’s future as a hub for blockchain and cryptocurrency companies remains to be seen.
Source: Coindesk
