Japan Considers Tax Breaks for Companies on Long-Term Crypto Profits

Published: December 06, 2023 at 3:23 am Updated: December 06, 2023 at 3:23 am

Edited and fact-checked:
December 06, 2023 at 3:23 am

In Brief

Japanese VCs and operators of NFT enterprises using cryptocurrencies for payment purposes may be exempt from taxes on unrealized cryptocurrency gains.

Japan Considers Exempting Companies' Long-Term Cryptocurrency Gains from Taxes

Japanese companies may be exempt from taxes on unrealized cryptocurrency gains if they possess digital assets, as per a proposal under consideration by policymakers in the Liberal Democratic Party and the ruling coalition partner Komeito. The objective is to curb overseas fund outflows.

According to the suggested amendments to tax laws, cryptocurrencies held for non-short-term trading purposes would be excluded from corporate tax at the end of each financial year, based on market capitalization valuations.

Notably, cryptocurrencies and tokens held by the same company that issued them would not be subjected to the tax. The inclusion of this exemption in Japan’s fiscal 2024 tax reform is expected to be finalized within the current month.

Japan currently has implemented a tax system based on market capitalization valuations for companies’ cryptocurrency holdings, with an exception for self-issued coins.

According to industry regulators, tax exemption is anticipated to compel businesses such as venture capital firms and operators of non-fungible token enterprises using cryptocurrencies for payment purposes to consider more tax-friendly jurisdictions, such as Singapore, Dubai and Switzerland.

Japan’s Crypto Regulation Tendencies

Despite recent relaxations in some cryptocurrency regulations, such as token listing, Japan is generally perceived as having rigorous rules, requiring strict adherence to the evolving regulatory framework for any cryptocurrency.

Earlier this year, the Japanese parliament approved stablecoin regulations to enhance investor security.

The “Payment Services Law” formally recognizes fiat-backed Stablecoins as “electronic payment methods” and sanctions their issuance. However, it’s essential to note that only licensed banks, registered remittance agents, and trust companies are authorized to issue Stablecoins.

The proposed exemption of Japanese companies from taxes on unrealized cryptocurrency gains signifies a significant development in the country’s regulatory landscape, characterized by a balance of strictness and ongoing modifications.

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About The Author

Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and engagement with scientific writing.

Alisa Davidson