SINGAPORE – The local tech scene is getting a shot in the arm from entrepreneurs and software experts leaving Japan and turning up in Singapore.
Industry insiders told The Straits Times that many Japanese start-ups and Web3-related companies have moved to Singapore or Dubai due to the high tax regime in their country.
Web3 refers to the third generation in the evolution of the Internet built using decentralised blockchains — the shared ledger systems used by cryptocurrencies. It is envisioned to transform the Internet by ushering in a new, middleman-free digital economy.
“Singapore is the more popular choice,” said Mr Sota Watanabe, founder of smart contract platform Astar Network, noting the one-hour time difference between the two countries, proximity to Japan and the quality of life here.
Astar moved its headquarters from Tokyo to Singapore in 2020 and was among the first Japanese Web3 players to do so. The Singapore operations started with fewer than 10 people and now has 35 staff.
Oasys, a popular blockchain for gaming, has also been moving staff to Singapore.
Director Daiki Moriyami said Japanese regulations, mainly around accounting and tax, are not designed for businesses using crypto assets, which is a major hurdle to promoting crypto businesses.
“In the extremely fast-moving blockchain space, start-ups cannot afford to wait for bureaucratic processes to run their course, and it is simply good business sense for them to relocate out of Japan in order to have access to global businesses,” he added.
High taxes have been blamed for choking the growth of Japan’s digital asset industry, but a push by lobby groups for the government to ease corporate tax rules seems to be working.
Japanese officials are now looking at easing corporate crypto tax rates to keep start-ups in the country, with a plan to support entrepreneurs to be mapped out by December.
Start-ups that issue their own tokens must now pay taxes on unrealised gains or paper gains for the tokens they might be holding – a key gripe of players. Company holdings are taxed based on the market value at the end of the taxation period.
Corporate crypto holdings are subject to a 30 per cent tax on all digital asset gains, while individual investors are subject to a maximum tax rate of 55 per cent.
The Japanese government is also looking at further easing regulations as soon as December that will make it easier to list coins.
The shift dovetails into Prime Minister Fumio Kishida’s plans for reinvigorating Japan’s economy, one of which was supporting the growth of Web3 firms.
Still, it is unclear what will change with the upcoming tax reforms.
“Until this is addressed, it will continue to be a major obstacle for growth of the blockchain gaming industry, and means that a number of companies and entrepreneurs will still base their operations out of Japan,” Mr Moriyama said.
Ms Eva Wu of Web3-focused investment firm Mechanism Capital said regulators who are supportive of changing technologies will continue to attract more talent, while those that prescribe irrelevant or even non-existent laws will face a talent loss, she said.
“Relevant laws should be written that keep everyone safe while also adapting to how new technology is used.”
Read More: news.google.com