Towards lower taxation on cryptocurrencies in Japan?

After the observation of the massive move of companies to other jurisdictions, the authorities in Japan are considering a tax cut to entice the cryptocurrencies addicts. The move is aimed at supporting new Prime Minister Fumio Kishida’s efforts to boost the country’s economy.

Note: although this news is a few days old, we think it is essential to highlight it. Let’s stay in the continuity of the countries that are trying to get a piece of the crypto cake.

Tax rebate to attract cryptocurrency investors to Japan

The Financial Services Agency, Japan’s financial regulator, has officially proposed to ease the tax burden on cryptocurrency companies according to Bloomberg reports.

If the proposal is approved, crypto companies would be exempt from capital gains taxes on digital assets… The proposed tax breaks also extend to individual investors.

This is because the current tax law in Japan classifies cryptocurrency-related income as miscellaneous income. As a result, cryptocurrency profits, including unrealized gains, are subject to a tax of about 30% (ed. note: as in France). This tax rate is constantly denounced by political opponents.

Last May, Yuichiro Tamaki, leader of the Japanese opposition, promised that his party would reduce the tax on crypto capital gains to 20% and that it would only be applied to profits actually made.

In order to promote Web3 and cryptocurrencies, the NDP (Democratic Party) will first tax cryptocurrencies at 20% on profits made. In addition, tokens held by the issuing company will be excluded from the market valuation at the end of the year, and the taxation system will be revised to tax income when it is actually generated, which will prevent the flight of human resources and companies abroad.

Yuichiro Tamaki, leader of the opposition

A similar call was made by the Japan Crypto-Asset Exchange Association (JVCEA) and the Japan Crypto-Asset Business Association (JBCA), two of the country’s most influential crypto lobbying groups. In a joint statement, they called for a reduction of up to 20% in taxes on cryptocurrency gains.

A Pro-Crypto Prime Minister

The Financial Services Agency’s request echoes the position of the country’s current prime minister on digital assets. In his address to parliament earlier this year, the Japanese prime minister suggested that the advent of the web3 era could lead to the realization of economic growth in the country.

Nous sommes convaincus que l’intégration de nouveaux services numériques tels que le métaverse et les NFT entraînera une croissance économique pour le Japon. Alors que nous entrons dans l’ère du Web3, je suis convaincu que nous devons résolument promouvoir cet environnement d’un point de vue politique.

Fumio Kishida, Prime Minister of Japan

For now, the request for tax breaks for crypto-investors is still at the stage of a simple proposal and has no binding force. To come into effect, the request must be analyzed and approved by a parliamentary committee. Considering the influence of the Financial Services Agency and the support of the Japanese Prime Minister, this proposal has a huge chance of being approved, something that local crypto industry players are very excited about. 2022 is the perfect year to reshuffle the crypto cards and some countries understand this, others do not.