The Japan Blockchain Association proposes three major tax reforms: no taxation on cryptocurrency-to-cryptocurrency transactions and the ability to offset trading losses within three years for tax purposes.

Yuzo Kano, co-founder of BitFlyer cryptocurrency exchange and representative of the Japan Blockchain Association, submitted a tax reform request to the Japanese government on July 27 for 2024. The three main requests include the abolishment of year-end "unrealized gains tax," restructuring of cryptocurrency trading gains tax, and the revocation of income tax on cryptocurrency exchanges.

Japan Cancels Year-End "Unrealized Gains Tax"

Prior to this, the National Tax Agency of Japan announced the conditional relaxation of the "taxation of unrealized gains on corporate-held coins," under which corporations do not need to pay unrealized gains tax if they meet two conditions:

1. The assets are issued by the corporation itself and held from the time of issuance

2. The assets have restricted transfer technology and meet the conditions of partial trust assets

Recap: Japan's National Tax Agency relaxes cryptocurrency tax, corporate "unrealized gains" conditionally exempt from tax

However, the terms at that time stated that if a corporation continues to hold cryptocurrencies issued by other institutions, they would still be subject to taxation.

Meanwhile, the Japan Blockchain Association is requesting further withdrawal of the unrealized gains tax imposed on corporate-held third-party issued assets.

It emphasizes that this tax system has become one of the barriers for various sectors to enter the Web3 industry, and abolishing it will optimize the business environment of the Web3 industry in Japan.

Request for Japan to Reform Cryptocurrency Trading Gains Tax

The appeal is to change the individual's cryptocurrency trading gains tax to individual declaration and to set a unified tax rate of 20%.

According to a previous report by Bloomberg, while the proceeds from selling stocks and bonds in Japan are taxed at a single rate of 15% national tax and 5% local tax, cryptocurrency gains are subject to progressive tax rates, with the highest reaching up to 55% for higher-income individuals.

The Japan Blockchain Association hopes to change the annual trading gains tax to individual reporting for each transaction, and if there is a loss in a particular trade, that trade can be deducted from taxes for up to three years in the future, to encourage more investors to trade cryptocurrencies.

Revoke Japan's Currency Exchange Tax

The third point calls for the revocation of the income tax on the exchange and conversion of cryptocurrency assets. The Blockchain Association points out that profits from each exchange are subject to income tax, believing that in the future Web3 era, the exchange of cryptocurrency assets may become a mainstream economic activity. The previous tax system made tax calculations too complex, severely hindering the convenience of cryptocurrencies themselves, hence the request for its abolition.