Listening to the industry's voice! Japan revises 2024 tax reform outline: Cryptocurrency "unrealized gains" exempt from taxation

According to a report from Nikkei Asia, the Japanese Cabinet approved a revision to the tax system reform outline for the fiscal year 2024 a few days ago. Local companies holding non-self-issued cryptocurrencies will be exempt from taxation on unrealized gains on their crypto assets at the end of the year, and will only be taxed when they are sold for profit in the future. The bill is expected to be submitted to the Japanese parliament for approval in January next year.

Japan Exempts "Year-End Unrealized Gains" from Taxation

A few days ago, the Japanese government approved in a cabinet meeting the Fiscal Reform Outline for Reiwa 6 (2024 Fiscal Year), which exempts Japanese corporations or businesses holding cryptocurrencies issued by third parties from taxation on "year-end unrealized gains."

At the end of last year, Japan also eliminated the tax on "year-end unrealized gains" for companies that issue and hold cryptocurrencies themselves, which previously required companies to pay taxes equivalent to 30% annually.

The ruling party in Japan has agreed to relax corporate tax regulations, exempting companies from taxing unrealized gains on cryptocurrencies they hold.

Now, Japanese companies holding cryptocurrencies issued by themselves or third parties will benefit from this amendment, significantly lightening the tax burden for companies holding or operating cryptocurrency businesses.

Currently, companies are only required to pay taxes when they sell cryptocurrencies and make profits.

Tax Reform Reflects Industry Needs

It is reported that this tax reform reflects the Japanese government's adoption of the Japan Blockchain Association (JBA) opinions, with the policy to "cancel tax on year-end unrealized gains" being one of several requests submitted by the association to the government for the 2024 fiscal reform.

The Japan Blockchain Association has made three major tax demands: no tax on crypto-to-crypto trading, allowing tax deductions for trading losses within three years

The organization is dedicated to promoting the Web3 industry and blockchain technology, fostering domestic entrepreneurship collaboration and social application promotion.

At the time, the organization also made two other requests, including a "unified tax rate for cryptocurrencies" and "repeal of tax on crypto-to-crypto exchange."

The former aims to change the progressive tax rate on cryptocurrency gains to a uniform 20% tax rate through individual reporting; the latter is intended to improve the convenience and willingness of businesses to participate.

It is understood that the bill will be submitted to the regular session of the Diet in January next year and will require approval from both the House of Representatives and the House of Councillors, with the expected effective date being April next year.

Japan Actively Engages in Cryptocurrency Regulation and Technology Testing

Japan has always been at the forefront of comprehensive and real-time cryptocurrency regulation, despite ongoing criticism from industry professionals, but has gradually relaxed related policies in recent years to optimize the domestic industry environment for Web3 in Japan.

At the same time, Japan continues to be proactive in the application and experimentation of blockchain technology.

Earlier reports stated that the Japanese Financial Services Agency (FSA) collaborated with financial regulatory authorities in Singapore and other countries to discuss digital asset regulations and tokenization solutions.

In addition, the country's first real estate security token (ST) started trading today, the 25th, on the Osaka Digital Exchange's PTS SMART private trading system.