REGULATION

Japan's National Tax Agency relaxes cryptocurrency tax rules, allowing businesses to be tax exempt on "unrealized gains" under certain conditions

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Japan

The National Tax Agency of Japan officially announced on the 20th the partial revision of rules regarding corporate taxes and issued regulatory explanations. The controversial issue of taxing unrealized profits from corporate holdings of cryptocurrencies will be relaxed under certain conditions.

Companies Holding Cryptocurrency "Unrealized Gains" Conditionally Exempt from Taxation

According to the revision of the "Corporate Tax Basic Circular" issued by the National Tax Agency of Japan on June 20th, companies are not required to pay taxes on unrealized gains from virtual currencies if they meet two conditions:

(1) The asset is a cryptocurrency issued by the company itself and has been held continuously since its issuance.
(2) The cryptocurrency has been subject to one of the following transfer restrictions since its issuance:

  • Has implemented a technical measure preventing its transfer to others
  • Serves as a trust asset meeting certain requirements

However, companies that continue to hold cryptocurrencies issued by other institutions are still subject to taxation.

Resistance of Japanese Companies Issuing Cryptocurrency

Under previous Japanese laws, companies holding virtual currencies were subject to taxation on "unrealized gains." This was seen as a hindrance to innovation in Japan's blockchain and cryptocurrency space, leading many Japanese crypto startups to relocate overseas.

Taxation Issues for Companies Still Need Resolution

Member of the Liberal Democratic Party's Web3 Project Team, Akira Amari, stated that while the current measures temporarily address the issue of driving Web3 talent to Singapore due to tax reasons, the next step will involve exempting governance tokens for non-short-term speculative purposes from taxation.