Japanese Government Finalizes Crypto Tax Reform
The Japanese government has recently finalized the crypto tax reform outline for fiscal 2024. One significant amendment in this reform impacts corporations holding crypto assets. The amendment removes the period-end mark-to-market valuation tax previously applied to corporations holding third-party-issued crypto assets.
Under the new policy, corporations will be taxed solely on profits from the sale of virtual currencies and tokens, aligning with the tax system for individual investors. This change aims to reduce the tax burden on corporations involved in holding and operating crypto assets.
Japan Ends Crypto Tax On Unrealized Profits
A revision has been made to the application scope of period-end mark-to-market under the Corporation Tax Law. Previously, corporations recorded profits or losses based on the difference between market value and book value of crypto assets at the fiscal year-end. However, this mark-to-market valuation will no longer apply if the asset is assumed to be held continuously.
The decision to revise the tax law was influenced by a request submitted by the Japan Crypto Asset Business Association (JCBA). The aim is to support the growth of Web3, domestic startups utilizing blockchain technology, and attract international projects.
Will This Boost Crypto Adoption in Japan?
The 2024 tax reform outline also includes plans to reduce income tax and resident tax, tax reductions for companies, and the establishment of a new tax system for strategic sectors and innovation. These changes are expected to result in a substantial decline in revenue for national and local governments.
The bill still needs approval from both the House of Representatives and the House of Councilors before it can be implemented.
This tax reform is an important step towards addressing the desires of cryptocurrency investors. However, discussions on profit and loss calculations in crypto asset transactions and other tax reforms in the crypto asset space are still ongoing.
Japan has always been friendly towards cryptocurrencies and continues to make timely reforms. Earlier this year, the country allowed VC firms to directly invest in crypto.
Hot Take: Japan’s Crypto Tax Reform Aims to Boost Innovation and Attract Investment
The Japanese government’s decision to finalize the crypto tax reform for fiscal 2024 is a significant move that aims to support the growth of the crypto industry in Japan. By removing the mark-to-market valuation tax for corporations holding third-party-issued crypto assets, the government seeks to alleviate the tax burden on these businesses and encourage their participation in the crypto market.
This reform, along with other planned tax reductions and initiatives, demonstrates Japan’s commitment to fostering innovation and attracting investment in strategic sectors. With its crypto-friendly approach, Japan remains an attractive destination for cryptocurrency firms and startups looking to leverage blockchain technology.
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