The Japanese government is currently considering a significant change in its tax code concerning cryptocurrencies, specifically targeting corporations and their cryptocurrency holdings. This proposal, set to be a part of Japan’s fiscal 2024 tax reform plan, aims to exempt companies from paying taxes on unrealized gains from their cryptocurrency holdings.
Under the current tax system, Japanese companies are taxed based on the market value of their cryptocurrency holdings at the end of each fiscal year. This approach has been criticized for placing a financial burden on companies and hindering innovation in the cryptoasset and blockchain sectors. The proposed exemption would apply to Japanese firms that hold digital assets for purposes other than short-term trading, with mark-to-market valuations at the end of the fiscal year serving as the basis for this exemption.
This move is part of Japan’s broader strategy to stimulate liquidity in the cryptocurrency market and position itself as a forward-thinking player in the global digital economy. It aims to align the country’s fiscal approach with the evolving digital asset landscape and follows the National Tax Agency’s notice in June, which stated that crypto issuers in Japan would not have to pay capital gains taxes on unrealized gains.
The proposal has been spearheaded by Japan’s Liberal Democratic Party and its coalition partner Komeito. The discussions are focused on aligning Japan’s crypto taxation policy with those of other Asian crypto hubs and reversing the trend of Japanese companies relocating to more tax-friendly jurisdictions like Singapore, Dubai, and Switzerland.
Additionally, the coalition’s meeting discussed other proposed tax changes, including extending deductible entertainment expenses for small and medium-sized enterprises and implementing a new tax system for foreign visitors making purchases in Japan. These changes are also expected to be included in the fiscal 2024 tax reform plan, which is being finalized and will subsequently be submitted to the Japanese Parliament for approval.