Tuesday, September 26, 2023

Japan Blockchain Association Proposes Cryptocurrency Tax Reforms to Government

The Japan Blockchain Association (JBA), led by Representative Director Yuji Kano of bitFlyer, submitted a proposal for cryptocurrency tax reforms to the government on July 28, 2023. The JBA is advocating for a review of the current tax system, which they argue is hindering the growth of Web3 businesses in Japan. They are calling for a more conducive environment for citizens to hold and use cryptocurrencies.

The specific requests in the proposal are as follows:

1. Abolish the year-end unrealized gain tax on tokens issued by third parties.

In June 2023, Japan’s National Tax Agency revised some corporate tax rules, allowing companies to exempt market value evaluations of cryptocurrencies they issued themselves. However, the year-end unrealized gain tax on tokens issued by third parties continues to be a barrier for domestic companies entering new Web3 businesses. The JBA believes that abolishing this tax would significantly reduce barriers to entry into Web3 businesses and prevent token price drops caused by companies selling tokens to pay taxes.

2. Change the taxation method for individual cryptocurrency transactions to separate declaration taxation and set a uniform tax rate of 20%.

According to the latest statistics from the Japan Virtual Currency Exchange Association (JVCEA), the number of cryptocurrency trading accounts in Japan continues to increase. As of April 2023, about 6.8 million accounts have been opened, surpassing the number of accounts (about 3.61 million) when the tax system for foreign exchange margin trading (FX) changed from comprehensive taxation to separate declaration taxation in June 2011. The JBA’s survey results showed that 43.9% of respondents would like to double their investment if the tax system changes to separate declaration taxation.

3. Abolish income tax on profits each time cryptocurrencies are exchanged.

The JBA expects that this will make operations more suitable for Web3 use cases such as DeFi and NFT markets, leading to an improvement in the convenience of cryptocurrencies.

The JBA hopes that by realizing these tax reform requests, Japan will be recognized as a leading Web3 country both domestically and internationally. They believe that the expansion of the new industry, the Web3 economy, will greatly contribute to the growth of the Japanese economy, which is facing transformation.

They also suggest that the increase in cryptocurrency users, investment amounts, profit realization, and proper declarations could contribute to tax revenue, limiting the impact on tax revenue reduction, and in some cases, could even increase tax revenue.

Image source: Shutterstock

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