Japan’s government approves a revision to 2024 tax regime regarding corporate crypto holdings

Japan’s government has decided to approve a revision for its 2024 tax regime, which will have a significant impact on crypto-dealing corporations. Specifically, firms that deal with crypto will no longer be obligated to pay tax on unrealized gains from cryptocurrencies if they hold their digital assets for the long term.

🚨Breaking: 🇯🇵Japan removes #crypto tax on unrealized profit😳

Big changes coming for #crypto hodlers🤯

Proposed reforms reveal major changes for 2024🔥

A Thread🧵 pic.twitter.com/WzwSofoGAA

— Avni Rohit (@CryptoExptAvni) December 26, 2023

Japan to change crypto tax rules for corporations holding cryptocurrencies

The revision was approved last Friday, December 22, and it will mark a major change for companies operating in the country. Right now, every corporation in Japan must report profits and losses on cryptocurrencies issued by third parties based on the market value vs. the book value at the end of the fiscal year.

However, the new tax revision will change that starting on April 1, 2024. With the start of the next fiscal year, Japan’s firms will only be taxed on profits that they make when they sell cryptocurrencies in their possession. In other words, if they only opt to hold the coins and tokens in their possession and not profit from the price change, they will not have to pay taxes on the potential profits made from the price change.

The reform aligns corporate tax treatment of digital currencies more closely with that of Japan’s retail investors, who have already only been taxed on profits made from selling cryptos. However, the bill has yet to go through legislative approval.

The plan is to submit it to the local lawmakers next month, in January 2024. After that, it needs to pass both the House of Representatives and the House of Councilors in order for it to become law.

3️⃣Key Dates:

👉The Japanese government unveiled the tax reform on Dec. 22, and if approved, changes could kick in from April 1, 2024, the start of Japan's financial year.

👉However, the bill must first go through lawmakers' approval in January.

— Avni Rohit (@CryptoExptAvni) December 26, 2023

Japan has made efforts to revise crypto tax rules in the past

Japan has been trying to make crypto-related taxes for corporations fair and reasonable for some time now. The discussions involving new tax regulations for digital assets started back in August 2022, as part of a broader tax reform agenda for 2023.

Then, earlier this year, in September, Japan’s National Tax Agency issued an updated edition of its corporate tax guidelines. The update granted corporations an exemption from the corporate tax rate of 30% on unrealized crypto gains, which has been the standard in the country. However, this only applies to firms that have issued their own cryptos. As such, it doesn’t extend to companies that only invested in other cryptocurrencies.

Japan’s current crypto tax rules impose an annual tax on any crypto assets held by companies, unlike numerous other countries, where entities are only taxed after selling their coins. The new changes will make Japan’s crypto tax easier on the firms, as they will not have to pay extra on the profits that they technically did not make.

Meanwhile, individuals who invested in crypto will still be subject to a maximum income tax rate of 55% on any earnings that go beyond 200,000 yen, or around $1,797, as long as the funds are crypto-related. This will be categorized as miscellaneous income.

It is also important to note that the companies still have to meet specific criteria to qualify for the tax exemption in order to take advantage of the change in rules. For example, they must be the issuers of the cryptocurrency that they hold, and they must retain continuous ownership of the asset after its issuance.