Japan exempts crypto issuers from 30% corporate tax

abdelaziz Fathi

The National Tax Agency of Japan has issued an updated edition of its corporate tax guidelines, bringing notable amendments to the taxation rules concerning crypto token issuers. The revised guidelines specifically grant them an exemption from the standard 30% corporate tax rate on unrealized cryptocurrency gains applied to their token holdings.

Discussions surrounding new tax regulations for digital assets have been underway among Japanese legislators since August 2022, part of a broader tax reform agenda for 2023.

The tax exemption, however, only applies to companies that issue their own tokens and does not extend to those that solely invest in other digital currencies. Additionally, individual crypto investors will still be subject to a maximum income tax rate of 55% on any earnings exceeding JPY 200,000 ($1,797) related to cryptocurrency, categorized as “miscellaneous income.”

According to the agency’s explanation, these coins will be exempted from being considered in the market value assessment of a company’s assets, given that certain conditions are met. Currently, under Japanese law, if a company holds crypto assets, they are subject to taxation as unrealized gains at the end of a tax period.

The legal notice further explains that for a company to take advantage of the revised rules, it must meet specific criteria to qualify for the tax exemption. Firstly, the company must be the issuer of the cryptocurrency in question. Additionally, it is required to retain continuous ownership of the crypto asset after its issuance, while the asset itself remains subject to transfer restrictions.

This move is part of Japan’s efforts to promote the growth of its blockchain and cryptocurrency sectors in line with the government’s push for “new capitalism,” as stated by Prime Minister Fumio Kishida.

Earlier in March, Japan’s Finance Ministry created an advisory panel to look at the feasibility of issuing a central bank digital currency. The launch of the panel coincided with the start of a CBDC pilot program following two years of proofs of concept (PoC). However, the central bank does not plan to conduct actual transactions among retailers and consumers.

Additionally, three Japanese banks are set to develop a payment system that integrates their stablecoins on a public blockchain while satisfying legal requirements.

Japan’s financial regulator was also seeking feedback on allowing domestic distributors to handle stablecoins issued outside the country on the condition that they maintain sufficient collateral.

Japan’s parliament passed a bill in June 2022 to regulate crypto tokens whose value is pegged to that of the yen, dollar, or other currencies. The new law is aimed at curbing the financial system risks of stablecoins and strengthening protections for investors.

Under the new law, stablecoins can be issued by licensed banks, registered money transfer agents and trust companies. Stablecoin licenses are expected to be issued only to highly credible businesses in charge of issuing and managing them, as well as intermediaries responsible for circulation.

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