Japan, long a leader in technology, is taking bold steps to embrace the digital asset revolution. The government is preparing to implement a new tax regime tailored specifically for businesses that hold cryptocurrencies as long-term investments. The move marks a significant shift in Japan’s approach to cryptocurrencies and reflects the country’s commitment to becoming a major player in the rapidly growing global digital economy.
Indicating changes in cryptocurrency tax policy
Under current tax laws, Japan is one of the few countries that taxes companies based on the market value of their cryptocurrency holdings at the end of each fiscal year. However, this market valuation method excludes self-issued coins. Although this rule was intended to capture capital gains, it had unintended consequences.
Exacerbating the shift toward tax-friendly jurisdictions
Strict tax regulations have prompted some companies with cryptocurrencies as part of their business model to relocate to tax-friendly jurisdictions such as Singapore, Dubai, and Switzerland. This resulted in loss of business and tax revenue for Japan. Now the ruling coalition aims to buck this trend and make Japan a more attractive location for companies involved in the digital asset sector by proposing to exempt companies from tax on unrealized profits from cryptocurrencies they hold for long-term purposes. .
Additional tax reforms under consideration
The coalition’s meeting on Tuesday also discussed other proposed tax changes, including:
- Extended deductible entertainment expenses: It extends a measure allowing small and medium-sized businesses to deduct up to 8 million yen ($54,000) per year for entertainment expenses. The bill is currently set to expire at the end of March 2024.
- Taxation for foreign visitors on purchases: A new tax system will be implemented for foreign tourists purchasing goods in Japan, with details to be finalized from fiscal year 2024.
strategy from now on
These proposed changes are expected to be included in the Coalition’s fiscal 2024 tax reform plan, which is currently being finalized. The plan will then be submitted to the Japanese parliament for approval.
If the proposed tax breaks for companies holding cryptocurrency are implemented, they are likely to attract companies to Japan and boost the country’s digital asset industry. Additionally, other proposed tax reforms could provide relief to businesses and stimulate economic activity.
Overall, The proposed changes mark a significant shift in Japan’s approach to cryptocurrency taxation and signal the government’s commitment to fostering a thriving digital asset ecosystem.