The National Tax Agency in Japan has announced the revision of corporate tax rules for cryptocurrency issuers. The new rules exempt crypto token issuers from paying corporate tax on unrealized gains for their holdings. This move has been welcomed as a step towards easing the business environment for crypto firms in Japan.
According to a local news report, there are two conditions for the exemptions to be applicable. Firstly, the tokens must be issued by the firm itself and held continuously since issuance. Secondly, the tokens must be subjected to “transfer restrictions” since issuance. The Liberal Democratic Party’s (LDP) tax committee approved the proposal for the revisions in December 2022. It was included in the ruling party tax reform outline for 2023 and the tax authority gave the final approval this week.
Prior to the revision, token issuers had to pay a 35% tax on unrealized gains for tokens they held, if the tokens were listed in the open market. The holdings were taxed at the end of the taxation period. This caused undue burden on crypto firms, who had to pay tax on paper gains, as the holdings were not sold and the taxable gains were unrealized. As a result, the taxation caused an exodus of crypto founders from Japan.
Tax relaxation welcomed by crypto firms
The relaxation in corporate taxes is a welcome move for crypto firms, who had been asking for tax breaks for a long time. Founder of Japan-based Astar Network, Sota Watanabe, who has been actively advocating for tax breaks for crypto firms, said the recent revisions will help stem the exodus. Watanabe said that he would continue to collaborate with regulators and politicians to usher in more favorable tax rules for Japanese crypto firms.
However, crypto firms still have to pay tax on paper gains for holding tokens issued by other firms. Watanabe has expressed his desire to do something about the end-of-term taxation of holding tokens issued by other companies as a corporation, as it is a hindrance to the domestic expansion of projects and domestic projects.
The revision of tax laws is a positive step towards creating a favorable business environment for crypto firms in Japan. The exemptions from corporate tax on unrealized gains for crypto token issuers will ease the burden on crypto firms that were facing steep taxation. The move has been welcomed by the crypto community, and it is hoped that more favorable tax rules will be introduced in the future.