Japan’s crypto groups demand an end to taxation of paper gains
Japan’s leading crypto lobby groups plan to submit a proposal to Japan’s financial regulatory body to address the high crypto taxes, which experts warn will make Japan less competitive as a crypto hub.
According to an internal memo seen by Bloomberg, the proposal will be sent to Japan’s Financial Services Agency (FSA) this week, asking them to stop taxing unrealized gains on crypto holdings “if the firm holds them for purposes other than short-term trading .”
The proposal also asks the Financial Supervisory Authority to lower the income tax rates on crypto income for individual investors to 20%, which is far less than the current rates that see some investors being taxed as high as 55%.
Head of Tax (APAC region) Danny Talwar of crypto tax platform Koinly told Cointelegraph that the current regulatory environment makes it difficult for companies and individual investors to hold digital assets in Japan compared to more crypto-friendly nations:
“The high crypto tax rates make Japan less competitive on the international front compared to countries like Singapore and Dubai, which are increasingly becoming digital assets for business.”
Talwar also said that taxation of unrealized capital gains can lead to situations where taxes paid are disproportionate to the asset value upon realization, and this is particularly common for volatile asset classes.
Talwar added that acceptance of the proposals by the FSA would be a “progress for crypto-friendly regulation” in Japan, although the exact content of the proposal is not yet known.
As for regulation, Talwar acknowledged “it shouldn’t stifle innovation in this fast-growing industry.” But before doing so, it’s important that lawmakers have a clear understanding of how digital asset taxation fits within current tax regimes and regulatory frameworks, he said.
Speaking to Bloomberg, Web3 infrastructure protocol Stake Technologies CEO Sota Watanabe said the current corporate tax rate was too high, making Japan “an impossible place to do business.”
“Japan is an impossible place to do business … the global battle for Web 3.0 hegemony is underway, and yet Japan is not even at the starting line.”
Watanabe is one of several CEOs who moved their crypto companies to Singapore, citing high taxes as one of the reasons for the move.
Related: South Korea Postpones 20% Tax on Crypto Profits Until 2025
Japanese politician Masaaki Taira also argued that lawmakers need to relax crypto regulations to “stem the outflow of digital talent”.
The proposal is reportedly being drafted by The Japan Cryptoasset Business Association (JCBA) and the Japan Virtual & Crypto Assets Exchange Association (JVCAEA), whose members consist of crypto firms including the Bitcoin Association and currency broker WikiFX.
