Japan’s Financial Services Agency (FSA) has proposed to significantly revise the tax code for fiscal year 2025, focusing on cryptocurrency. In its Aug. 30 request, the FSA suggested that digital assets should be treated similarly to traditional financial assets, a shift that could lower the tax rate on crypto investments. The proposal comes amid growing calls from the crypto industry for a more favorable tax environment.
Tax Treatment of Cryptocurrency in Focus
The current tax system in Japan classifies cryptocurrency profits as miscellaneous income, with rates ranging from 15% to 55%, depending on the income bracket. Notably, individuals earning over 200,000 Japanese yen ($1,377) face the highest tax rate of 55%. This is in contrast to stock trading profits, which are taxed at a flat rate of 20%. According to TokenTax, a crypto tax software, the disparity has been a concern for crypto investors and has driven calls for reform.
The situation is even more stringent for corporate holders of crypto assets. At the end of the financial year, they are subject to a 30% tax on their holdings, regardless of whether a sale was made or profits were realized. This corporate tax rule has led to criticism from industry advocates who argue that it stifles growth and innovation in Japan’s burgeoning crypto sector.
Japan to Reform Crypto Taxes, Boosts Web3 Startups
Next Steps in the Legislative Process
Government ministries submit their tax reform proposals to the ruling party for consideration. The tax system research committee reviews these proposals before forwarding them to Japan’s national legislature.
The reforms must be approved by both the House of Representatives and the House of Councilors for them to become law. Given the FSA’s push for a comprehensive overhaul, the crypto community will closely watch these developments in the coming months.
