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Japan’s Financial Services Agency (FSA) has proposed major changes to the nation’s crypto tax. The proposed reforms, detailed in an August 30 request, would align the tax treatment of crypto assets more closely with traditional financial assets.
Japan’s Heavy Crypto Tax
Currently, Japan’s crypto tax structure imposes hefty rates on profits, classifying them as miscellaneous income. Depending on the taxpayer’s income bracket, these profits can be taxed at rates ranging from 15% to 55%, with the highest rate applied to earnings over 200,000 Japanese yen (around $1,377). In stark contrast, profits from stock trading are taxed at a maximum rate of just 20%.
Corporate entities holding cryptocurrencies are also subject to a flat 30% tax on their holdings at the end of the financial year, even if they have not realized any gains through sales. This corporate tax structure has drawn criticism from various sectors, including the FSA, which has called for a relaxation of these strict approaches.
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Urges for Relaxation
The proposed tax reforms represent a response to growing calls from Japan’s crypto industry for a more favorable tax environment. The Japan Blockchain Association (JBA), a leading pro-crypto lobbying group, has been at the forefront of these efforts.
In 2023, the JBA formally requested the government to lower the tax rates on digital assets, arguing that the current tax framework stifles innovation and growth in the Web 3.0 sector.
In its July 19 proposal for the 2025 financial year, the JBA recommended a flat 20% tax rate for cryptocurrency transactions and the introduction of a three-year loss carryover deduction.
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A Complex Process for a Change
However, despite the persistent lobbying efforts, the government’s crypto tax policies have remained largely unchanged. The FSA’s recent push for reform marks a step forward, but the proposed changes must still pass through Japan’s complex legislative process.
Government ministries submit their tax reform requests to the ruling party, which then forwards them to a tax system research committee and, ultimately, to the national legislature for approval.
Hefty crypto taxes are not just limited to Japan. Several governments around the world impose heavy taxes on digital asset transactions. Foe instance, the Indian government imposes a 30% flat tax on income from the sale or receipt of digital assets.
