Japan’s Crypto Token Issuers Get Tax Break on Unrealized Gains

Japan’s National Tax Agency has made a move to support the cryptocurrency industry by exempting crypto token issuers from paying corporate tax on unrealized gains for their holdings.

The Japanese government has put in place two conditions for crypto token issuers to be exempt from corporate tax on unrealized gains: first, the tokens must be issued by the firm itself and held continuously since issuance; second, the tokens must be subjected to “transfer restrictions” since issuance.

The Japanese government is taking a progressive approach to cryptocurrency regulation. In a move that is likely to be welcomed by the cryptocurrency industry, the LDP tax committee approved revisions to the corporate tax rules for cryptocurrency issuers in December 2022. The revisions were included in the ruling party’s tax reform outline for 2023, and the tax authority gave final approval this week.

The Japanese government used to impose a 35% tax on unrealized gains for tokens held by token issuers if the tokens were listed on an active market. The holdings were taxed at the end of the taxation period.

The Japanese government’s taxation of crypto firms was a major blow to the industry, as it made it very difficult for these businesses to operate profitably. Taxing businesses on earnings they had not made was one of the costs associated with the necessity to pay tax on unrealized gains. This led to an exodus of crypto founders from Japan.

The Japanese government’s recent decision to relax corporate taxes for crypto firms is a positive step towards easing the business environment for the industry in Japan. Sota Watanabe, the founder of Japan-based Astar Network, who has been actively advocating for tax breaks for crypto firms, believes that the recent revisions will help to stem the exodus of crypto founders from the country.

Watanabe is not stopping here. He intends to continue working with regulators and politicians to create even more favorable tax rules for Japanese crypto firms.

Japan’s open-minded approach to cryptocurrency taxation could make it a global leader in the industry.

Countries are competing to become the global crypto hub by implementing lucrative policies that are attracting huge investments.