Cryptocurrency projects will no longer be subject to hefty taxes in Japan from April 2023 onwards.
The tax committee of Japan's ruling Liberal Democratic Party (LDP) has met and unanimously agreed to draft a corporate tax exemption for token issuers for unrealized profits, a party politician said Dec. 17.
Akihisa Shiozaki, secretary general of the party's Web3 project group, said that the proposal would be included in the annual tax policy guide, submitted to parliament in January and would take effect in the next tax year starting April 1.
Under current rules, Japan is collecting a tax on token issuers of up to 35% on unrealized profits for token holdings, if the token is listed on an active market. Obligations to pay taxes are based on their market value at the end of the tax period. In fact, this tax has gradually pushed projects out of Japan in the past.
Industry associations have proposed many other tax reforms, including taxing cryptocurrency profits similar to stocks, and taxing them only when individuals convert profits from cryptocurrencies to Fiat money. However, this is unlikely to happen this year and is likely to reappear in LDP tax discussions next winter.
In addition, the proposal also recommends enacting legislation for LLC-style decentralized autonomous organizations (DAOs), issuing yen-based uncensored stablecoins, reforming the governance of the Virtual Currency Exchange Association, screening tokens, and guiding audits of cryptocurrency companies.
Since last year, many cryptocurrency companies in Japan have struggled due to harsh tax policies and strict regulatory interventions from the authorities. The Japanese government also passed a bill to combat crypto money laundering and terrorist financing in October. However, metaverse and NFTs are still potential candidates in the land of the rising sun, and Japan will soon test the national digital yen.