Japan’s ruling party, the Liberal Democratic Party, is pushing for immediate reform regarding cryptocurrency taxes. The party’s web3 project team released a white paper on April 12, calling for the taxation of profits and losses from cryptoasset transactions. The team believes that this issue needs to be addressed immediately and has passed on the report to the Digital Society Promotion unit within the party. Currently, Japanese law requires crypto traders to include their trading profits and losses in their annual income declarations.
In Japan, taxpayers must declare all crypto-related earnings as “other income,” with tax rates varying depending on the individual’s income level. Campaigners have been advocating for changes to the tax laws, and recently, Prime Minister Fumio Kishida has shown support for the web3 sector. Kishida has expressed interest in reforming tax laws related to cryptocurrencies and has shown support for NFT-powered economic growth. Corporations in Japan are no longer required to pay taxes on unrealized gains, which are coins that appreciate in value but are not sold for fiat within the same financial year.
If the tax reform for individual crypto traders is approved by the Digital Society Promotion unit, it will then be passed on to the Political Affairs Research Council for further approval. Once approved by the council, tax reform will become official Liberal Democratic Party policy, paving the way for lawmakers to create a bill to present to the National Diet. The ruling party, which has been in power since 1955, is likely to support the proposed tax reforms for crypto traders, creating a favorable environment for the implementation of changes in the tax laws.
The authors of the white paper aim to position Japan at the center of the web3 revolution and support the development of blockchain technology in social infrastructure projects. In addition to separating crypto profits taxation from income tax, the proposed changes would allow traders to defer losses for up to three years. The white paper also addresses the issue of tight crypto leverage trading rules that Japanese exchanges have been facing for several years. Industry insiders in Japan have welcomed the news, with some stating that the white paper covers many of their requests for improvement.
Japanese crypto industry insiders, including the CEO of Startale Labs Sota Watanabe and the Vice Chairman of the Japan Crypto Asset Exchange Association Genki Oda, have expressed support for the proposed tax reforms outlined in the white paper. Watanabe stated that the paper comprehensively covers the main issues that need improvement in the industry, while Oda noted that almost all of the industry’s requests have been included in the white paper. The industry is hopeful that these reforms will be implemented in the future, and steps will be taken to ensure that they become a reality.
