Japan’s National Tax Agency revised corporate tax rules for cryptocurrency issuers earlier this week. The revised rules exempt token issuers from paying corporate tax on unrealized gains on their holdings.
A local news report said the exemptions applied under two conditions. First, the tokens must be issued by the company itself and held continuously since issuance. Second, tokens must be subject to “transfer restrictions” since they are issued.
The tax committee of Japan’s Liberal Democratic Party (LDP) approved the revisions proposal in December 2022. It was included in the ruling party’s 2023 tax reform blueprint and the tax authority gave final approval this week.
Prior to the review, token issuers had to pay a 35% tax on unrealized gains of the tokens they held, if the tokens were listed on the open market. The tax is levied on holdings at the end of the tax period.
These heavy taxes placed an undue burden on cryptocurrency companies, which had to pay tax on fiat gains — since the holdings were not sold, the taxable gains were not realised. In other words, companies had to pay taxes on the profits they didn’t actually make. Therefore, taxes caused cryptocurrency founders to migrate from Japan.
Corporate tax relief is a step towards facilitating the business environment for crypto companies in Japan. Japan-based founder of Astar Network, Sota Watanabe, who has been actively advocating for tax breaks for crypto companies, He said Recent revisions will help stop the exodus.
Watanabe said he will continue to cooperate with regulators and politicians to usher in more favorable tax rules for Japanese crypto companies. he added:
“Next, I would like to do something about the end-of-term taxes for holding tokens issued by other companies as a business, because it is a barrier to local expansion and local projects.”
While the current revision of tax laws provides relief, cryptocurrency companies are still required to pay tax on fiat gains in return for holding tokens issued by other companies.
Token issuers in Japan are now exempt from corporate tax on unrealized gains which first appeared on CryptoSlate.