Japan Abolishes Corporate Tax on Unrealized Crypto Profits

Crypto News- Effective April 1, 2024, Japanese corporations will no longer bear the burden of taxation on unrealized gains from their cryptocurrency holdings, signaling a significant shift in the nation’s tax framework for digital assets, as approved by the Cabinet. The decision, unveiled on December 22 following a cabinet meeting, underscores Japan’s evolving stance on taxing corporate cryptocurrency assets.

Japan Abolishes Corporate Tax on Unrealized Crypto Profits

Previously, corporations were mandated to report the disparity between market and book values for cryptocurrencies received from third parties, irrespective of whether these assets were liquidated. However, the revised rules now bring corporate taxation in line with that of individual retail investors, taxing only the profits realized from actual cryptocurrency sales.

The government’s revelation of the 2024 tax reform outline on December 14 offered an early insight into the forthcoming changes. Notably, the Financial Services Agency had already set the stage for this shift by proposing the abandonment of taxes on unrealized cryptocurrency profits on August 31.

The anticipated positive impact of these relaxed tax regulations is poised to stimulate increased exploration of opportunities within the Web3 space by Japanese companies. Encouragingly, advancements are already in motion, exemplified by the collaboration between stablecoin issuer Circle, known for USD Coin (USDC), and Tokyo-based financial services firm SBI Holdings. This partnership aims to propel stablecoin adoption and foster Web3 services in Japan.

This transformative shift occurs amid heightened scrutiny by Japan’s tax authorities, identifying 548 instances of cryptocurrency-related tax violations out of 615 investigations in 2022—an uptick of 35% from the preceding year. Despite the increase in cases, there has been a notable 19% reduction in the average value of undeclared cryptocurrency holdings, declining from ¥36.5 million ($245,000) in 2021 to ¥30.7 million ($206,000) in 2022.