The Japan Blockchain Association (JBA), an influential non-governmental advocacy group, has called for a comprehensive revision of Japan’s current taxation regulations on digital assets. This request, addressed to the Japanese government, underscores three pivotal measures to alleviate the financial strain on cryptocurrency holders.
Taxation – The Biggest Hurdle for Web3 Enterprises
Unveiled on the JBA’s official website on July 28, the request labels taxation as the principal obstacle for Web3 companies operating within Japan’s borders. This tax barrier, they argue, discourages citizens from fully participating in the ownership and usage of crypto assets. Consequently, the JBA proposed three major amendments designed to reduce the weight of the burgeoning digital economy.
The primary proposition focuses on nullifying the year-end tax on unrealized gains for corporations possessing crypto assets. An unrealized gain is essentially an on-paper profit derived from incomplete transactions. Specifically, the JBA intends to terminate the taxation on unrealized profits from tokens issued by third parties.
Earlier in June, the National Tax Agency of Japan exempted local companies from the year-end tax on unrealized gains from their cryptocurrencies.
Reforming Personal Crypto Trading Profit Taxation
The second proposed change revolves around the taxation strategy for personal profits from crypto asset trading. This proposal recommends a shift from the prevalent comprehensive taxation system to a self-assessed, separate taxation method with a standard tax rate of 20%. Moreover, it advocates for a three-year term for writing off losses incurred from depreciation in digital asset value.
Lastly, the JBA is campaigning to remove income tax on profits from individual crypto asset exchanges. The association contends that:
“In the boundless web3 age, there’s a significant chance that crypto asset exchange will dominate the economic sphere. Given the extensive range of transactions and diversity of crypto assets exchanged, tax calculation could become exceedingly challenging.”
Japan’s Pledge to Web3 Industry Development
By the end of July, Fumio Kishida, Japan’s Prime Minister, reaffirmed the country’s resolve to nurture the Web3 sector, emphasizing its potential to revolutionize the internet and ignite societal transformations. Coinciding with this statement, Changpeng Zhao, Binance CEO, declared the imminent launch of the cryptocurrency exchange’s services on a novel Japanese platform in August.
These proposed reforms could significantly shape the future landscape of the crypto industry in Japan and potentially worldwide. Time will tell how these changes might impact the digital economy as all eyes remain on Japan’s regulatory responses.
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