On June 20, the National Tax Agency in Japan implemented a law revision that eliminates the obligation for token issuers to pay corporate taxes on unrealized cryptocurrency gains. This tax exemption comes into effect approximately six months after the Japanese government approved a proposal to remove the requirement for crypto companies to pay taxes on the theoretical profits from tokens they issued and retained.
Since last August, lawmakers in Japan have engaged in discussions regarding new cryptocurrency tax regulations as a component of the overall tax reform for 2023. However, it was only this week that the tax authority finally granted its ultimate approval.
As per the newly established regulations, Japanese companies that issue tokens are now exempt from paying a fixed 30% corporate tax rate on the tokens they possess. Prior to this legislation, even unrealized gains were liable to be taxed.
The ruling Liberal Democratic Party aims to streamline business operations related to token issuance, making it more accessible for different companies. This effort is expected to facilitate a smoother process for businesses engaging in such activities.
The cryptocurrency landscape in Japan has been experiencing notable transformations recently. Starting from June 1, the country has been implementing more rigorous Anti-Money Laundering (AML) measures to track cryptocurrency transactions and align its legal framework with global regulations governing cryptocurrencies. In response to the Financial Action Task Force’s assessment of insufficient AML legislation, lawmakers made revisions to the existing AML laws in December.
Last year, in June, the government enacted a law that forbids non-banking institutions from issuing stablecoins. Recently, the bill was put into effect, outlining specific regulations that restrict the issuance of stablecoins in the country to licensed banks, registered money transfer agents, and trust companies.
Being an early adopter in legalizing cryptocurrency as a private asset, Japan has implemented some of the most stringent crypto regulations globally. In response to the hacking incidents of Mt. Gox and Coincheck, the country’s financial regulator imposed stricter rules on cryptocurrency exchanges. These local regulations are thought to have expedited the process of asset recovery for FTX users in Japan after the exchange’s worldwide collapse, distinguishing it from users in other nations who lacked a definitive timeline for their refunds.