On June 20, Japan’s National Tax Agency published a partial revision of its corporate tax guidelines. They include a new set of rules for digital token issuers that remove previous taxes on unrealized profits from crypto assets issued by companies.
The new tax rules would “make it easier for cryptocurrency-related companies to do business in Japan,” said industry analyst Colin Wu.
Japan Eases Corporate Crypto Taxes
The latest tax break follows the approval of a proposal to remove the requirement that crypto companies pay taxes on unrealized “paper profits” on the tokens they issued and held.
Japanese fintech companies that issue tokens will be exempt from paying a flat 30% corporate tax rate on their holdings.
Currently, the laws impose taxes on unrealized profits, which caused some companies to move abroad to friendlier jurisdictions.
While there are still issues to be addressed to make it easier for cryptocurrency companies to do business in Japan, “this represents a step forward in improving the business environment,” local media reported.
There are two main conditions for crypto token tax exemptions. Tokens must be issued by the company and continuously held from the time of issuance, and transfer restrictions must be in place.
The crypto community has reacted positively to the latest government move. Sota Watanabe, founder of Astar Network (ASTR), who has advocated for this tax review, commented:
“At the moment, people who want to do something like Astar can now do it without leaving the country. I would like to continue constructive discussions with politicians and authorities.”
He added that he wants to review the taxation of having tokens issued by other companies “since it is an obstacle to the national expansion of the projects.”
Japan has been enforcing stricter AML (anti-money laundering) rules since early June in an effort to align with the Financial Action Task Force (FATF) requirements.
Pivot to Asia Continued
Japan was one of the first countries to fully legalize and regulate cryptocurrency, which is why it remains a popular destination for businesses. Earlier this month, reports surfaced that its largest bank could become a stablecoin issuer.
However, Hong Kong and Singapore have emerged as more crypto-friendly nations this year with their own regulations and digital welcome mats.
Meanwhile, the United States continues to crack down on the industry, taking legal action against companies for failing to do the impossible: register as stock exchanges.
Cryptocurrencies in Japan
The cryptocurrency sector in Japan has undergone significant changes lately. Since June 1, the country is enforcing stricter anti-money laundering (AML) measures to track cryptocurrency transactions and align the Japanese legal framework with global cryptocurrency regulations.
Lawmakers revised the anti-money laundering legislation in December after the Financial Action Task Force (FATF) deemed it insufficient.
In June last year, the government passed a law that prohibits the issuance of stablecoins by non-bank institutions. The law, which came into force just a few weeks ago, stipulates that stablecoin issuance in the country is limited to licensed banks, registered money transfer agents, and trust companies.
Japan was one of the first countries to legalize cryptocurrencies as a form of private asset, and its cryptocurrency regulations are among the strictest in the world. Following the Mt.Gox and Coincheck hack, the Japanese financial regulator tightened rules on cryptocurrency exchanges.
Local regulations are believed to have made it easier for FTX users in Japan to quickly return assets following the global collapse of the exchange, in contrast to users in other countries without a clear deadline for their refunds.
By Marina Meza
