Japan scraps corporate tax on unrealized cryptocurrency profits

Domestic firms were previously obligated to pay tax on paper gains from Bitcoin ownership, but this is now only required when the asset is sold. After the Cabinet allegedly agreed on a modification to the national tax code for digital assets, Japanese corporations will apparently no longer be obligated to pay tax on “unrealized gains” from bitcoin holdings as of April next year. 

According to local media, Japan’s government announced the new tax reform on December 22 following a cabinet meeting, with the new adjustments due to take effect on April 1, 2024 – the start of Japan’s fiscal year. Previously, corporations had to report cryptocurrencies received from third parties – based on the difference between market value and book value, regardless of whether they sold them.

However, corporations will now solely be taxed on earnings from cryptocurrency sales, similar to what retail investors must do under Japanese tax laws. In a paper issued on December 14, the administration first shared the contents of its 2024 tax reform proposal. However, on August 31, the country’s Financial Services Agency first proposed scrapping unrealized bitcoin earnings. The loosened tax laws may encourage more corporations to invest in Web3-related ventures in Japan. Stablecoin issuer Circle — the team behind USD Coin (USDC) — recently partnered with Tokyo-based financial services giant SBI Holdings to increase stablecoin usage and Web3 services in Japan. It comes as Japan’s tax authorities discovered 548 incidents of cryptocurrency-related tax offenses from 615 investigations in 2022, a 35% increase from the previous year. The average value of unregistered cryptocurrency holdings, on the other hand, declined 19% from 36.5 million yen ($245,000) in 2021 to 30.7 million yen ($206,000) in 2022.

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