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Japan planning to implement tax measures on crypto companies to prevent fleeing cash

According to the local news source, Yomiuri, Japan’s Financial Services Agency is planning to make changes in virtual currency taxation policy to consider corporate organisations in preparation for the country’s tax reform in 2023.

The change that is being proposed would eliminate capital gain liabilities for undisposed corporate crypto assets at the end of each taxation year. Additionally, the classification of virtual assets would be changed in such a way that the maximum capital gains tax that is applicable would be reduced from 55% to 20%.

The nominal tax rates start at 55% and go higher from there for foreign nationals who have made Japan their permanent home. Any activity that results in the generation of crypto-based revenue, such as decentralised finance lending, Bitcoin mining, or plain old cryptocurrency trading, is subject to taxation under the category of other income. In addition, it will not be able to “carry forward” any capital losses that may have been incurred as a consequence of cryptocurrency activities into future years.

The substantial tax obligations that Japanese crypto startups must face, according to industry analysts, play a big part in the companies’ decisions to relocate their corporate domiciles outside of Japan. Astar Network, which is a decentralised network hub on Polkadot, is an example of this kind of organisation.

Earlier this year, the company made the decision to issue its tokens outside of Singapore in order to avoid having to comply with severe tax payments. Sota Watanabe, the creator of Astar, was asked about the planned tax change, and he responded by saying that he believes it has the potential to be “positive momentum for the Web3 business, even if it’s still in the middle of the road.”

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Jeewan Singh is CryptoShrypto’s content writer and a seasoned writer with over two years of experience in writing about Indian Securities Market. Jeewan's participation in Blockchain and Cryptocurrency started in late 2020, and he hasn't looked back since. The technical and economic outcomes of cryptocurrency are what spark his curiosity, and he keeps one eye on the market.
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