Japan’s Financial Services Agency (FSA) has announced a proposal to overhaul the tax code for the fiscal year 2025, with significant changes aimed at lowering the tax rate on cryptocurrency transactions. The FSA suggests that crypto assets should be treated similarly to traditional financial investments.
The FSA is leading the initiative, backed by the Japan Blockchain Association, which has been advocating for crypto tax reforms for several years. TokenTax, a firm specializing in crypto accounting, has highlighted the high tax rates currently imposed on crypto profits in Japan.
The FSA submitted its request for tax reform on August 30, 2024. If approved, the new tax code would come into effect in the 2025 fiscal year, subject to approval by the ruling party, the tax system research committee, and Japan’s national legislature.
The proposed reforms would affect cryptocurrency holders and traders across Japan, where current tax laws classify crypto profits as miscellaneous income, with rates ranging from 15% to 55%, depending on income levels.
The FSA argues that cryptocurrency transactions should be taxed more like traditional financial assets, such as stocks. Currently, crypto profits can be taxed up to 55%, while stock trading profits are capped at 20%. The FSA believes that a fairer tax structure would help foster growth in the digital asset industry in Japan. Corporate entities holding cryptocurrency are also burdened by a 30% tax rate on their holdings, regardless of whether they’ve realized any profits.
The reform proposal calls for a flat 20% tax rate on cryptocurrency profits, aligning it with the tax treatment of stock investments. The Japan Blockchain Association, which has been lobbying for tax reform since 2023, is also pushing for the introduction of a three-year loss carryover deduction for crypto. While previous attempts to change the tax structure have not succeeded, this new proposal is part of a broader push to modernize Japan’s financial sector and embrace emerging technologies.
The proposed changes must be approved by both houses of Japan’s government—the House of Representatives and the House of Councilors—before becoming law. If enacted, these reforms could significantly ease the tax burden on crypto investors and contribute to the growth of Japan’s cryptocurrency market.
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