Japan scraps corporate tax on unrealized crypto profits: Report

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Japanese firms will reportedly no longer be required to pay tax on “unrealized gains” from cryptocurrency holdings as of April next year after the Cabinet reportedly approved a revision to the national tax regime for digital assets. 

According to local reports, Japan’s government unveiled the new tax reform on Dec. 22 following a cabinet meeting, with the new changes set for April 1, 2024 — the start of Japan’s financial year.

Previously, cryptocurrencies held by corporations received from third parties needed to be reported — based on the difference between market value and book value, regardless of whether the firm sold the cryptocurrency.

But now corporations will only be taxed on profits from the sale of cryptocurrencies, similar to what retail investors must comply with under Japanese tax laws.

The government first shared the details of its 2024 tax reform outline in a document published on Dec. 14.

However, the country’s Financial Services Agency initially submitted the plan to scrap unrealized cryptocurrency profits on Aug. 31.

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The eased tax rules could allow more companies to pursue Web3-related endeavors in Japan.

Progress has already been made, with stablecoin issuer Circle — the team behind USD Coin (USDC) — recently teaming up with Tokyo-based financial services firm SBI Holdings to boost stablecoin adoption and Web3 services in Japan.

It comes as Japan’s tax authorities found 548 cases of cryptocurrency-related tax violations from 615 investigations in 2022, up 35% from 2021.

However, the average value of undeclared cryptocurrency holdings fell 19% from 36.5 million yen ($245,000) in 2021 to 30.7 million yen ($206,000) in 2022.

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