Japanese token issuers no longer need to worry about corporate taxes on unrealized cryptocurrency gains, as the National Tax Agency has revised the law on June 20th. This tax exemption comes nearly six months after the Japanese government approved a proposal to remove the obligation of crypto firms to pay taxes on paper gains on the tokens they issued and held.
The Liberal Democratic Party (LDP) has been discussing new crypto tax rules since August 2020 as part of a wider tax reform for 2023, and the tax authority has now given its final approval for the new rules. Under the new regulations, Japanese firms issuing tokens are exempt from 30% corporate tax rate on their holdings, which was previously applicable even for unrealized gains.
The cryptocurrency industry in Japan has also been undergoing significant changes in recent times. Since June 1st, the country has been enforcing stricter Anti-Money Laundering (AML) measures to trace cryptocurrency transactions, so as to make the Japanese legal framework compatible with global crypto rules. Last December, the AML legislation was revised after it was found to be inadequate by the Financial Action Task Force (FATF). Additionally, a bill that was passed in June last year prohibits the issuance of stablecoins by non-banking institutions, and limits the issuance of stablecoins to licensed banks, registered money transfer agents and trust companies.
Japan is one of the first countries to legalize cryptocurrency as a form of private asset, and its crypto regulations are amongst the strictest in the world. After the Mt.Gox and Coincheck hacks, Japan’s financial regulator tightened the rules on crypto exchanges. These regulations are believed to have facilitated the speedy return of assets to FTX users in Japan after the exchange’s global collapse, as compared to users in other countries without a clear timeline for their refunds.
