Japan Unveils Plan for Major Tax Reforms for Crypto Firms in 2024


The Japanese government finalized the crypto tax reform outline for fiscal 2024 at a cabinet meeting on December 22nd. The reform comes with an amendment that removes the period-end mark-to-market valuation tax for corporations holding third-party-issued crypto assets. This means corporations will be taxed solely on profits from the sale of virtual currencies and tokens, similar to individual investors.

The amendment was in response to a request from the Japan Crypto Asset Business Association (JCBA), and is expected to relieve the tax burden on corporations involved in operating crypto assets. It also seeks to encourage the growth of Web3, support domestic startups utilizing blockchain technology, and attract international projects.

The revision alters the application scope of period-end mark-to-market under the Corporation Tax Law. Before, corporations had to record profits or losses based on the difference between market value and book value of crypto assets at the fiscal year-end. The new policy exempts this mark-to-market valuation if the asset is assumed to be held continuously. Last year’s tax reform only exempted virtual currencies issued by corporations themselves.

In addition to the crypto asset amendment, the fiscal 2024 tax reform outline also includes a 40,000 yen income tax and resident tax reduction per person from June 2024, tax reductions for companies, and a new tax system for strategic sectors and innovation. This is expected to result in a 3,874.3 billion yen decline in revenue for national and local governments, making it the third-largest decline since fiscal 1989. The bill requires approval from both Houses of Parliament to be put into effect.

The latest tax reform is a step towards introducing separate taxation (20%) and loss carryover deductions for cryptocurrency investors. Discussions on profit and loss calculations in crypto asset transactions, lump-sum tax on the conversion of crypto assets into legal currency, and “carry-over” deductions for three years starting from the following year, still need to be held.

Japan has been making timely reforms to foster the adoption of cryptocurrencies in the country. It remains a popular destination for crypto firms, and earlier this year, the country allowed VC firms to directly invest in crypto.

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