To prevent emerging startups from migrating out of the country, Japan is planning to soon launch new crypto tax rules. The country’s Financial Services Agency and Ministry of Economy, Trade and Industry will review the corporate taxation method for crypto assets. The new rules are aimed at reducing regulatory burden on newly established companies in the space. Overall, the country plans to reform crypto tax rules by 2023 to prevent promising startups from flowing overseas.
Japan Leadership Favorable To Easier Regulation
In June this year, Japanese Prime Minister Fushio Kishida opined that crypto listing in Japan could be lot easier. After this, The Japan Virtual and Crypto Assets Exchange Association (JVCEA), resolved to allow the listing process easier. A final decision on the issue was set to be readied by the end of the year. With the reforms in corporate taxes for cryptocurrencies well in place for 2023, the country could turn out to be much more favorable for crypto ecosystem.
In the new crypto tax rules to be launched in 2023, the authorities will tax only profits gained from sales. The objective is to not hinder the growth of startups and prevent companies’ outflow from the country.
“Under the new system being considered by the Financial Services Agency and others, crypto assets owned by companies that issue them will be excluded from the market valuation at the end of the term, and will be taxed only when profits are generated from sales.”
Current Rules Tax Based On Market Value
As per the ongoing crypto taxation system, companies are forced to borne the taxes on unrealized gains. This is compared with taxation on only realized profits in the 2023 Japan crypto tax reforms. “Under the current tax system, unrealized gains are taxed because the company’s holdings are taxed based on the market value.” Due to this, companies are burdened with heavy financial burden and forced to move out of the country.