National Tax Agency of Japan amended corporate tax rules for cryptocurrency issuers earlier this week. The revised rules exempt crypto token issuers from paying corporate tax on unrealized gains for their holdings.
The exemptions are applicable under two conditions, according to a local newspaper report. First, the tokens must be issued by the company itself and held permanently since issuance. Second, the tokens must be subject to “transfer restrictions” since their issuance.
Japan’s Liberal Democratic Party (LDP) tax committee approved the revision proposal in December 2022. It was included in the ruling party’s tax reform bill for 2023 and the tax authority gave final approval this week. .
Prior to the review, token issuers had to pay a 35% tax on unrealized gains for the tokens they held, if the tokens were listed on the open market. Assets were taxed at the end of the tax period.
This heavy taxation placed an undue burden on crypto businesses, which had to pay taxes on paper gains – since assets are not sold, taxable gains have not been realized. In other words, companies had to pay taxes for profits that they did not actually generate. Consequently, the taxation caused an exodus of crypto founders from Japan.
The corporate tax relaxation is a step towards easing the business environment for crypto companies in Japan. Founder of Japanese company Astar Network, Sota Watanabe, who has actively advocated for tax breaks for crypto businesses, said recent revisions will help stem the exodus.
Watanabe said he will continue to work with regulators and politicians to usher in more favorable tax rules for Japanese crypto businesses. He added:
“Secondly, I would like to do something about the end-of-term taxation of holding tokens issued by other companies as a company, because it is an obstacle to the national expansion of projects and projects nationals.”
While the current overhaul of tax laws provides relief, crypto companies still have to pay tax on paper gains for holding tokens issued by other companies.
Post-Japan token issuers are now exempt from corporate tax on unrealized capital gains that first appear on CryptoSlate.