Japan to scrap tax on unrealised crypto profits

The Japanese Cabinet approved a bill that would exempt companies from paying tax on unrealized profits from deals with digital assets. Local СМИ reported.

The proposal will be presented to lawmakers in January, after which it must pass votes in the House of Representatives and the House of Councillors.

If enacted, the provisions would take effect on 1 April 2024.

Under current rules, the tax on cryptocurrencies held by companies is calculated based on the difference between market value and book value, regardless of whether the assets were sold.

The reform would tax only realized profits, in line with the treatment of retail investors.

Some stakeholders welcomed the news with enthusiasm. The tax relief would allow a larger number of firms to pursue Web3-projects in Japan.

First earlier this year Japan allowed VCs to invest in crypto and now this along with allowing fair value account for companies with crypto. Crazy they even allowed taxes on unrealized profits in the first place but could be new potential flows too pic.twitter.com/oJGq1iVMG1

— guleid (@riddle245) December 24, 2023

At the end of November, the government reported a 35% increase in tax evasion cases in 2022. A total of 548 such violations were recorded. However the volume of unregistered cryptocurrency fell by 19% in the same period.

Earlier Japan eased financing rules for crypto startups. After the bill is enacted, companies will be able to raise funds through digital assets.

In June, local authorities freed issuers of tokens from paying 30% tax on unrealised profits from issued and balance-held coins.

Later, Circle announced plans to issue a stablecoin in Japan.