Japan’s National Tax Agency revised its 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 apply under two conditions, according to a local news report. First, the tokens must be self-issued by the company and kept continuously since issuance. Second, the tokens must be subject to “transfer restrictions” since issuance.
The Liberal Democratic Party (LDP) Tax Commission of Japan approved the proposal for the revisions in December 2022. It was included in the ruling party’s 2023 tax reform outline and the tax authorities gave final approval this week.
Prior to the review, token issuers had to pay 35% tax on unrealized gains for tokens they held, if the tokens were listed on the open market. The participations were taxed at the end of the tax period.
This high tax placed an unnecessary burden on crypto companies, which had to pay taxes on paper profits – since the holdings are not sold, the taxable profits were not realised. In other words, the companies had to pay taxes on profits they did not actually generate. Therefore, the tax caused an exodus of crypto founders from Japan.
The corporate tax easing is a step towards easing the business climate for crypto companies in Japan. Founder of the Japan-based Astar Network, Sota Watanabe, who has actively advocated tax breaks for crypto companies, said the recent revisions will help counter the exodus.
Watanabe said he would continue to work with regulators and politicians to usher in more favorable tax regulations for Japanese crypto companies. He added:
“Next, I would like to do something about the end-of-term taxation of holding tokens issued by other companies as a business, as it is a barrier to the domestic expansion of projects and domestic projects.”
While the current overhaul of the tax laws provides some relief, crypto companies still have to pay taxes on paper profits for holding tokens issued by other companies.
The post Japan’s token issuers are now exempt from corporate tax on unrealized gains appeared first on CryptoSlate.
