Japan to Remove Corporate Tax on Unrealized Cryptocurrency Profits
DeFi and blockchain services providers around the world have limited clarity when it comes to the regulatory process. However, most nations have already added cryptocurrency trading profits to the taxation bracket. The government of Japan has decided to introduce new taxation laws for blockchain firms.
New Tax Reforms
As per the revised policies, domestic firms do not have to pay taxes for paper gains based on unrealized cryptocurrency reserves. Now, the firms will only be subjected to taxation after they sell the asset.
Japanese media reported that the nation is moving forward with a tax reform that will allow blockchain services providers to pay taxes on unrealized gains. The cabinet approved a policy revision on the national taxation regime for digital currencies.
The new policy is set to go into effect on 1st April, 2024 the start of the Japanese financial year. However, the bill needs approval from the House of Representatives and House of Councilors after added to the legislative assembly in January, 2024.
Japanese Blockchain Firms Get Tax Relief Due to New Government Policies
Before the recent taxation amendment for blockchain firms, businesses were directed to pay taxes on their digital asset reserves based on market value and book value difference. However, if the taxation bill is approved, digital asset services providers will not have to pay taxes based on the amount of their digital currency holdings until they sell the reserves.
In this manner, businesses will have the same taxation obligations as retail investors within the Japanese jurisdiction.
According to online responses on the taxation reform bill, Japanese government enabled VCs to invest in cryptocurrencies and fair value account for firms that deal in virtual currencies. The government has also shared details regarding 2024 tax reform outline.
The Financial Services Agency presented a proposal to scarp unrealized digital currency profits on 31st August. Statesmen noted that latest taxation reforms will allow firms to participate in Web 3.0 projects.
Circle is Working with SBI Holdings to Boost the Web3 Sector
USDC stablecoin project Circle signed a business contract with Tokyo-based firm namely SBI Holdings to promote stablecoin adoption and Web 3.0 services within Japan.
The taxation authorities of Japan located 548 instances of tax-violations from blockchain firms out of 615 investigations during 2022. The number increased by 35% since 2021.
On the other hand, the total amount of undeclared digital currency holdings dropped by 20% going from 36.5 million yen ($245,000) in 2021 to 30.7 million yen ($206,000) in 2022. Unsurprisingly, Japan is at the forefront of blockchain, DeFi, and Web 3.0 development.
On 25th December, Japanese digital asset trading platform Ichigo announced listing of $20 million in digital securities backed by real estate at the Osaka Digital Exchange.
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