National Tax Agency Officially Announces Partial Revisions to Virtual Currency Corporation Tax Rules


Improving the environment for the cryptocurrency business

On the 20th, Japan’s National Tax Agency issued a legal interpretation notice regarding partial revisions to corporate tax rules.

Among them, he explained that crypto assets (virtual currencies) issued by companies will be excluded from the market value evaluation if the conditions are met. While there are still issues to be addressed to make it easier for cryptocurrency-related companies to do business in Japan, this represents a step forward in improving the business environment.

connection: The Kishida administration “The issue of the virtual currency corporate tax will reach a conclusion in the next fiscal year’s tax reform”

Regarding the exclusion of self-issued virtual currencies from the subject of market valuation, it has been confirmed that there has been a movement toward revision for some time. This revision is also included in the “ruling party tax reform outline” for fiscal 2023. It has been officially decided to be exempted by the notification of the National Tax Agency this time.

connection: The government will decide on the “Tax Reform Outline” next year, NISA will be made permanent, and the end-of-term mark-to-market valuation of virtual currency will be revised.

Under current law, if a company holds cryptocurrencies, it will be taxed on unrealized gains at the end of the period. It has long been pointed out that this rule puts a burden on companies and hinders innovation in cryptocurrencies and blockchains. Because of this Japanese law, some companies have chosen to do business overseas. With this revision, the rules for self-issued virtual currencies have been officially relaxed.

There are two main conditions for exemption from market valuation. The first is that it must be a cryptocurrency issued by the company and held continuously from the time of issuance. The second is that “from the time of issuance of the virtual currency, it must continue to be subject to transfer restrictions due to one of the following.”

  1. Certain measures are taken as technical measures to prevent transfer to other persons.
  2. Must be a trust property of a trust that satisfies certain requirements

connection: Why did the Japanese government start promoting “Web3 policy”?Summary of important points and related news

Future move

Many voices of joy have been heard from the Japanese community and those involved in cryptocurrency-related businesses in response to the National Tax Agency’s notification. Sota Watanabe, founder of Aster Network (ASTR), who has been actively appealing for the revision of this rule, commented as follows.

connection: “Why does Japan’s virtual currency tax problem cause an outflow of human resources overseas?” Astar Network CEO Watanabe’s opinion

As Mr. Watanabe also pointed out, this rule revision only applies to “in-house issued” virtual currencies. With regard to corporate tax, issues remain with cryptocurrencies issued by other companies.

Liberal Democratic Party lawmaker Masaaki Taira, chairman of the web3 project team, commented as follows, including this point.

It should be noted that the web3 project team is proposing not only revisions to the corporate tax law. It also proposes that profits and losses related to virtual currency transactions be subject to separate self-assessment taxation.

connection: Liberal Democratic Party web3PT publishes proposals on taxation of virtual currency transactions

What is Web3

Also known as the “Next Generation Internet,” it refers to a decentralized network based on blockchain. Specifically, it includes NFTs (non-fungible tokens) and virtual currencies.

The early Internet, in which the flow of information was one-way, is called “Web1”, and the current centralized Internet is called “Web2”.

▶Cryptocurrency Glossary

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