The ruling party of Japan, the LDP, is eager to swiftly implement crypto reform measures. In a press release, the LDP’s web3 team unveiled their “White Paper” on April 12, marking a first for the party. Back in February, authorities proposed opening doors for local cryptocurrency firms to seek support from venture capital investors.
The team’s findings concluded that gains or losses from cryptocurrency transactions should be classified as personal income and subject to separate taxation through individual declarations. The commission emphasized the urgent need to resolve this issue and has forwarded the report to the party’s Digital Society Promotion section. Currently, Japanese law states that profits or losses from crypto trading should be accounted for in annual income earnings taxes.
In Japan, individuals must report any earnings from cryptocurrency as “other earnings,” and those in the lower tax bracket will face an 11% tax on their earnings. For taxpayers in the higher tax bracket, income taxes can reach up to 50%.
Campaigners have been urging Tokyo to change its stance on crypto taxes for years, but Prime Minister Fumio Kishida has recently shown support for web3 technologies. The secretary has made positive comments and suggested revising tax laws to accommodate the growth of NFT-based economics.
This has resulted in a new corporate tax regime that exempts corporations from paying taxes on their theoretical gains. This is crucial for holding coins and allowing them to appreciate in value during a financial year, without having to sell them for fiat currency.
The tax reform proposal from the Digital Society Promotion section, which aims to benefit individual traders, will be forwarded to the Political Affairs Research Council for review. If the council approves the proposal, it will be implemented in accordance with the Liberal Democratic Party’s policy. The bill will then be crafted and sent to the National Diet for approval.
Although the process of scheduling and organizing may be time-consuming, it should not hinder the development team. The LDP has been in power since 1955 and holds 259 seats in the lower house and 116 senatorial seats in the upper chamber. It seems inevitable that Japanese crypto traders will have a tax reform venue in the near future.
Advocates of the draft propose that Japan aims to play a central role in the web3 revolution. They also emphasize the high priority given to implementing blockchain technology in various social projects.
Other proposed amendments include separating cryptocurrency capital gains tax from income tax and allowing traders to carry forward losses for up to three years. The draft also highlights the need for strict regulations on crypto leverage trading, an issue that has plagued Japanese exchanges.
