The Japanese government has shown the potential to reduce the tax burden on cryptocurrency startups through tax reform in 2023, preventing them from going abroad to set up businesses. Yomiuri Shimbun Online report.
Rakuten Group President Hiroshi Mikitani brutally self-criticized himself when speaking at the government’s Digital Society Initiative conference in April.
“Most people go to Singapore because starting a business in Japan is silly.”
Japanese Prime Minister Fumio Kishida announces 2022 “First year of startup creation” He revealed his intention to support the rise of startups in Japan.
Kishida also said the government will plan a new implementation process to create an environment that nourishes start-ups and will develop a five-year plan dedicated to this topic by the end of the year.
Current tax law in Japan
Japan currently taxes both corporate and retail investors on realized and unrealized crypto profits.
Businesses holding crypto assets will be taxed at a rate of 30% on all profits derived from digital assets, while retail investors may be taxed at a rate of up to 55%.
New tax reforms target corporate investors and encourage the emergence of startups. If the tax update goes as intended, companies that hold a portion of the crypto assets they issue will not include those assets in their market valuations and will not be taxed on their unrealized gains.
However, you will be taxed based on the revenue you make from selling the tokens you issue and other crypto assets you may hold. There is no talk of changing tax rates for retail investors.
The purpose of the new tax law is to support the ICO process for cryptocurrency startups. This is because almost all cryptocurrency startups have set aside a portion of their native tokens as their own assets or to maintain voting rights. By not taxing the unrealized profits of the project’s native token, Japan hopes to encourage startups to set up operations there.
The new tax law is being jointly discussed by Japan’s Financial Services Agency and the Ministry of Economy, Trade and Industry. Tax reform needs to be completed with additional legislative measures to be updated as discussed by these two agencies.
Lobbyists wanted more
Certain members of Japan’s most important crypto lobbying groups and government are aware of the heavy tax law’s impact on the community. They’ve spent the last few months trying to invert the environment and make it more startup-friendly.
Japan’s most prominent lobbying groups, the Japan Crypto-Asset Business Association (JCBA) and the Japan Virtual Crypto-Asset Exchange Association (JVCEA), are particularly enthusiastic about the topic, with new tax proposals to be submitted to Japan’s Financial Services Agency (FSA). prepared. July 2022.
Their proposal included more comprehensive changes to the current cryptocurrency tax regime that would ease corporate and individual investors. They hoped their proposal would be included in his 2023 tax reform bill.
The JCBA and JVCEA have proposed that all profits from cryptocurrencies be tax-free, whether realized or not. According to their proposal, only profits made by companies investing in short-term positions would be taxable. On the other hand, individual investors are taxed at a fixed rate of 20%.