Japan’s Financial Regulator Proposes Lower Taxes for Crypto Assets in 2025

Japan’s Financial Services Agency (FSA) has proposed changes to the country’s tax code for the fiscal year 2025, including new provisions related to the taxation of crypto assets.

The FSA’s Aug. 30 request for tax reform outlined a plan to treat cryptocurrencies like traditional financial assets, potentially lowering the tax rates currently applied to crypto transactions.

“Regarding the tax treatment of cryptocurrency transactions, cryptocurrency should be treated as a financial asset that should be an investment target for the public,” stated the FSA. The proposal also noted the need to “consider this issue from the perspective of whether it should be treated as such.”

Profits from cryptocurrency transactions in Japan are taxed as miscellaneous income, with rates ranging from 15% to 55% based on individual income tax brackets. According to crypto accounting firm TokenTax, the highest rate of 55% applies to earnings exceeding 200,000 Japanese yen (approximately $1,377).

In contrast, profits from stock trading are subject to a maximum tax rate of 20%. Corporate holders of crypto assets face a flat rate of 30% on their holdings at the end of the financial year, regardless of whether or not they have realized a profit.

The FSA’s inclusion of crypto assets in the 2025 tax reform proposal is a shift from previous regulatory stances, where digital assets were not formally acknowledged within the corporate tax regime. The proposal aims to address this by aligning the tax treatment of crypto assets more closely with that of traditional financial investments.

It also includes provisions allowing losses from crypto trading to be offset against other income, similar to existing rules for certain public bonds and listed stocks. This would be a new addition to Japan’s tax code if enacted.

Advocates within Japan’s cryptocurrency industry have been pushing for revisions to the national tax regime for several years. The Japan Blockchain Association, a prominent lobbying group, has been at the forefront of these efforts, submitting requests to the government to lower the tax rate on crypto assets. In July 2024, the association proposed a flat 20% tax rate on crypto profits and a three-year loss carryover deduction as part of the reform for the 2025 fiscal year.

The association’s requests emphasize the need to drive growth in Japan’s crypto sector by reducing the tax burden on digital assets. Despite these efforts, previous proposals for reform have not resulted in changes to the tax code. Several ministries, including those overseeing agriculture, forestry, fisheries, and trade, have also submitted proposals advocating for tax reforms that could impact the treatment of crypto assets.

Under Japan’s regulatory framework, government ministries submit tax reform requests to the ruling party. These requests are then passed to a tax system research committee and the national legislature for consideration. The proposal must receive approval from the House of Representatives and the House of Councilors to become law.

Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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