Japan’s ruling party, the Liberal Democratic Party, has recently made a push for immediate crypto tax reforms. This push comes in the form of a “White Paper” that was unveiled by the party’s web3 project team on April 12. The team emphasized the need for separate taxation on profits and losses from cryptoasset transactions. Currently, Japanese law requires crypto traders to include their trading profits and losses on their annual income declarations. This has led to varying tax rates for individuals based on their income levels, with some paying as little as 11% and others over 50%.
Prime Minister Fumio Kishida has shown support for the web3 sector and indicated a willingness to reform tax laws related to crypto trading. This has already resulted in tax reform for corporations, who are no longer required to pay tax on unrealized gains. If the tax reform for individual traders is approved by the Digital Society Promotion unit and the Political Affairs Research Council, it will become official policy for the Liberal Democratic Party. This would pave the way for lawmakers to create a bill to present to the National Diet.
While the process may be time-consuming, it seems likely that Japanese crypto traders will see tax reform in the near future. The Liberal Democratic Party, which has been in power since 1955, holds a significant number of seats in both houses of the Japanese parliament. This gives them a strong position to implement the proposed changes outlined in the White Paper. The goal of the authors of the paper is to position Japan at the forefront of the web3 revolution and support the development of blockchain technology in social infrastructure projects.
Industry insiders in the Japanese crypto sector have responded positively to the news of the proposed tax reforms. The paper addresses many of the requests made by industry players, according to Genki Oda, the Founder of BITPoint and Vice Chairman of the Japan Crypto Asset Exchange Association. Sota Watanabe, CEO at Startale Labs, praised the comprehensive coverage of main industry issues in the White Paper. The proposed changes would not only separate crypto profits taxation from income tax but also allow traders to defer losses for up to three years.
Japan’s Liberal Democratic Party’s push for crypto tax reform is a significant step towards creating a more favorable environment for crypto traders in the country. The proposed changes, if implemented, could streamline the taxation process for crypto transactions and provide clearer guidelines for traders. The industry’s positive response to the White Paper indicates a strong desire for reform within the sector. It remains to be seen how quickly the proposed reforms will be implemented and what impact they will have on the Japanese crypto market.