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Japan's government has approved a revision to the national tax regime for digital assets, granting Japanese firms exemption from paying taxes on "unrealized gains" from cryptocurrency holdings starting April 1, 2024. The reform was unveiled on December 22 after a cabinet meeting.
Cointelegraph reported that the country aims to promote economic growth and stimulate Web3-related endeavors with the reform.
Changes to Tax Reporting Requirements
Previously, corporations in possession of cryptocurrencies received from third parties were required to report the difference between market value and book value, irrespective of whether the firm sold the digital assets. However, the revised tax rules will only subject corporations to taxation on profits generated through the sale of cryptocurrencies. This aligns corporations with retail investors who abide by Japanese tax laws.
The Japanese government's decision to ease tax rules on cryptocurrency holdings is expected to impact businesses operating in the digital asset space positively. The new regulations provide a favorable environment for companies to pursue Web3-related initiatives, contributing to the growth and adoption of cryptocurrencies in Japan.
The government initially shared the details of its 2024 tax reform outline on December 14. It outlines the vision for a modernized tax system that supports technological advancements and encourages innovation.
The plan to scrap taxation on unrealized cryptocurrency profits was initially submitted by Japan's Financial Services Agency on August 31, according to an earlier report. The proposal gained momentum and support, leading to the Cabinet's recent approval of the tax reform.
Collaboration for Web3 Adoption
The relaxed tax regulations have prompted collaborative efforts to boost stablecoin adoption and Web3 services in Japan. Recently, Circle, the stablecoin issuer behind USD Coin (USDC), partnered with Tokyo-based financial services firm SBI Holdings to drive the adoption of stablecoins and further the development of Web3 solutions in the country.
Despite the new tax reforms, Japan's tax authorities reported a 35% increase in cryptocurrency-related tax violations in 2022 compared to the previous year. However, the average value of undeclared cryptocurrency holdings fell by 19%, suggesting an improved compliance rate among cryptocurrency holders.
Photo: Kanchanara/Unsplash
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