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Japanese Cabinet Approves Tax Reform Eliminating Unrealized Crypto Gains Tax for Companies

December 27, 2023 | by stockcoin.net

japanese-cabinet-approves-tax-reform-eliminating-unrealized-crypto-gains-tax-for-companies

In a significant development, the Japanese Cabinet has given its approval to a tax reform that eliminates unrealized gains taxes on cryptocurrency holdings for companies. This reform, which has been under discussion since earlier this month, is aimed at facilitating the inclusion of cryptocurrencies in corporate treasuries without imposing taxes for simply holding them. By removing this tax burden, the reform enables companies to hold crypto assets more consistently, potentially leading to an increased adoption of cryptocurrencies in the country’s corporate sector. However, it is important to note that the reform will still require the approval of the Diet next year before it can be implemented.

Japanese Cabinet Approves Tax Reform Eliminating Unrealized Crypto Gains Tax for Companies

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Overview of the tax reform

The Japanese government has recently approved a tax reform that aims to eliminate the unrealized gains tax on crypto holdings for companies and conglomerates. This reform is part of the FY2018 tax reform and includes a series of modifications to the rules affecting companies operating in the cryptocurrency space.

Removal of unrealized gains tax on crypto holdings

The discussion and consideration of removing the unrealized gains tax on crypto assets have been ongoing since early December. With this tax reform, companies will no longer be required to pay tribute based on the price change of their crypto assets each fiscal year. This change will provide significant relief for companies and make it easier for them to hold crypto assets without facing additional financial burdens.

Impact on companies and conglomerates

The removal of the unrealized gains tax on crypto holdings will have a significant impact on companies and conglomerates operating in the cryptocurrency industry. This reform will facilitate a more consistent holding of crypto assets by companies, allowing them to add cryptocurrencies to their treasury without incurring additional taxes. This change is expected to reduce the financial burden on companies and encourage them to engage more actively in the crypto market.

Previous approval for self-issued cryptocurrencies

Prior to this reform, there had already been a separate change approved earlier this year, eliminating the unrealized gains tax for self-issued cryptocurrencies. This change was a step towards creating a more favorable environment for companies to issue their own cryptocurrencies and incentivize their adoption in the market.

Exemption for holding crypto issued by third parties

In addition to the removal of the unrealized gains tax on crypto holdings, the tax reform also includes an exemption for holding crypto issued by third parties. Previously, companies were obligated to pay taxes on the unrealized gains of any crypto assets they held, regardless of the issuer. With this modification, companies can now hold crypto assets issued by third parties without being subject to unrealized gains taxes.

Continuation of taxation for cryptocurrency sales and purchases

While the tax reform eliminates the unrealized gains tax, it is important to note that sales and purchases of crypto assets will still be subject to taxation. This means that companies will still be required to pay taxes on any gains they make from buying or selling cryptocurrencies. It is worth mentioning that this is contrary to the petition from the Japan Crypto Asset Business Association, which had requested the elimination of taxes on crypto exchanges.

Contrary to the petition from Japan Crypto Asset Business Association

The Japan Crypto Asset Business Association had petitioned for the elimination of taxes on crypto exchanges. However, the tax reform approved by the Japanese government does not fulfill this request. Cryptocurrency sales and purchases will still be subject to taxation, which might be seen as a setback for the association’s efforts to create a more favorable tax environment for crypto assets.

Expected reduction in tax-derived income for 2024

The implementation of this tax reform is expected to lead to a reduction in tax-derived income for June 2024. This reduction is projected to be the largest since 1989, signaling the significant impact that the elimination of the unrealized gains tax on crypto holdings will have on the Japanese economy. While this reduction in tax revenue might be seen as a short-term setback, it is a necessary step to encourage corporations to hold cryptocurrencies and contribute to the growth of the crypto market in Japan.

Aiming to encourage corporations to hold crypto

The main objective of this tax reform is to encourage corporations and conglomerates to hold cryptocurrencies. By removing the unrealized gains tax on crypto holdings, companies will have more incentive to hold crypto assets and utilize them as part of their investment or treasury strategies. This change is expected to foster innovation and growth in the cryptocurrency industry in Japan.

Next steps for the tax reform

While the tax reform has been approved by the Japanese cabinet, it still needs to go through further steps before it is fully implemented. The next step is to present the reform to the Diet in the following year. Approval from both houses of the Diet will be required for the reform to be officially enacted. These additional steps ensure that the tax reform undergoes thorough deliberation and scrutiny before it is implemented into law.

In conclusion, the Japanese government’s approval of the tax reform to eliminate the unrealized gains tax on crypto holdings for companies and conglomerates is a significant development for the cryptocurrency industry in Japan. This reform aims to create a more favorable tax environment for companies, encouraging them to hold cryptocurrencies and contribute to the growth and innovation in the crypto market. While there are still further steps to be taken before the reform is fully implemented, this approval reflects Japan’s commitment to embracing cryptocurrencies and fostering their adoption in the economy.

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