Japan may see reduced 20% tax on crypto earnings with new proposal

The two major crypto advocacy organisations in Japan, the Japan Crypto-Asset Business Association (JCBA) and the Japan Crypto-Asset Exchange Association (JVCEA), recently presented a tax reform proposal that asks for cutting taxes on cryptocurrency earnings for individual investors.

The fiscal 2023 tax reform request addressed important issues that advocacy groups feel prevent the country from adopting cryptocurrencies. The proposal concentrated on the need for improvement in the environment for individual tax filing, the significance of cryptocurrencies in Japan's web3 plan, and comparisons with other countries' tax regimes on cryptocurrencies.

Individual cryptocurrency investors would be subject to a separate 20 percent tax under the idea, with the ability to carry losses forward for three years starting in the next year. The plan also requests that the same tax system be applied to the market for cryptocurrency derivatives.

The 20 percent separate tax on cryptocurrency earnings with an exemption for unrealized gains would come as a huge relief to Japanese cryptocurrency investors, who currently pay taxes on their investments of up to 55 percent.

The media first reported on an internal letter for crypto tax revisions that will be filed to Japan's Financial Services Agency barely one week before to the tax reform proposal (FSA).

With a special focus on tax reforms, the Japanese crypto associations have been striving to ensure that the crypto business thrives in the nation. In contrast to more crypto-friendly countries, these crypto lobby groups feel that a high tax rate in Japan would make it impossible for corporations and individual investors to keep digital assets.

This year, governments all around the world focused on crypto taxes, with some enacting high tax rates while others tried to abolish or postpone it due to a lack of clear legislation. While Thailand abandoned its proposed 15 percent cryptocurrency tax and even exempted dealers from 7 percent VAT to promote the adoption of cryptocurrencies in the country, India implemented a 30 percent tax on cryptocurrency gains in April of this year. In a similar vein, South Korea postponed its proposed 20 percent cryptocurrency tax policy until 2025.