Japanese Cryptocurrency Groups Want Tax Reductions to Stop The Exodus Of Talent
The government of Japan are being urged by cryptocurrency lobbying organisations to relax corporate tax regulations that are seen to be impeding the development of the country’s local digital asset market.
Two organisations, the Japan Cryptoasset Business Association (JCBA) and the Japan Virtual and Crypto assets Exchange Association (JVCEA), are to ask the Financial Services Agency (FSA) to reduce the cost for businesses to issue and hold cryptocurrency tokens.
The organisations plan to petition the government to suspend taxing paper gains on cryptocurrency holdings if businesses own them for reasons other than short-term trading, according to a report. Profit from these assets, including unrealised gains, is now taxed at a corporation rate of around 30%.
Because of this, keeping hold of digital money once it has been created is costly for businesses, increasing the cost of starting cryptocurrency operations.
The demands from the cryptocurrency sector will serve as a litmus test for the government of Prime Minister Fumio Kishida’s commitment to growing Japan’s Web3 economy as part of a program that would support the expansion of the Web3 industry which was authorised earlier this year by the Japanese government.
The FSA has been debating whether a corporate tax adjustment for the cryptocurrency business is necessary, but the agency has not decided whether to include this suggestion in its yearly proposed changes, which were scheduled to be presented in August to the tax authorities.
Additionally, the advocacy organisations want to push the government to impose a flat 20% income tax on cryptocurrency profits made by individual investors rather than a range of rates up to 55%.
Change in Tax Rates to Reduce Talent Turnover in Crypto
Due to unfavourable trading conditions—including the expense to firms of holding onto digital currency after their creation—Japan has recently lost local enterprises to other countries with a lot of local businesses moving to Singapore and other countries.
Additionally, a tax has been levied on “governance tokens,” which allow holders to participate in company decision-making.
The country’s government passed a policy earlier this summer to promote the usage of digital assets, non-fungible tokens (NFTs), and decentralised autonomous organisations (DAOs) in the Web3 domain (DAOs).
If authorised, local companies will not have to pay taxes on the paper profits they generate from Bitcoin investments if they retain them for purposes other than short-term trading. Such income is now subject to an annual tax rate of 30%.
It is expected that the strategy would be presented to the financial watchdogs during the summer keeping in mind that the Japanese government normally has discussions on tax changes around the start of the summer and takes final decisions by the end of the year.