With the proposed amendments, the FSA aims to create a better environment for Web3 and blockchain startups.
The Financial Services Agency (FSA), Japan's primary financial regulatory authority, has recently proposed an amendment to the country's tax code regarding cryptocurrencies. The move could potentially alleviate tax burdens for domestic firms dealing in digital assets.
On August 31st, the FSA officially submitted its recommendations, the highlight of which calls for an end to the yearly taxation on "unrealized gains" for crypto assets held by Japanese firms.
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Typically, companies in Japan face taxation on digital assets on an annual basis, in contrast to some jurisdictions where taxes are only levied after crypto assets are converted into fiat currencies.
The proposed change seems to have garnered support already. The FSA indicates that the Ministry of Economy, Trade and Industry has backed the amendment.
According to the agency, this tax code modification aims to foster a better environment for blockchain technology and Web3 startups. This only reaffirms the statement about plans to expand the Web3 sector given by Japan's Prime Minister Fumio Kishida in July.
The tax landscape surrounding cryptocurrencies in Japan has long been a subject of debate. Industry advocates, including the non-governmental Japan Blockchain Association (JBA), have been lobbying for tax reforms.
In late July, the JBA submitted its own set of recommendations to the government, which mirror many of the FSA's proposals. Specifically, the JBA called for scrapping the year-end unrealized gains tax on crypto, switching to self-assessed separate taxation with a uniform rate of 20% for personal crypto trading profits, and abolishing income tax on individual crypto transactions.
The FSA's proposed tax changes for the crypto industry signify an important step towards creating a more favorable financial ecosystem for digital assets in Japan. With apparent support from significant governmental departments, this move may well mark a turning point in how cryptocurrencies are treated fiscally in the country.
