The Liberal Democratic Party, which is in power in Japan, wants the government to implement "immediate" crypto tax reforms.
The web3 project team of the Liberal Democratic Party presented a "White Paper" on April 12 according to a release from the party and a report from the Japanese-language media outlet CoinPost.
The government announced plans to permit venture capital firms to participate in local cryptocurrency ventures in February.
Changes to Crypto Policy Are Wanted by Japan's Ruling Party
"Profits and losses" from "cryptoasset transactions," according to the team, ought to "be subject to separate taxation by self-assessment."
The aforesaid issue "should be addressed immediately," according to the team, and the report has been forwarded to the party's Digital Society Promotion unit.
As of right now, cryptocurrency traders are required by Japanese law to report any earnings and losses from their trading on their annual income reports.
What Are The Japanese Crypto Tax Regulations?
Taxpayers in Japan are required to report any earnings related to cryptocurrencies as "other income." This implies that those with lower incomes may only pay 11% of their profits from cryptocurrency trading, while those in higher tax brackets may be required to pay more than 50%.
As with assets like stocks and shares, traders must pay capital gains tax on their winnings in the majority of other nations that tax profits from cryptocurrency trading.
For years, activists have been calling on Tokyo to modify its position. Prime Minister Fumio Kishida, meanwhile, has recently adopted a resolutely pro-web3 position.
Kishida has praised the industry, expressed a desire to change tax regulations, and advocated for NFT-driven economic expansion.
Furthermore, corporations will no longer be required to pay taxes on "unrealized" earnings as a result of this tax reform.
This is used to describe coins that gain value over the course of a fiscal year but aren't exchanged for cash during that time.
What Takes Place Next?
The tax reform for individual traders will go to the Political Affairs Research Council if it is approved by the Digital Society Promotion unit.
Tax reform will become official Liberal Democratic Party policy if this council gives its approval. From this point on, legislators can draft a measure for the National Diet.
Although each of these procedures might take some time, none should constitute a significant barrier to the suggested modifications made by the web3 project team.
Since 1955, the ruling party of Japan has ruled the country. It is in control of 259 of the 465 seats that can be found in the parliament of Representatives and 116 of the 248 seats in the House of Councillors, the upper parliament.
In light of this, for Japanese cryptocurrency traders expecting for tax reform, the question now seems to be "when," not "if."
Is the Web3 Revolution Coming to Japan?
The authors of the white paper assert that they intend to position Japan as the epicenter of the web3 revolution.
Additionally, the authors said that they "strongly support the development of blockchain technology" in projects related to "social infrastructure."
The proposed reforms would permit traders to postpone losses for a maximum of three years in addition to isolating the taxation of cryptocurrency profits from income tax.
The authors also recommended talking about Japan's strict regulations on cryptocurrency leverage trading, a problem that has plagued Japanese exchanges for a number of years.
Insiders in the Japanese crypto business seemed pleased with the news, stating that the white paper answers "many" of their requests.
The document "comprehensively covers" the "main issues" that the industry believed "needs improvement," according to Sota Watanabe, CEO of Startale Labs and Astar Network.
April 2024, Cryptoniteuae