Japan’s Financial Services Agency (FSA) has unveiled plans for a major overhaul of the nation’s tax code, with a focus on potentially reducing taxes on cryptocurrency holdings by 2025. This proposal marks a significant shift as the FSA aims to align the tax treatment of crypto assets with that of traditional financial investments.
In a request for tax reform dated August 30, the FSA emphasized the need to reclassify cryptocurrencies as financial assets, thereby making them more attractive for public investment. “Cryptocurrency should be considered a financial asset that is eligible for public investment,” the FSA stated, stressing the importance of evaluating this perspective.
Currently, profits from cryptocurrency transactions in Japan are classified as miscellaneous income, with tax rates ranging from 15% to 55%. The highest rate applies to earnings exceeding 200,000 yen (approximately $1,377), though the exact rate depends on the individual’s income tax bracket. In contrast, profits from stock trading are taxed at a maximum rate of 20%.
Corporate holders of cryptocurrencies face a flat tax rate of 30% on their holdings at the end of the fiscal year, regardless of whether they have realized a profit through sales.
The proposal for tax reform will undergo a review process involving government ministries, which will forward the request to the ruling party. The ruling party will then present it to a tax system research committee and ultimately to Japan’s national legislature for approval. The reform will only become law if both the House of Representatives and the House of Councilors endorse it.
Crypto advocates in Japan have long been campaigning for changes to the tax regime for digital assets. In 2023, the Japan Blockchain Association (JBA), a prominent pro-crypto lobbying group, formally requested a reduction in the tax rate on cryptocurrencies. Their proposal, submitted on July 19, included a suggestion for a flat 20% tax rate and a three-year loss carryover deduction to stimulate growth in the country’s crypto sector.
Despite these ongoing efforts, no substantial policy changes have been implemented thus far. The upcoming tax reform could be a pivotal moment for the future of cryptocurrency regulation in Japan.
