A report has said that the Financial Services Agency in Japan is planning to change the cryptocurrency taxation laws in the country to prevent capital flight. The regulatory body plans to make these changes as part of the 2023 tax reforms.
Japan launches tax reforms to prevent capital flight
The proposed changes include removing the capital gain liabilities for undisposed corporate cryptocurrency assets at the end of each taxation year. The regulatory body has also proposed changes such as getting rid of the capital gain liabilities for undisposed corporate crypto assets at the end of each taxation year.
Besides, the individual and corporate earnings of more than 200,000 Japanese Yen within any fiscal year would be termed “miscellaneous income.” This income is taxed at a range ranging between 15% and 55%. This rate also includes the local tax rate.
On the other hand, the profits earned from trading stock and forex were subjected to a 20% tax at the highest levels. Foreign permanent residents in Japan are also subject to a nominal rate of above 55%.
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The payable taxes on income-generating activities such as DeFi lending, crypto mining, and crypto trading are also taxed based on miscellaneous income. Additionally, carrying forward the capital losses from cryptocurrency operations in the coming years is impossible.
High tax requirements in Japan
One of the most contentious issues in the global crypto market is taxation. Japan has high tax liabilities for crypto companies. According to industry experts, these liabilities are the main reason some firms migrate abroad.
One company that is moving away from Japan’s high tax obligations is Astar Network. The company operates a decentralized network protocol on the Polkadot network. Earlier this year, it announced it would be issuing tokens to overseas locations to avoid the high tax requirements.
The company currently has its headquarters located in Singapore. The company’s founder, Sota Watanabe, recently shared his thoughts on the tax reforms introduced in Japan. He said it could create good momentum for the Web 3 sector in the country. However, he added that the reforms were yet to be implemented. Therefore, any changes would only be seen once the reforms are in play.
Nevertheless, Japan remains one of the world’s largest crypto hubs, attracting some of the largest companies. The country could attract even more crypto businesses with a friendly crypto regulatory and taxation framework.