Japan Considers Lowering Crypto Tax Rate to Unified 20% from Current 55%

Japan is considering a change to its crypto tax code, potentially lowering it to align with other financial assets.

The country’s financial regulator, the Financial Services Agency (FSA), has recently proposed a reform that could lower the tax rate on crypto profits to a flat 20%.

The proposal was outlined in an August 30 request for tax reform, part of a broader review of the fiscal code for the year 2025.

FSA Advocates for Treatement of Crypto as TradFi Assets

The FSA is advocating for the treatment of cryptocurrencies as traditional financial assets, which would make them more accessible for public investment.

“Cryptocurrency should be treated as a financial asset and an investment target for the public,” the FSA stated in its report.

Crypto taxation: The #Japanese government is considering changing the current maximum tax rate of 55% for cryptocurrencies to a unified 20% tax rate in response to investor feedback.

— MartyParty (@martypartymusic) September 3, 2024

Currently, Japan taxes cryptocurrency earnings under a miscellaneous income category, with rates ranging from 15% to 55%, depending on the individual’s income bracket.

The high tax rate can apply to earnings over $1,377 (200,000 Japanese yen), making it a significant burden for many crypto investors.

In contrast, stock trading profits are capped at a 20% tax rate, which the FSA suggests should be applied to cryptocurrency as well.

Additionally, corporate holders of crypto assets are required to pay a flat 30% tax on their holdings, regardless of whether they sell their assets at a profit.

The proposed changes would offer some relief to both individual and corporate investors, making the tax landscape for crypto more favorable.

The process of changing tax laws in Japan involves several steps.

First, government ministries submit tax reform requests to the ruling political party.

These requests are then passed to the tax system research committee before being considered by the national legislature.

Both the House of Representatives and the House of Councilors must approve any reforms before they become law.

Advocates within Japan’s crypto industry have long been pushing for a revision of the tax regime.

In 2023, the Japan Blockchain Association (JBA) formally requested the government to reduce the tax burden on crypto assets.

Their proposals included a flat 20% tax rate and a three-year loss carryover deduction to encourage growth in the sector.

However, previous efforts have not yet led to concrete policy changes.

Japan’s Active Crypto Trading Population to Grow Rapidly

Japan’s use of crypto is expected to grow rapidly, with the number of people trading crypto daily rising from 350,000 to around 500,000 by the end of this year, according to a Bitget study.

The surge would place Japan’s market size between those of Turkey and Indonesia, and about two-thirds the size of South Korea’s market.

“Japan with its high awareness for crypto is a dynamic and rapidly evolving landscape,” said Gracy Chen, CEO of Bitget.

She added that exciting possibilities and current trends in Japan make it a prime area for new technologies and widespread use.

More recently, Japanese tech giant Sony Group entered the crypto market by acquiring the crypto firm Amber Japan.