Japan’s Liberal Democratic Party Urges Immediate Crypto Tax Reforms

The Liberal Democratic Party (LDP) of Japan is pushing for prompt reforms to the country's cryptocurrency tax policies. According to an official LDP statement and a report by CoinPost, the party's web3 project team unveiled a "White Paper" on April 12 outlining these proposed changes.

In February, the government announced plans to enable venture capital firms to invest in domestic cryptocurrency companies, further indicating a shift towards supporting the crypto industry.

The LDP's web3 project team emphasized the need for "profits and losses" from "cryptoasset transactions" to be "subject to separate taxation by self-assessment." They stressed that this issue "should be addressed immediately." The report has been forwarded to the party's Digital Society Promotion unit for consideration.

Presently, Japanese law mandates that cryptocurrency traders must include profits and losses from crypto trading in their annual income declarations.

Proposed Tax Changes and Current Situation in Japan

Japanese taxpayers are required to declare all earnings related to cryptocurrencies as "other income." This means that while individuals with lower incomes may pay as little as 11% on their crypto trading profits, those in higher tax brackets could pay over 50%.

Unlike in many other countries where capital gains tax is applied to crypto trading profits, Japan's tax system treats crypto profits differently.

Political and Industry Response

Prime Minister Fumio Kishida has shown support for the crypto sector, expressing a willingness to reform tax laws and endorsing NFT-powered economic growth. This proactive stance has already resulted in tax reforms for corporations, eliminating taxes on "unrealized" gains, which are coins that increase in value but are not sold for fiat within the same financial year.

If approved by the Digital Society Promotion unit and subsequently by the Political Affairs Research Council, the tax reform for individual traders will become official LDP policy. This would lead to the creation of a bill to be presented to the National Diet.

The LDP, which has been in power since 1955, currently holds a significant number of seats in both houses of the Japanese parliament, making it likely that the proposed tax reform will be implemented.

Source: BibiBegin

The white paper's authors aim to position Japan as a leader in the web3 revolution and express strong support for blockchain technology in social infrastructure projects. In addition to separating crypto profits taxation from income tax, the proposed changes would allow traders to defer losses for up to three years.

Industry insiders in Japan have welcomed the news, with some stating that the white paper addresses many of their concerns. Sota Watanabe, CEO at Startale Labs, praised the paper for comprehensively covering the main issues needing improvement. Genki Oda, Founder of BITPoint and Vice Chairman of the Japan Crypto Asset Exchange Association, noted that almost all of the industry's requests have been included in the white paper, expressing the importance of implementing these reforms in the future.