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Japanese lawmakers discussed Tuesday on plans to exempt companies from paying tax on unrealized cryptocurrency gains. The proposal is set to be included in the fiscal 2024 tax reform plan.
According to a Nikkei report, the proposal is being discussed by the country’s ruling coalition. The proposal applies to Japanese firms that hold on to digital assets for purposes other than short-term trading.
The exemption from corporate tax will be based on mark-to-market valuations at the end of fiscal year, the report added.
Mark-to-market refer to measuring the fair values of accounts that are subject to periodic fluctuations such as cryptocurrencies.
Some of these companies include VC firms, non-fungible tokens businesses and other blockchain firms that hold cryptos for payment purposes. Additionally, crypto issuers, who are also holders of cryptos are not subject to taxes.
Policymakers from the Liberal Democratic Party and ruling coalition partner Komeito discussed the tax exemptions on Tuesday.
Crypto Tax Clarity in Japan
In June, the country’s National Tax Agency published a notice, clearing that crypto issuers in the country will not have to pay capital gains taxes on unrealized gains.
Japan has been reviewing its crypto tax treatment since at least last year, to encourage companies to remain in the country. Particularly after many startups left the country due to heavy tax burdens.
Recently, Japan’s top financial regulator Financial Services Agency (FSA) submitted legislation-change requests to the government to change the way Japan taxes domestic crypto firms.
“The rule has long been criticized for placing a burden on companies and hindering innovation in the cryptoasset and blockchain sectors,” a local media noted.
On October 16, some of the biggest businesses in Japan sought government action to make crypto tax reforms. The Japan Association of New Economy (JANE) has asked the government to “reduce tax rates” in 2024 to “encourage growth and increase tax revenue.”
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