TOKYO — In a notable move, companies in Japan may soon be relieved from paying taxes on unrealized gains from cryptocurrencies, provided they retain these digital assets, as per an ongoing proposal within the country’s ruling coalition.
Under the potential alteration to the tax code, cryptocurrencies held for purposes beyond short-term trading could be exempted from corporate taxes, relying on mark-to-market valuations at the conclusion of each fiscal year.
Policymakers from the Liberal Democratic Party and their coalition partner Komeito deliberated on this proposed tax exemption during discussions on Tuesday. The envisaged change is slated to be incorporated into the fiscal 2024 tax reform plan, set to be compiled later this month.
Japan presently stands out as a country taxing companies based on mark-to-market valuations of their cryptocurrency holdings, excluding self-issued coins. Observers note that this taxation approach is prompting companies incorporating cryptocurrencies into their business models to seek tax-favorable jurisdictions such as Singapore, Dubai, and Switzerland.
Venture capital firms and operators of non-fungible token businesses, holding cryptocurrencies for transactional purposes, fall under the purview of these tax regulations. However, cryptocurrencies and tokens issued by the same company are exempt from this tax.
In addition to the crypto-related tax proposal, Tuesday’s discussions among coalition policymakers also touched upon other potential tax rule changes. This includes deliberations on extending a measure permitting up to 8 million yen ($54,000) annually in deductible entertainment expenses for small and midsize enterprises, beyond its current expiration at the end of March 2024.
Furthermore, there is confirmation of a proposal to alter the taxation framework for foreign visitors making purchases in Japan. The specific details of these changes will be finalized from fiscal 2024 onward.
