Token issuers in Japan exempt from 30% crypto tax on paper profit

Token issuers in Japan no longer have to pay corporate tax on unrealized cryptocurrency profits, According to a law amendment by the National Tax Agency on 20 June.

The tax exemption comes into effect nearly six months after the Japanese government approved a proposal for crypto companies to eliminate the need to pay tax on paper gains on tokens issued and held.

Legislators in Japan have been discussing new crypto tax rules since last August as part of a wider tax reform for 2023, but the tax authority only gave final approval this week. Under the new rules, Japanese companies issuing tokens are exempt from paying the prescribed 30% corporate tax rate on their holdings. Prior to this law, unrealized gains were also subject to taxation.

The ruling Liberal Democratic Party (LDP) hopes it will make it “easier for various companies to do business, including issuing tokens.”

The cryptocurrency industry in Japan has been going through significant changes lately. Starting June 1, the country is implementing stricter anti-money laundering (AML) measures to detect cryptocurrency transactions in order to align Japan’s legal framework with global crypto regulations. Lawmakers revised the AML law in December after it was found inadequate by the Financial Action Task Force (FATF).

In June last year, the government passed a law prohibiting the issuance of stable coins by non-banking institutions. The bill – enacted only a few weeks ago – stipulates that the issuance of stablecoins in the country is limited to licensed banks, registered money transfer agents and trust companies.

Japan was one of the first countries to legalize crypto as private property, and its crypto regulations are among the strictest in the world. After the hacks of Mtgox and Coincheck, Japan’s financial regulator tightened rules on crypto exchanges. Local regulations are believed to have facilitated quick withdrawal of assets for FTX users in Japan following the global collapse of the exchange, while users in other countries have no clear deadline for their refunds.

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