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Japan Considers Flat 20% Tax Rate on Crypto Profits

Japan is exploring changes to its crypto tax code that could significantly reduce the tax burden on cryptocurrency profits.

By Ruholamin Haqshanas

Last Updated: Sep 4, 2024

Fact checked

By Sam Cooling

Japan Considers Flat 20% Tax Rate on Crypto Profits

Japan is exploring changes to its tax code that could significantly reduce the tax burden on cryptocurrency profits. The Financial Services Agency (FSA), the nation’s financial regulator, has proposed a flat 20% tax rate on crypto gains, aligning them with traditional financial assets like stocks.

The proposal came as part of the FSA’s tax reform request submitted on August 30. It aims to simplify the treatment of cryptocurrency investments by categorizing them similarly to traditional financial (TradFi) assets.

“Cryptocurrency should be treated as a financial asset and an investment target for the public,” the FSA noted in its report. This change could make digital assets more attractive to the general public by reducing the complexity and tax burden.

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Japan’s Crypto Tax System Explained

At present, Japan’s tax system categorizes crypto earnings under “miscellaneous income,” which subjects them to a progressive tax rate that can vary between 15% and 55%, depending on an individual’s total income.

Investors earning more than $1,377 (200,000 Japanese yen) from cryptocurrencies can face these higher rates, making it a deterrent for many retail investors. In contrast, earnings from stock market trading are capped at a flat 20% tax rate.

Moreover, corporate holders of crypto assets in Japan must pay a flat 30% tax on their holdings, regardless of whether they’ve made any profit from selling these assets.

The FSA’s proposed reform seeks to address these disparities, offering relief to individual and corporate investors by creating a more favorable tax environment for crypto investments.

The process of tax reform in Japan involves multiple steps. First, government ministries submit requests, such as the FSA’s proposal, to the ruling political party.

The tax system research committee then reviews these requests before being introduced to the national legislature. The House of Representatives and the House of Councilors must approve any changes before they become law.

Japan’s crypto industry has long advocated for reforms to reduce the tax burden on digital assets. In 2023, the Japan Blockchain Association (JBA) pushed for a flat 20% tax rate and a loss carryover provision to stimulate growth in the sector. However, previous efforts have not led to significant policy changes.

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BOJ Governor Signals Rate Hikes Amid Positive Outlook

On Tuesday, Bank of Japan (BOJ) Governor Kazuo Ueda reiterated that the central bank is prepared to continue raising interest rates if the economy and inflation meet the BOJ’s expectations, Bloomberg reported.

Ueda’s statement reminded markets that, despite the global market turmoil partly caused by the BOJ’s rate hike in July, he remains committed to raising interest rates if the bank’s economic forecasts are met.

According to a recent survey, around two-thirds of economists expect the BOJ to implement another rate hike by the end of the year. Among those surveyed, 41% believe December is the most likely time for the next move.

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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

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Disclaimer
Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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Ruholamin Haqshanas
Ruholamin Haqshanas
Crypto Journalist

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over three years of experience. He has been featured in various high-profile outlets, including Cryptonews.com, Investing.com, 24/7 Wall St, and Business2Community. Read More

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