Improving the environment for the cryptocurrency business
On the 20th, Japan’s National Tax Agency issued a legal interpretation notice regarding partial revisions to corporate tax rules.
Among them, he explained that crypto assets (virtual currencies) issued by companies will be excluded from the market value evaluation if the conditions are met. While there are still issues to be addressed to make it easier for cryptocurrency-related companies to do business in Japan, this represents a step forward in improving the business environment.
connection: The Kishida administration “The issue of the virtual currency corporate tax will reach a conclusion in the next fiscal year’s tax reform”
Regarding the exclusion of self-issued virtual currencies from the subject of market valuation, it has been confirmed that there has been a movement toward revision for some time. This revision is also included in the “ruling party tax reform outline” for fiscal 2023. It has been officially decided to be exempted by the notification of the National Tax Agency this time.
connection: The government will decide on the “Tax Reform Outline” next year, NISA will be made permanent, and the end-of-term mark-to-market valuation of virtual currency will be revised.
Under current law, if a company holds cryptocurrencies, it will be taxed on unrealized gains at the end of the period. It has long been pointed out that this rule puts a burden on companies and hinders innovation in cryptocurrencies and blockchains. Because of this Japanese law, some companies have chosen to do business overseas. With this revision, the rules for self-issued virtual currencies have been officially relaxed.
There are two main conditions for exemption from market valuation. The first is that it must be a cryptocurrency issued by the company and held continuously from the time of issuance. The second is that “from the time of issuance of the virtual currency, it must continue to be subject to transfer restrictions due to one of the following.”
- Certain measures are taken as technical measures to prevent transfer to other persons.
- Must be a trust property of a trust that satisfies certain requirements
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Many voices of joy have been heard from the Japanese community and those involved in cryptocurrency-related businesses in response to the National Tax Agency’s notification. Sota Watanabe, founder of Aster Network (ASTR), who has been actively appealing for the revision of this rule, commented as follows.
For the time being, people who want to do something like Astar, which will follow us, can now do it without leaving the country. I would like to continue constructive discussions with politicians and authorities. Next, I would like to do something about the end-of-term taxation of holding tokens issued by other companies as a corporation, as it is a hindrance to domestic projects and domestic projects https://t.co/v64lEx2XSU
— Sota Watanabe @Startale Labs (@Sota_Web3) June 23, 2023
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As Mr. Watanabe also pointed out, this rule revision only applies to “in-house issued” virtual currencies. With regard to corporate tax, issues remain with cryptocurrencies issued by other companies.
Liberal Democratic Party lawmaker Masaaki Taira, chairman of the web3 project team, commented as follows, including this point.
The so-called “Watanabe Sota problem (web3 human resources Singapore immigration promotion tax system)” has been somehow resolved. Next is the issue of removing the market value evaluation of alliance-based governance tokens that are not intended for short-term trading and are issued by other companies.
*By the way, Sota Watanabe@Sota_Web3 The problem is not with Mr. Sota Watanabe, but with the Japanese tax system. to make sure. https://t.co/NchwotNIeD
— Masaaki Taira (@TAIRAMASAAKI) June 23, 2023
It should be noted that the web3 project team is proposing not only revisions to the corporate tax law. It also proposes that profits and losses related to virtual currency transactions be subject to separate self-assessment taxation.
connection: Liberal Democratic Party web3PT publishes proposals on taxation of virtual currency transactions
What is Web3
Also known as the “Next Generation Internet,” it refers to a decentralized network based on blockchain. Specifically, it includes NFTs (non-fungible tokens) and virtual currencies.
The early Internet, in which the flow of information was one-way, is called “Web1”, and the current centralized Internet is called “Web2”.