The Government of Japan is planning to institute tax breaks for cryptocurrency firms in an effort to attract start-ups and keep firms operating in the Asian nation.
Japan's Financial Services Agency (FSA) is considering a tax reform proposal for 2023 that could exempt cryptocurrency start-ups that issue their own digital coins and tokens from paying taxes on unrealized gains.
Under the current system in Japan, start-up companies must pay taxes on unrealized gains for the digital coins and tokens they hold on their balance sheets. Cryptocurrency holdings are taxed based on their market value at the end of the tax year.
The potential tax breaks are aimed at encouraging start-up companies to remain in Japan. In the past, Japan’s tax laws led many cryptocurrency firms to leave or avoid the country.
Earlier this month, two cryptocurrency lobbying groups, the Japan Crypto-Asset Business Association (JBCA) and the Japan Crypto-Asset Exchange Association (JVCEA), asked the government to consider lowering taxes on cryptocurrency firms, and cancel a proposed 20% capital gains tax on retail investors who own cryptocurrencies.
Currently, investors in Japan are taxed up to 55% on their capital gains, which is one of the highest rates in the developed world.
