Japan Exempts Token issuers From Incurring 30% Tax on Unrealized Crypto Gains

The partial amendment to the corporate tax guidelines by Japan’s National Tax Agency (NTA) is offering a new treatment for token issuers. The revised guideline exempts the token issuers from paying the corporate taxes previously imposed on the unrealized crypto gains. 

Revised Guidelines Exempts Cryptos from 30% Corporate Tax

The law revision conveyed by the NTA in a Tuesday, June 20 communication, Japan is implementing the tax exemption six months after its approval by the government. An earlier communication by the government gave the nod to the proposed elimination of taxes that digital assets firms were incurring on paper gains realized from issued and held tokens. 

The move coincides with the ongoing legislative discussions concerning the proposed crypto tax rules. The debates that began in August 2022 featured in the broader tax reforms promised by Japan for 2023. The approval of the revisions by the country’s tax authority yields a reprieve for the digital assets firms. 

Japan Deploys Stricter yet Crypto-Friendly Legislation

The new rules are set to benefit Japanese firms involved in issuing tokens. In particular, their holdings are exempted from paying a 30% corporate tax rate. Before the amendments, firms engaged in issuing tokens lamented the taxation of unrealized gains in tokens they held after their issuance.

The partial revision to the tax guidelines aligns with the agenda adopted by the government led by the Liberal Democratic Party (LDP) with expectations to ease how companies conduct business that concerns issuing tokens. 

The partial amendment of the tax is part of the significant changes undertaken within Japan’s cryptocurrency industry. Since the onset of June I, Japanese authorities have begun enforcing the new Anti-Money Laundering (AML) requirements. The measures obligate firms to facilitate the tracing of crypto-related transactions in a manner aligning with the global digital assets rules. The country’s lawmakers had in December 2022 approved the adjustment to the AML legislation to eliminate the insufficiency observed by the Financial Action Task Force (FATF).  

Stablecoin Issuance Restricted to Licensed banks, Money Transfer Agents and Trust Companies

A review of Japan’s journey for crypto registration shows that the government enacted new legislation in June 2022 to prohibit non-banking institutions from issuing stablecoins. The bill implemented a few weeks before the tax rule revision, affirmed that stablecoin issuances are the scope for licensed banks. The bill extends the approved entities to include trust companies and money transfer agents duly registered within Japan’s laws. 

The new taxation and stablecoin issuance policies vindicate Japan ranking among the first countries to legalize crypto as a private asset. The country’s crypto regulations are the strictest in the world. 

Japan’s Tighter Rules to Govern Exchanges Facilitate Quicker Return of Digital Wealth from FTX

Adopting a strict regulatory framework arose from the Mt.Gox and Coincheck aching incidents. It obligated Japan’s financial regulator to tighten rules governing crypto exchanges.

The stricter approach adopted in local regulation is evident in the financial regulator overseeing the speedy return of crypto assets to users of embattled FTX Japan. 

The quick return contrasts the experiences elsewhere, where users are reeling in the delayed return of their digital wealth as the regulators lack a clear framework and deadline to finalize refunds. 

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