According to a party politician, Japan’s ruling Liberal Democratic Party (LDP) tax committee has endorsed a plan to exempt cryptocurrency firms that issue their tokens from paying corporate taxes on unrealized gains.
According to Akihisa Shiozaki, secretary-general of the party’s Web3 project team plan will be incorporated into the yearly tax policy guidelines that will be presented to the nation’s parliament in January. This set of regulations is expected to take effect on the 1st of April in the next tax year.
In the current corporate tax regulations, token issuers who have tokens listed on an active market are subject to a tax rate of around 35% on unrealized profits on tokens they own. These holdings are taxed in line with the market value of the holdings at the end of the taxation period. Project founders were effectively compelled to establish their businesses outside of Japan as a result of this high tax rate.
Industry associations have proposed various tax reforms, such as taxing cryptocurrency profits at the same rate as stock gains and only taxing people when they convert cryptocurrency winnings to fiat money. However, this is not expected to be approved this year, and the LDP’s tax discussions next winter are probably going to bring them up once more.
Notwithstanding, the founder of Astar Network, Sota Watanabe, expressed his delight at the approval of the exemption of token issuers from corporate tax on unrealized profit. He stated that “the most fundamental one is approved,” describing it as “a win for crypto people, especially founders.”
In an interim policy proposal released on Thursday, the Web3 project team suggested abolishing the tax on paper gains.
Additionally, the proposal contained recommendations for the adoption of a law governing LLC-style decentralized autonomous organizations (DAO), for the support of the issuance of permissionless stablecoins based on the Yen, for governance reforms at the Japan Virtual Currency Exchange Association, which handles token screening, and for auditing standards for cryptocurrency firms.
Japan and Crypto
The proposed changes to the tax law show that the government is moving on with its earlier stated plans to lessen regulations on the cryptocurrency business to promote innovation and investment.
Japanese prime minister Kishida has advocated strongly for the use of blockchain technology and digital assets, and he recently disclosed new investments in the non-fungible token (NFT) and metaverse industries. He highlights the crucial role that NFTs, blockchain, and the metaverse will play in the country’s digital transition and uses the digitization of national identity cards as an example. This has been demonstrated recently when the country gave out awards in the form of NFTs.
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