Source: TaxDAO

The tax survey meeting of Japan's Liberal Democratic Party and Komeito recently clarified the outline of the tax reform in 2025 and proposed to review crypto assets (virtual currencies) ) tax system, aiming to pave the way for the implementation of separate taxation. According to the reform proposals, the tax rate on crypto-assets may be reduced to 20% in the future, while accounting for profits and losses is allowed. However, the implementation of the reform still requires necessary legal preparations, including investor protection, transaction suitability requirements, and the obligation of exchanges to report transaction content to tax.

Member Takuya Hirai of the Liberal Democratic Party’s Digital Headquarters has submitted an emergency proposal to the Financial Services Agency, suggesting that crypto-asset trading gains be included in the scope of separate tax declarations as soon as possible, and that the regulatory framework be improved to ensure that crypto-assets play an important role in promoting the economy. effect.

Analysts pointed out that this will help attract more foreign companies and investors, promote the development of Japan's Web3 industry and enhance its international competitiveness.

This move signals that Japan is seriously considering improving the tax system for crypto assets to enhance international competitiveness in the Web3 field. Currently, Japan classifies crypto-asset trading gains as “miscellaneous income” and has a tax rate of up to 55%. This high tax rate, tax on transactions between cryptocurrencies, and the inability to reconcile profits and losses across years are considered to be the main reasons that hinder innovation in the Web3 field, resulting in a large number of talents and start-ups flowing overseas. Although the current reform plan is still in the "review stage", the explicit mention of this topic in the tax reform outline shows that Japan has taken an important step to improve the tax system for crypto assets.

TaxDAO brief review:

Japan’s cryptocurrency taxation is extremely strict. Japan currently classifies crypto trading income as "miscellaneous income", with a maximum tax rate of up to 55%, and exchanges between cryptocurrencies are also taxed, and profits and losses are not allowed to be accounted for across years. These regulations are undoubtedly a heavy burden for individual investors and businesses in crypto assets. Japan’s tax reform plan proposes to explore “separate taxation” of crypto trading profits. To put it simply, crypto-asset trading gains are treated separately, a fixed tax rate may be applied (estimated to be around 20%), and cross-year profits and losses are allowed to be accounted for. This is good news for investors to reduce their burden, and for companies it means greater financial flexibility and more predictable tax planning. From a horizontal comparison, Japan has currently missed many opportunities in the Web3 track. On the other hand, Singapore has attracted a large influx of Web3 projects and funds due to its zero capital gains tax, making it a popular destination for global Web3 innovation. Japan obviously hopes to re-attract projects and talents by adjusting taxes, thereby enhancing its competitiveness in the Web3 field. In fact, this tax reform is not Japan’s first effort to develop the Web3 industry. Not long ago, in August 2024, Japan held the "Web X" conference. Japanese Prime Minister Fumio Kishida spoke as a special speaker.There was a better response.

If this tax reform plan is implemented, its effect will be immediate. On the one hand, local companies, especially small start-ups, will benefit the most, because lower tax burdens will allow these companies to have more resources to invest in innovation and operations, and enhance market competitiveness. On the other hand, this tax reform plan will improve Japan's image among international investors, attract more overseas Web3 projects to choose Japan as their Asian base, and may even set off a crypto asset boom in Japan. However, the tax reform still faces some challenges before it can be implemented. For example, this tax reform also requires the support of a series of supporting measures, such as improving investor protection mechanisms, strengthening tax transparency, and improving transaction compliance. For another example, tax reform may reduce tax revenue in the short term, which may arouse concerns among the public and relevant departments. In addition, Japan's implementation pace is relatively conservative, and it is still unknown whether it can truly seize the global window period of the encryption industry and even the entire Web3 industry.

In the future, when we look back, this tax reform may become an important turning point for the Japanese Web3 industry. This is not only an incentive for companies and investors, but also a statement: Japan does not want to continue to miss opportunities, but hopes to embrace the Web3 industry more actively. If it can really fulfill its promise, perhaps Japan will become the focus of global investors in the next bull market.