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As reported by Nikkei and CoinPost, this revision, approved on Friday, means corporations will no longer have to pay tax on unrealized gains from cryptocurrencies if they hold them for the long term. 
Currently, corporations in Japan must report profits or losses on cryptocurrencies issued by third parties based on the market value versus the book value at the fiscal year's end. The new revision, set to take effect from April 1, 2024, will change this mark-to-market valuation. 
Instead, <a href="https://financefeeds.com/japans-monetary-future-navigating-beyond-nirp-exit-and-gradual-policy-shifts/">Japanese companies</a> will be taxed only on profits made from the actual sale of cryptocurrencies. This reform aligns corporate tax treatment of cryptocurrencies more closely with that of retail investors in Japan, who are only taxed on profits realized from the sale of cryptocurrencies. 
However, this bill still needs to go through legislative approval. It will be submitted to lawmakers in January and must be passed by both the House of Representatives and the House of Councilors. 
Earlier in September, the <a href="https://financefeeds.com/circle-signs-sbi-holdings-to-boost-usdc-adoption-in-japan/">National Tax Agency of Japan</a> issued an updated edition of its corporate tax guidelines, which specifically grant them an exemption from the standard 30% corporate tax rate on unrealized cryptocurrency gains. 
Discussions surrounding new tax regulations for digital assets have been underway among Japanese legislators since August 2022, part of a broader tax reform agenda for 2023. Unlike some other countries where entities are taxed on crypto assets only when they are converted into fiat currency, Japan currently imposes an annual tax on these assets. 
The current tax exemption, however, only applies to companies that issue their own tokens and does not extend to those that solely invest in other digital currencies. Additionally, individual crypto investors will still be subject to a maximum income tax rate of 55% on any earnings exceeding JPY 200,000 ($1,797) related to cryptocurrency, categorized as “miscellaneous income.” 
According to the agency’s explanation, these coins will be exempt from being counted when assessing the market value assessment of a company’s assets, given that certain conditions are met. 
The legal notice further explains that for a company to take advantage of the revised rules, it must meet specific criteria to qualify for the tax exemption. Firstly, the company must be the issuer of the cryptocurrency in question. Additionally, it is required to retain continuous ownership of the crypto asset after its issuance, while the asset itself remains subject to transfer restrictions. 
This move is part of&nbsp;<a href="https://financefeeds.com/webull-japan-launches-domestic-stock-trading-as-nikkei-225-prints-post-bubble-highs/">Japan’s</a>&nbsp;efforts to promote the growth of its blockchain and cryptocurrency sectors in line with the government’s push for “new capitalism,” as stated by Prime Minister Fumio Kishida.

Japan approves tax reform for unrealized crypto gains

FinanceFeeds

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