An official publication from the Japanese National Tax Agency (NTA) revealed that the regulator would introduce a new taxation regime for token issuers. The NTA posted a revised version of the country’s corporate tax guidelines stating that token issuers will be exempted from some of their tax obligations.
Per the June 20 publication, the NTA team mentioned that the Japanese token issuer would be excluded from corporate tax on income generated from crypto activities. A few months ago, the Japanese government approved a bill to ease the tax requirement for crypto firms.
Japanese Regulators Introduced New Tax Regime
In December the authority agreed to impose a 30% tax on crypto firms from the profit generated from the issuance of tokens or gains generated from holding a digital asset. The imposed corporate tax will be applicable even if the crypto issuer has not made any sale.
Since August, the policymakers in Japan have been engaging in embroiled debates on crypto tax regulations. The legislative bodies has prioritized exploring the crucial tax reforms that should be implemented in 2023.
After multiple meetings, the NTA group has finally provided an overview of the new crypto taxation regime. According to the NTA publication, the local crypto firms will be exempted from remitting a 30% corporate tax on their crypto holdings. The exemption of crypto taxes aims to improve the profitability of businesses using tokens as a payment method.
The NTA announcement has been welcomed by high-profile Japanese companies such as Japan Virtual & Crypto Assets Exchange Association (JVCEA) and Mitsubishi UFJ Financial Group Inc. (MUFG). The JVCEA and MUFG noted that the tax exemption would encourage innovation in the crypto sector.
Why Did Japan Impose Strict Crypto Regulation?
Despite imposing a new tax regime on digital assets, the regulators have been exploring ways to shape the Japanese crypto landscape. On June 1, the regulators imposed harsh policies on anti-money laundering (AML) measures. Notably, the regulators aimed at ensuring the Japanese regulatory framework meets AML global standards.
In December, the Financial Action Task Force (FATF) observed that the Japanese AML regulations were insufficient. The FATF findings obliged the Japanese regulators to prioritize amending the existing AML regulations.
Prior to this, the regulators had presented a bill before the Japanese parliament restricting non-banking institutions from issuing stablecoins. After undergoing multiple regulatory reviews, the policymakers greenlighted the bill last June.
In the previous week, the regulators implemented the bill which allows regulated banks, licensed money transfer providers, and a few trusted companies to issue stablecoins. Despite Japan adopting restrictive measures on digital assets, the country was the first to consider crypto a private asset. Japan was also the first country to discover the massive potential of the decentralized ecosystem.
Beyond this, the Asian country has gained popularity due to its openness to technological innovation. This has inspired most Bitcoin mining companies to expand to Japan.
In February 2014, the leading crypto exchange in Japan, Mt. Gox and Coincheck suffered a malicious attack that exposed customers to the loss of millions of assets. The loss of customers’ assets obliged the Japanese regulators to impose stricter rules to safeguard the consumer from exploitative businesses.
As of this writing, Japan has enforced some of the strictest regulations on crypto in the world. A few months ago, the Japanese regulators made significant contributions to allow the affected FTX users to recover their assets. It was reported that FTX Japan was allowed to withdraw all its assets from the insolvent Bahamian crypto exchange in February.