Japan Considers Tax Exemption for Corporate Unrealized Crypto Gains

Japan contemplates a tax reform, possibly allowing corporations to escape taxes on unrealized gains from cryptocurrency holdings. The move aims to attract crypto assets held abroad to Japan but poses potential revenue losses for the government.

In a significant shift, Japan is contemplating a tax reform that could liberate corporations from taxes on unrealized gains from their cryptocurrency holdings. Part of the 2024 tax overhaul, the proposed change would alleviate the burden on companies holding cryptocurrencies, enabling them to evade taxes even amid fluctuations in market values.

Currently, Japan taxes corporate cryptocurrency holdings based on market prices at the fiscal year’s start and end, a practice criticized for its adverse effects on companies. If approved, this reform could prompt companies holding crypto assets overseas, in locations like Singapore and Dubai, to bring their holdings to Japan. However, such a move would entail a potential loss in tax revenue for the Japanese government.

Nikkei Japan specifies that this exemption would be applicable solely to cryptocurrencies held as part of a company’s assets, excluding those intended for short-term trading. The Japan Blockchain Association advocated for these changes in June, asserting that the existing tax regime hampers Web3 growth and induces market instability as companies sell cryptocurrencies to meet tax obligations.

Japan has been proactive in cryptocurrency taxation, having lifted a tax on self-issued cryptocurrencies by companies earlier in June, fostering an environment conducive to companies issuing such currencies.

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