Japan to Exempt Token Issuers From Corporate Tax on Unrealized Gains

Project founders will no longer be subject to hefty taxes which forced them abroad from next April onwards.

AccessTimeIconDec 16, 2022 at 6:46 p.m. UTC
Updated Dec 16, 2022 at 7:12 p.m. UTC

Japan’s ruling Liberal Democratic Party (LDP) tax committee approved a proposal to exempt crypto startups that issue their own tokens from paying corporate taxes on unrealized gains, a party politician said Friday.

Akihisa Shiozaki, secretary-general of the party’s Web3 project team, told CoinDesk that the proposal will be included in annual tax policy guidelines that come before the country’s parliament in January, and will come into effect in the next tax year starting April 1.

Under current corporate tax rules, token issuers are subject to a tax rate around 35% on unrealized gains for tokens that they hold, if their tokens are listed on an active market. Holdings are taxed based on their market value at the end of the taxation period. This tax in effect drove project founders to leave Japan and set up entities elsewhere.

Industry associations submitted other tax reform proposals, which included taxing crypto gains at the same rate as stocks and taxing individuals only when they convert crypto gains to fiat currency. These are unlikely to go through this year and will likely come up again in the LDP’s tax discussions next winter.

Still, “the most fundamental one is approved,” Sota Watanabe, founder of Astar Network, a platform that supports transactions on multiple blockchains, told CoinDesk, calling the approval “a win for crypto people, especially founders.”

The proposal to do away with the tax on paper gains was part of an interim policy proposal issued on Thursday by the Web3 project team.

It also included recommendations on enacting a law on LLC-type decentralized autonomous organizations (DAO), supporting the issuance of yen-based permissionless stablecoins, governance reforms at the Japan Virtual Currency Exchange Association that handles token screening, and guidelines on how crypto companies can be audited.

Shiozaki told CoinDesk that the project team will set up an informal discussion forum for the accounting associations, Web3 businesses, and the Financial Services Agency.


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Lavender Au

Lavender Au is a CoinDesk reporter with a focus on regulation in Asia. She holds BTC, ETH, NEAR, KSM and SAITO.