JAKARTA The development of the cryptocurrency industry in recent years has accelerated, although the crypto market has experienced a decline recently. Japan is the third-largest economy in the world to recently announce plans to lower domestic crypto taxes.
According to a report from local media, Yomiuri Shimbun Online, the Japanese government indicated the possibility of reducing the tax burden on crypto startups by tax reforming 2023 to prevent startups from leaving the area to establish their businesses.
In the 'Digital Society Initiative Conference' last April, Rakuten Group President Hiroshi Mikitani criticized government policies. According to Mikitani, due to the high tax burden, many domestic crypto startup companies chose to go to Singapore.
"Most people go to Singapore because starting a business in Japan is stupid," he said.
The criticism has an impact on Japanese government policies, especially tax-related regulations. On the other hand, Japanese Prime Minister Fumio Kishida revealed that 2022 is the first year creating a startup.
Furthermore, PM Kishida stated that his party would create a healthy environment for the development of domestic startups. He also plans to formulate a plan for the next five years to implement this.
Tax Rules in Japan
Currently, the Japanese government imposes crypto income taxes on individual and corporate investors. For corporations that have crypto, a tax of 30% of all their profits on digital assets. Meanwhile, individual investors are taxed up to 55%.
The high taxes on investors affect crypto companies in Japan. This forced them to choose a new goal to operate, one of which was Singapore. However, with the new tax reforms, it is hoped that corporate investors can encourage the emergence of startups.
According to a CryptoSlate report, if a tax update takes place as referred to, companies holding part of their published crypto assets will not include those assets in their market assessments and will not be subject to taxes on unrealized profits.
However, they will still be taxed based on revenue generated from the sale of the tokens they issue or other crypto assets they may hold. There is no talk of changing individual investor tax rates.
The purpose of the new tax law is to support the crypto startup ICO process as almost all back up part of their original tokens for themselves as part of the company's balance sheet or to defend their voting rights. By not imposing taxes on profits that have not been realized from crypto token projects, Japan hopes to encourage startups to establish their businesses there.
The new tax regulations will be discussed by the Japan Financial Services Agency with the Ministry of Economics, Trade and Industry. If the government manages to reduce the high income tax, then crypto companies in Japan will likely survive there.
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