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Japan considers tax relief for domestic firms holding crypto

The reforms are being touted as a broader effort to reduce taxation in Japan across the board.

Japan considers tax relief for domestic firms holding crypto

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Japan is slated to approve a revision to its taxation law, which contains clauses providing tax relief for companies holding crypto on their books. If approved, the reforms are slated to take effect in the 2024 fiscal year.

According to a report from Nikkei Asia, Japan’s revision to taxation has specific conditions for assessment and inclusion. One such condition requires firms to hold crypto issued by a third party. In effect, this changes the scope of the year-end market value assessment through its Corporate Tax Law.

Japan’s tax law maintains that both gains and losses related to or due to exposure to crypto are taxable. The deductions are calculated based on the variance between market value and book value, with the differences recorded for every April 1 to March 31 (Japan’s annual fiscal cycle). 

As of now, companies in Japan must pay a fixed 30% tax on any cryptocurrency they hold, regardless of whether the holdings have generated a capital gain. Under the proposed tax code, crypto assets held by domestic companies for reasons apart from short-term trading would be exempt from corporate taxes on unrealized gains. 

The market value assessment no longer applies if a domestic firm holds crypto continuously. The company is then subject to taxation if it decides to sell off its crypto holdings.

Reports indicate that the reforms to Japan’s corporate tax code and its frameworks specific to crypto are a result of initiatives by the Japan Cryptocurrency Business Association and the Japan Blockchain Association, among other organizations calling for reform.

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