The Cabinet approved the FY2018 Tax Reform Outline, and corporate crypto assets are no longer subject to end-of-period mark-to-market valuation taxation.

Cabinet approval of the FY2018 Tax Reform Outline

The Japanese government decided on the tax reform outline for fiscal 2024 at a cabinet meeting on the 22nd. This amendment includes the exclusion of the period-end mark-to-market valuation tax that was applied to corporations that hold crypto assets (virtual currencies) issued by third parties.

Due to the tax reform, the scope of application of period-end mark-to-market under the Corporation Tax Law will change. Previously, crypto assets (virtual currencies) issued by third parties held by corporations were recorded as profits or losses based on the difference between market value and book value at the end of the fiscal year. However, this revision includes a policy that this mark-to-market valuation will no longer be applied if the asset is assumed to be held continuously.

As a result, corporations will be taxed only on profits generated from the sale of virtual currencies and tokens, which represents a change to the tax system that applies to individual investors. . This amendment will reduce the tax burden on corporations in holding and operating crypto assets.

This tax reform partially reflects the request for the 2024 tax reform submitted to the government by the Japan Crypto Asset Business Association (JCBA). This revision is expected to encourage the promotion of Web3, domestic business start-ups that utilize blockchain technology, and the attraction of overseas projects.

Under last year’s tax reform, only virtual currencies issued by corporations themselves were exempted from mark-to-market taxation, but there were growing calls for the same treatment to be applied to cryptocurrencies issued by other companies.

In addition, the FY2024 Tax Reform Outline includes a plan to reduce income tax and resident tax by 40,000 yen per person from June 2024 onwards, tax cuts for companies, and the establishment of a new tax system for strategic sectors and innovation. . The scale of the decline in revenue due to these factors will reach 3,874.3 billion yen for the national and local governments, making it the third largest decline since fiscal 1989.

This bill will be submitted to the regular session of the Diet in January next year, and will need to be approved by both the House of Representatives and the House of Councilors.

connection:Announcement of tax reform outline for fiscal year 2024, “term-end mark-to-market valuation tax” by corporations (third parties other than issuers) will no longer be subject to tax reform

An important step towards separate taxation

In this tax reform, the only decision was to abolish the year-end unrealized gain tax applied to corporations. This is an important step toward introducing separate taxation (20%) and loss carryover deductions, which are desired by cryptocurrency investors.

Regarding profit and loss calculations in crypto asset transactions, the Japan Crypto Asset Business Association (JCBA) proposes that no tax be imposed on the exchange of crypto assets, that a lump-sum tax is imposed upon converting crypto assets into legal currency, and that there is a “carry-over” for three years starting from the next year. They asked the government to consider “deduction.” These requests remain for future discussion.

With the development of the corporate tax system, it is expected that discussions will become more active regarding the separate taxation of crypto assets and other tax reforms in the future.

connection:Japan Blockchain Association submits request for crypto asset tax reform to government

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