• The Japanese cabinet has endorsed a proposal to eliminate taxation on unrealized gains from cryptocurrency, particularly benefiting Web3 businesses.
• The proposal, currently awaiting deliberation in Japan’s parliament (Diet), aims to remove corporate taxation on the difference between market and book values of crypto assets issued by external companies.
• If enacted, this move would address the existing inconsistency in the tax treatment of assets issued by third parties compared to those issued by holders, who are currently not taxed on mark-to-market values.

In a report, the Japanese cabinet approved a proposal by the ruling Liberal Democratic party to eliminate taxation on unrealized cryptocurrency gains, particularly affecting Web3 businesses.

Japan on Crypto Gains Taxation

As reported by CoinDesk Japan, the Japanese cabinet has approved a proposal by the ruling Liberal Democratic Party to end taxation of unrealized cryptocurrency gains, a move that is likely to boost the development of the country’s web3 industry.

The proposal, which currently has a pending deliberation in Japan’s parliament, the Diet, aims to eliminate corporate taxation on the disparity between market and book values of crypto assets issued by other companies. 

If enacted, the approval received on December 22 would rectify the inconsistency in the treatment of assets issued by third parties compared to those issued by holders, the latter of which currently do not face taxation on mark-to-market values.

Moreover, Prime Minister Fumio Kishida has been reviewing submissions from industry associations such as the Japan Crypto Asset Business Association (JCBA) and Japan Blockchain Association on how best to promote the industry’s development, which it sees as a pillar of economic reform.

Crypto Tax in PH

In 2022, Representative Joey Salceda, Chairman of the Ways and Means Committee, refiled the Digital Economy Value Added Tax (VAT) Law (House Bill 372), aiming to address ambiguities in VAT and tax laws related to the digital economy. Salceda emphasizes the need to subject the digital economy to VAT and plans to establish a group to explore taxing digital assets. 

In addition to this, his plans included the formation of a Technical Working Group (TWG) within the Ways and Means panel to study the taxation of digital assets, including non-fungible tokens (NFTs), cryptocurrencies, and digital gambling. However, there is still no update regarding these.

Moreover, Tax expert Mon Abrea emphasized the need for financial agencies and regulators to establish a defined mechanism for cryptocurrency before proper taxes can be collected. Speaking at the launch of his new book, IWAS BUWIS-it 2022 edition, Abrea highlighted the lack of clear guidelines for cryptocurrency in the Philippines and the absence of regulations from the Bangko Sentral ng Pilipinas (BSP).

Prior to these, the Department of Finance (DOF) submitted a proposal to President Ferdinand “Bongbong” Marcos Jr. and his economic team, outlining plans to implement cryptocurrency taxation by 2024. However, DOF secretary Benjamin E. Diokno expressed disagreement with the proposed tax amendments.

Although there are still no specific taxation regulations for cryptocurrency in the Philippines, it is subject to taxation when sold at a profit, attracting capital gains tax.

(Read: What are the Seven Notable Crypto-Related Regulations in PH & Their Impact on the Community?)

This article is published on BitPinas: Japan Mulls Removing Corporate Tax on Crypto Gains

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