Japan’s Liberal Democratic Party to Reassess Cryptocurrency Taxation in the Coming Year, Hopes for Distinct Tax Regime Grow

The blueprint for Japan’s 2025 tax overhaul has been adopted at the general assembly of the tax committee of the ruling parties, the Liberal Democratic Party and Komeito. This blueprint includes a significant revision targeting the taxation of crypto asset income, sparking anticipation among the crypto asset community in Japan.

A news release by CoinPost on the 0th (in local Japan time) highlighted that in the proposed tax plan, the Liberal Democratic Party has acknowledged that crypto assets play a role in forming the nation’s wealth through finances. It emphasizes the importance of formulating legislation that provides investor protections and regulatory measures similar to other financial instruments, with a proposal to consider tax deductibility akin to publicly traded securities. Additionally, there is an aim to enhance the reporting requirements to taxing authorities.

Further, Takuya Hirai, who holds the position of the first ever Digital Minister at the Digital Headquarters of the Liberal Democratic Party, has made a formal suggestion via the financial minister’s briefing. The suggestion prioritizes the classification of earnings and losses from crypto asset dealings under separate tax laws, aligning crypto asset regulations, and amplifying cybersecurity measures in light of their contribution to the fiscal strength of the nation.

CoinPost’s analysis suggests that this inclusion of cryptocurrency transactional tax considerations in the Liberal Democratic Party’s tax reform framework marks a stepping-stone for incoming targeted legislative amendments that may include tax rate revisions, new rules for profit and loss reconciliation, and alterations to tax categories.

Currently, the gains from trading crypto assets in Japan fall under ‘miscellaneous income’ with a potential maximum taxation rate of 55%. Through the proposed tax reforms, there’s a growing likelihood of introducing a separate tax at the more favorable rate of 20% along with a profit and loss carryover mechanism. This prospect is raising the spirits of crypto entrepreneurs and interested parties within Japan.