[NEWS] The LDP and Komeito decide on the outline of tax reform for fiscal 2025, clearly stating that the cryptocurrency tax system will be "reviewed."

On the 20th, the Liberal Democratic Party and Komeito announced a summary of the tax reform outline for fiscal 2025.

Regarding the "1.03 million yen wall," which was the biggest focus of attention, it was clearly stated that the LDP and Komeito would raise it to 1.23 million yen, as proposed by the Democratic Party for the People. The Democratic Party for the People has announced its intention to end discussions in response to the lack of progress in discussions on raising the tax to 1.78 million yen, which it has long advocated, but the ruling party has indicated its intention to continue to work on the matter.

In addition, regarding tax reform on crypto assets (virtual currencies), which have been attracting attention mainly in the Web 3.0 industry, it was clearly stated that "reviews will be considered." In the past two years, tax reform on crypto assets held by companies has been written into the tax reform outline and has been realized. However, it was stated that there are still issues that need to be sorted out regarding the tax system for crypto assets targeting individuals, and the specific timing for the reform was not specified.

The tax reform outline states the following:

"Regarding taxation of cryptocurrency transactions, we will consider reviewing the tax system, assuming that cryptocurrency will be positioned in the business law as a financial product that contributes to the asset formation of the general public, and necessary legal measures such as explanation obligations and suitability regulations for investor protection equivalent to other financial products for which special tax exemptions are provided, such as listed stocks, will be put in place, and that trading companies will be required to report the details of their transactions to tax authorities."

Based on the contents of the document, it appears that discussions on tax reform of cryptocurrency will be intensified.

The contents of the tax reform outline will be extremely important for the tax reform of next year. At present, the tax system for cryptocurrency is only described as "under consideration," so the specific time for its realization is unclear, but the momentum for reform is building more than ever.On the other hand, there has been no significant progress in the tax reform of cryptocurrencies this time around, so it can be said that the industry was left dissatisfied.

There have been calls for a review of the tax system for crypto assets for many years. Under the current tax system, profits from crypto asset trading are classified as miscellaneous income, and are subject to a maximum tax rate of 55% when combined with income tax and local resident tax. This is known as a strict tax system compared to other countries, and is a major factor in stimulating crypto asset trading in Japan and hindering overseas companies from entering the Japanese market. Furthermore, there is a steady stream of Web 3.0 entrepreneurs who are relocating their bases overseas due to the unfavorable tax system.

In order to improve these issues, the LDP Policy Research Council recently approved an "urgent proposal to make crypto assets an asset that contributes to the national economy." This proposal includes making profits and losses from crypto asset trading subject to a 20% separate tax on declarations and allowing loss carryover deductions for three years.

In addition, Yuichiro Tamaki, a member of the House of Representatives of the Democratic Party for the People, who has previously emphasized the need for tax reform for crypto assets, also commented on the tax reform outline. Regarding the tax system for cryptocurrencies, he prefaced it by saying that it was "disappointing," and stated, "Regarding taxation of cryptocurrency transactions, there has been no concrete progress this year, such as the introduction of a separate tax of 20%, and there has only been consideration of it." He criticized the move, saying, "Wasn't web3 supposed to be positioned as a national strategy? It's moving too slowly."

Reference: Mr. Tamaki X
Image: Shutterstock

Related articles

LDP Policy Research Council Approves "Urgent Proposal to Make Crypto Assets an Asset that Contributes to the National Economy"

The Ishiba Cabinet is in chaos as hopes and concerns collide. What does the future hold for Web 3.0 in Japan?