The Japanese cabinet has given its approval to a proposal set forth by the ruling Liberal Democratic party that seeks to eliminate the taxation of unrealised gains in the cryptocurrency realm. This strategic move is anticipated to provide a significant boost to the growth of Japan’s Web3 industry, as reported by CoinDesk Japan.
The proposal, now awaiting deliberation in the Diet (Japan’s parliament), aims to cease corporate taxation on the difference between the market and book values of crypto assets issued by external entities. If enacted following the December 22 approval, it would effectively resolve a disparity in the treatment of assets issued by third parties versus those issued by individual holders. Notably, individuals are currently exempt from taxation based on mark-to-market values. The existing tax structure has posed challenges for Web3 businesses within the country, as highlighted by CoinDesk Japan.
Prime Minister Fumio Kishida’s government has been actively considering input from industry associations like the Japan Crypto Asset Business Association (JCBA) and Japan Blockchain Association. These organisations have been advocating for measures to stimulate the industry’s growth, which the government views as a key component of economic reform. It is noteworthy that this approach marks a departure from the conventional practice in Japan, where policy development is typically steered by the bureaucracy rather than politicians.
According to Gaku Saito, the chairman of JCBA’s tax review committee, the tax burden imposed on Web3 companies in Japan has led to a trend of these entities relocating overseas. The tax liability, even before generating profits from their operations, compelled companies to pay taxes on unrealized gains, prompting them to liquidate assets and impeding overall business development, Saito explained in an interview with CoinDesk Japan.
