Japanese Lawmaker Proposes 4 Tax Cuts for Cryptocurrency Users and Traders

A Japanese lawmaker has proposed four changes to Japan’s tax law to benefit crypto users and traders as well as widen the adoption of cryptocurrency in the country. The current tax rate of 55 percent could be lowered to 20 percent while crypto-to-crypto trading and small payments could be exempt from taxation.

Changing Crypto Taxation

Representative Takeshi Fujimaki of Japan’s Nippon Ishin no Kai political party has proposed four changes to the current taxation system for cryptocurrencies. Fujimaki, who was formerly an adviser to billionaire investor George Soros, announced on Friday:

The proposed changes are designed to “promote the wider adoption of virtual currency” as well as “encourage the development of blockchain technology,” he clarified.

From 55% Tax Rate to 20%

Currently, Japan taxes profits from cryptocurrency transactions as miscellaneous income, which could be as high as 55 percent. Fujimaki explained that unlike salaries which are fixed amounts, gains from crypto transactions — like stocks and mutual funds — vary and losses could be incurred over a number of years.

Fujimaki has also proposed allowing losses from crypto transactions to be carried forward, which the current law does not permit. Taxpayers with losses from crypto transactions this year and profits the next, for example, are not able to offset their gains with losses. He elaborated:

Exemptions for Crypto-to-Crypto Trading and Payments

Trading between cryptocurrencies, such as between XRP and BTC, is currently subject to taxation under the current tax law, Fujimaki noted. “The task of calculating profit and loss for each transaction is extremely cumbersome and a heavy burden,” he described, adding:

For example, a person eating at a restaurant and paying with bitcoin will have to calculate their “profit and loss from the bitcoin price and the purchase price of the bitcoin at that point,” and then pay tax if there is profit. Fujimaki emphasized that with the current system, “you cannot hope for the adoption of virtual currency payments in real society,” elaborating: