Money

Expert Committee Works on Crypto Asset Tax Simplification in Japan

A high-level committee of tax experts in Japan are working to simplify the cryptocurrency tax filing process there, with the goal of increasing tax payment compliance in the country.

As the third-largest economy in the world, Japan also appears to have some of the highest levels of acceptance and use of cryptocurrencies anywhere. Yet official figures show only a small fraction of those paying taxes.

One reason for the tax avoidance is just the high level of taxation on cryptocurrencies in the country. According to analysts, in Japan crypto tax rates run between 15% and 55% and are filed under miscellaneous income. The rate is variable based on total adjusted gross income earned.

A second challenge is that in Japan cryptocurrencies are taxed not just on how much is gained in a crypto trade itself but also on gains when one kind of digital asset is transferred into another. A key to fixing the second part would be to have more accurate historical data on cryptocurrency prices; that will likely be worked on soon even on an international basis. Without that it is impossible to precisely figure gains on either part of the taxation process.

The historical data information may best be worked out as part of an international panel which tracks it. That may take time, but it is an important part of how cryptocurency assets can be integrated into the global financial ecosystem.

The expert committee is now actively seeking opinions on how to revise the tax filing process, including how to establish the tax basis for calculating taxes.