Recently, Japan has decided to revise its crypto tax. At the moment, cryptocurrency traders nowadays can be taxed up to about 55 percent of their profits. Taro Aso, Japan’s Deputy Prime Minister wants to change how crypto transactions are being taxed, from a progressive rate to a uniform rate.
During the Upper House budget committee meeting that took place on the 25th of June, the Deputy Prime Minister and Minister of Finance Taro Aso stated that; The profits gained by virtual currency transactions should be changed from current miscellaneous income to declaration separate taxation. Currently, capital gains from crypto transactions are taxed as miscellaneous income. An accounting software company called Freee detailed; Miscellaneous income is subject to comprehensive taxation, and the tax rate is decided according to the amount combined with other income such as salary income.
The National Tax Agency (NTA) gave an explanation of Japan having seven income tax brackets, with the tax rates ranging from 5 percent to 45 percent based on earnings. On top of the progressive tax rates, inhabitant taxes are levied in Japan by prefectural and municipal governments at the rate of 10 percent. The Policy Research Institute of the Japanese Ministry of Finance mentioned; “The maximum income tax rate now stands at as high as 55 percent including 10 percentage points for the local individual inhabitant tax.” This means cryptocurrency traders could pay up to 55 percent in capital gains tax under the current rule.
This new proposal by the Deputy Prime Minister would lead to crypto profits to be taxed at a uniform rate. PricewaterhouseCoopers (PwC) explained that in Japan; Capital gains from sales of certain securities (including shares/equity interest in corporations, warrant bonds, etc.) are taxed separately from other sources of income at a flat rate of 20.315 percent (i.e. 15.315 percent national tax and 5 percent local inhabitant’s tax).
Right after the Japanese government announced that crypto profits will be taxed as miscellaneous income, most industry participants have criticized this tax treatment. Up to 11,786 of them, later on, signed a petition on Change.org calling for the NTA to tax crypto profits like they do stocks. Not long ago, as stated by reports, up to 331 taxpayers with miscellaneous incomes of 100 million yen ($914,000) and over from sources other than public pensions in Japan declared cryptocurrency income.
Mr. Aso disclosed his doubt that people will understand the reason for the change by saying; “From the viewpoint of the international nature of virtual currency uncertainty and tax fairness, etc. Public understanding can be obtained for the tax rate equal to a uniform rate of 20 percent.”