According to a recent report, Japan’s Financial Services Agency (FSA) plans on changing its crypto taxation laws for preventing capital flight.
The regulatory body is planning on introducing these changes as part of its new tax reforms for 2023.
The changes that have been proposed by the Financial Services Agency (FSA) involve the removal of capital gain liabilities applicable at the end of a taxation year on undisposed corporate crypto assets.
In addition, corporate and individual earnings that exceed the threshold of 200,000 Japanese yen in a fiscal year, then they would be classified as ‘miscellaneous income’.
The taxation rate for this income is between 15% and 55% and the local tax rate is also included in this range.
In comparison, the profits that are generated from forex and stock trading are subject to a tax of 20% at the highest levels.
Likewise, foreign permanent residents of the country also have to pay a nominal tax rate, which is above 55%.
The miscellaneous income category is used for determining taxes that are applicable to income-generating activities in the crypto sector.
These include decentralized finance (DeFi) lending, crypto trading, and crypto mining. Moreover, the new regulations would make it impossible for people to carry forward capital losses from crypto operations.
Japan’s taxation requirements
Taxation has become one of the most contentious issues in the crypto market all over the world. Japan has also introduced high taxation liabilities that are applicable to crypto companies.
Industry experts have said that these liabilities are the primary reason why some companies decide to move their operations abroad.
Astar Network is one of the companies that has decided to shift its operations from Japan because of the high tax obligations that it has to deal with.
The company is running a decentralized network protocol, which is based on the Polkadot network. An announcement from the company earlier this year disclosed its plan of avoiding the taxation requirements.
The company is now planning on issuing tokens in overseas locations to accomplish this goal. Currently, Aster Network’s headquarters are based in Singapore.
The founder of the company, Sota Watanbe, recently shared his thoughts regarding the new tax reforms that have been introduced in Japan.
He stated that the new tax reforms could certainly be helpful in creating great momentum for Japan’s Web 3 sector.
However, he also went on to say that these reforms have not been implemented as yet. Therefore, they would only be able to assess the impact of these reforms once they go into effect.
Nonetheless, even though Japan has introduced strict regulations, there is no denying that the country is still one of the largest crypto hubs in the world.
It has managed to attract some of the biggest companies that are operating in the crypto sector.
If it does adopt a friendly crypto regulatory and taxation framework, it would help the country in attracting even more investment in the future.