JBA submits "5 items" for cryptocurrency tax reform to the government, including separate taxation at 20%【Interview Report】

The Japan Practical Blockchain Association (JBA) submitted a "Request for Tax Reform Regarding cryptoassets" to the government on July 18. A press conference was held from 3 PM the same day, with representative director Yuusuke Kano and Tax System Subcommittee Chairman Kouta Iwasaki speaking.

Amid the intensifying discussions on the transition to the Financial Instruments and Exchange Act, the latest version of the tax reform requests, which have been ongoing since 2022, has been announced.

[Five Tax Reform Requests Submitted by JBA]

• Introduction of separate taxation and loss carryforward deduction
• Development of tax system related to inheritance
• Tax deferral on exchanges between cryptoassets
• Establishment of tax system for donating cryptoassets
• Continuation of review for cryptoassets with specific transfer restrictions

Request for Separate Taxation of 20% Equivalent to Stocks

The core of the JBA's request is the introduction of separate taxation for declarations on cryptoasset transactions (tax rate of 20.315%). Under the current system, sale profits are subject to comprehensive taxation as miscellaneous income, with a maximum of 55% imposed when combined with resident tax. This puts it in a significantly disadvantaged position compared to the 20.315% for stocks and investment trusts.

Kano, the representative director, pointed out that "the number of cryptoasset account openings in Japan has exceeded 12 million, and the ownership rate among experienced investors is 7.3%, surpassing that of FX trading and corporate bonds." He emphasized that in the United States, the assets under management of Bitcoin spot ETFs have exceeded $140 billion, indicating that cryptoassets are becoming a means for general investors to build their wealth.

Carrying forward losses is also an important demand item. "If I made a loss last year and made a profit this year, I want to offset the losses and profits so that no tax is incurred. I would like you to introduce a system similar to that of stock and corporate taxes," explained Representative Kanou.

Deferral of taxation during the exchange of cryptoassets was also proposed (crypto-to-crypto). Under the current system, taxation occurs at the point of exchange between cryptoassets, making tax calculations extremely complicated when multiple exchanges are conducted in DeFi and other scenarios. There is a request that "the only moment to be taxed should be when exchanging from yen to cryptoassets initially and then back to fiat currency at the end."

Furthermore, we request the continued review of the application of non-taxable measures when donating cryptoassets and the treatment of cryptoassets with specific transfer restrictions under corporate tax law. Representative Kanou mentioned the double taxation issue known as the "110% problem" during a press conference. He argued that when a deceased person has purchased cryptoassets at a low price and their value has increased, resulting in a total tax burden of 110% from inheritance tax and capital gains tax, similar tax measures to those for stocks are necessary.

Concerns about tax disparities when listing the ### ETF.

According to the materials presented at the press conference, Japan's cryptoasset tax rate of 55% is the highest among advanced countries. Representative Kanou pointed out the issue of wealthy cryptoasset holders leaving the country, stating, "Even if we impose high taxes, tax revenue will not increase. This is because they will go overseas."

If a Bitcoin spot ETF is listed in Japan in the future, the ETF will be subject to a separate tax of 20% on up to 55% of the spot trading. "As investors flow into the ETF, the liquidity of the spot market will be lost, hindering the healthy development of Japan's cryptoassets industry," warns Kanou, the representative director. JBA has also proposed the introduction of optional withholding tax to aim for the simplification of the tax return process.