Digital currency taxation dilemma: Japan’s monthly transactions exceed 5 trillion yen, at least 1.4 billion can’t file taxes

According to recent data from the Japan Digital Currency Exchange Association, although there were only 60 stores in the world that can use cryptocurrency payments in 2013, as of June 2021, at least 23,000 physical stores accept cryptocurrency payment channels. The number of users has also repeatedly hit new highs. According to the statistics of licensed exchanges in Japan, it reached 4.32 million in March 2021. This number has exceeded the number of foreign exchange trading accounts during the OTC foreign exchange tax reform in 2011. The penetration rate of encrypted assets can be said to have reached that year. A level comparable to foreign exchange.


The research report released by Cryptact a few days ago also showed that at least 16 Japanese listed companies currently hold currency. The volume of personal transactions has also grown steadily along with the market. According to statistics from the Japan Digital Currency Trading Association on its 28 exchanges, the total transaction volume in August this year alone was 6 trillion yen, of which 2.4 trillion yen was in spot transactions and 3.6 trillion yen in margin transactions. This data has been rising since the beginning of 2021.

“Tax avoidance” methods such as underreporting and underreporting are emerging one after another

In the previous article, Linkde also sorted out the various legal regulations on the operation of encrypted assets in Japan, especially the regulations of the National Tax Agency on the income of encrypted assets.

Japan’s current law stipulates that the investment income of encrypted assets is classified as miscellaneous income, according to the cumulative taxation law, and the tiered taxation ratio. For example, if the annual income is more than 40 million yen, 45% of the miscellaneous income tax is required, and less than 1.95 million yen is only required to pay 5% of the tax.

However, it should be noted that in Japan, currency exchanges must be converted into current prices to pay taxes. Moreover, when using cryptocurrency to make purchases, it also needs to be included in the scope of tax payment. Therefore, when calculating, it is very complicated and easy to produce gray areas.

In Tokyo, Japan, some tax management companies openly advertised “reasonable tax avoidance” to attract customers. Although many tax rate calculators are available on the Internet, the complicated calculations and Japan’s household-based income tax declaration system make it even more difficult to pay taxes in accordance with the law.

According to recent data from the National Tax Agency of Japan, in the Kanto region alone, at least dozens of people have not properly and legally declared, and at least 1.4 billion yen in encrypted asset transaction income has not been declared.

In particular, the Ada coin listed in Japan in August 2021, after passing the application for listing in Japan, has been listed on major Japanese exchanges one after another, and it became famous during the listing period. The key currency of the above investigation was at least 670 million yen. The additional tax due was not declared.

Japan’s tax system is criticized

As mentioned above, Japan is currently used as a financial asset and a means of payment to consolidate the legal status of cryptocurrency. According to the “QA on the Taxation Issues of Cryptocurrency” of the National Tax Agency of Japan, all income related to crypto assets is miscellaneous in principle. For income, the maximum tax rate is set to 45% (55% plus resident tax), and there is no need to declare separately. If you declare at the end of the year, you do not need to pay tax if the income is less than 200,000 yen after adjustment.

The total value of mining income is the current price at the time of mining.

Japan’s current tax system has encountered many oppositions. First of all, the tax rate as high as half makes everyone complain. Recently, Japan Digital Currency Exchange Industry Association (JVCEA) and Japan Crypto Assets Business Association (JCBA) jointly filed a petition for tax reform. The main points contained in the petition include: imposing a 20% declaration tax on the profits obtained from trading encrypted assets, and requiring deduction of losses from the income related to derivative transactions in the next three years; introducing a small tax exemption system within 200,000 yen per year, etc.

It is not the decentralization and internationalization of cryptocurrency that makes tax collection more difficult, but the uncertainty of relevant laws and regulations. The chaos of the tax system in various countries has increased the difficulty.

Current status of taxation of crypto assets in various countries

As an asset, the United States needs to pay asset income tax. If it is held for a long time, it needs to pay up to 20% of water. If it is less than one year, it needs to pay tax according to the cumulative system; and the mining income is also the current price when the mining is obtained. According to calculations, even for corporate mining, tax declaration and payment are required at the “self-employed” tax rate. For details, please refer to the previous article: The US-Japan tax season is over, but the virtual currency tax system is still chaotic.

The United Kingdom stipulates that encrypted assets are intangible assets other than goodwill. As long as they are determined to be identifiable and valuable encrypted assets, they need to pay “taxable assets” and pay capital gains tax. If the taxpayer is a “higher additional tax rate taxpayer”, additional tax needs to be paid, becoming the subject of a fixed tax rate of 20% applicable to the transfer of other taxable assets.

Germany also calculates the tax rate based on intangible assets, but there is no need to pay if it is held for more than one year. The mining income is also divided into corporate and long-term encrypted asset traders for taxation.

France is even more clear. Individual investors are subject to a fixed tax rate of 30% in Jiaonan, and there is no need to declare if their annual income is less than 305 euros. However, the tax rate for institutional investors and corporate mining activities is extremely expensive, requiring a tax of up to 60%, which is also paid in a progressive stepped manner.

Moreover, the mining revenue in France is not calculated at the current price at the time of mining, but is calculated at the current price at the time of the transaction.

However, the policy is always changing, and the tax system will be a very complicated issue before the legality of cryptocurrencies is unified globally.

Posted by:CoinYuppie,Reprinted with attribution to:
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