Going a step further in being one of the most crypto-friendly jurisdictions, Japan is looking to simplify its complex tax reporting procedures for cryptocurrency investors.
In a general assembly meeting held on October 17, the Tax Committee, which is responsible for all tax policies of Japan, discussed ways and means to improve the prevalent tax filing system for cryptocurrencies. The Tax Committee believes that convenient crypto reporting mechanisms will help investors report their tax gains more accurately.
Earlier in July, this move was initiated by Japanese lawmaker Senator Kenji Fukimaki when he called for a change in Japan’s tax policy on cryptocurrency profits. He questioned the classification of cryptocurrency profits and if it could be changed from its current “miscellaneous income” to “separate declared taxation.”
However, during that time, Japan’s Deputy Prime Minister and Minister of Finance, Tarō Asō was apprehensive regarding Fukimaki’s proposal. He stated that owing to the ‘international nature’ of cryptocurrencies, Japanese residents might dislike a change in tax classification. Asō was also doubtful if taxpayers will be able to understand a ‘separate declared taxation, as proposed by Fukimaki. He also emphasized that he was unsure about the ‘tax fairness’ of implementing such a change.
At present, profits earned by investors in cryptocurrency can be taxed between 15 and 55 percent, due to the miscellaneous income rules. Stock profits, which are treated more like separate declared taxes, are taxed at roughly 20 percent in the country.
Currently, calculating crypto profits can be a very complicated and tedious process as the price for a cryptocurrency on different exchanges can vary. Also, the way different platforms store the historical data of each transaction is not standardized. As a result, crypto traders find it difficult to file accurate tax reports.
The Tax Committee is now reportedly planning to develop a new system that would standardize the tax filing procedure and make it easier for taxpayers to calculate their profits on the sales of digital assets against both fiat currencies and other cryptocurrencies.
Minoru Nakazato, President of the Tax Committee, was quoted as saying,
“Since it is necessary to take into consideration frameworks other than the taxation system and business practices, we will hold a small meeting of experts to deepen the discussion while listening to outside opinions.”