Japan’s Financial Regulator Proposes Lower Crypto Taxes by 2025

The Financial Services Agency (FSA) of Japan has put forth a plan aimed at revising the country’s tax code, which includes a proposal to reduce the tax rate on crypto assets starting in 2025.

On August 30, the FSA requested tax reforms specifically addressing the treatment of crypto assets, advocating for their recognition as traditional financial assets accessible for public investment.

Details of the Tax Reform Proposal

The FSA emphasized that cryptocurrency transactions should be seen as financial assets deserving of public investment opportunities. They stated:

“It is necessary to consider this issue from the perspective of whether it should be treated as such.”

Currently, profits from crypto investments in Japan are classified as miscellaneous income, subject to a tax rate that ranges from 15% to 55%, depending on the income level. The highest tax rate of 55% applies to earnings exceeding 1,377 USD (or approximately 200,000 Japanese yen), with rates varying according to individual income tax brackets.

In contrast, profits realized from stock investments face a maximum tax rate of 20%. Corporations holding crypto must also contend with a flat tax rate of 30% on their holdings at the end of the financial year, regardless of whether they have sold any assets or not.

The process for implementing tax reforms involves submissions from government ministries to the ruling party, which are then reviewed by a tax research committee and must be approved by both houses of the Japanese legislature, the House of Representatives and the House of Councilors.

Calls from the Crypto Community for Tax Reform

Supporters of the crypto sector in Japan have been advocating for changes to the national tax regime concerning digital assets for several years. The Japan Blockchain Association (JBA), a pro-crypto lobbying group, formally appealed to the government in 2023 to reduce the tax burdens on crypto assets.

On July 19, the JBA submitted a comprehensive request for tax reform aimed at the 2025 financial year, seeking to stimulate further development within the crypto industry. Among their proposed measures was a standard 20% tax rate for cryptocurrencies, along with the introduction of a three-year loss carryover deduction.

Despite ongoing advocacy, previous efforts have not led to significant changes in tax policy for the Japanese crypto sector.