A Japanese lawmaker has proposed four changes to Japan’s tax law to benefit crypto users and traders as well as widen the adoption of cryptocurrency in the country. The current tax rate of 55 percent could be lowered to 20 percent while crypto-to-crypto trading and small payments could be exempt from taxation.
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Changing Crypto Taxation
Representative Takeshi Fujimaki of Japan’s Nippon Ishin no Kai political party has proposed four changes to the current taxation system for cryptocurrencies. Fujimaki, who was formerly an adviser to billionaire investor George Soros, announced on Friday:
We believe that it is necessary to change the current virtual currency taxation system to an appropriate tax system in order to develop virtual currency / blockchain technology. The tax system should not deprive the future of virtual currency and blockchain.
The proposed changes are designed to “promote the wider adoption of virtual currency” as well as “encourage the development of blockchain technology,” he clarified.
From 55% Tax Rate to 20%
Currently, Japan taxes profits from cryptocurrency transactions as miscellaneous income, which could be as high as 55 percent. Fujimaki explained that unlike salaries which are fixed amounts, gains from crypto transactions — like stocks and mutual funds — vary and losses could be incurred over a number of years.
Capital gains from stocks and mutual funds are taxed separately from other income sources, at a flat rate of about 20 percent. “From that point of view, it is necessary to [similarly] apply separate taxation with a tax rate of 20% to the gains from virtual currency transactions,” he said.
Fujimaki has also proposed allowing losses from crypto transactions to be carried forward, which the current law does not permit. Taxpayers with losses from crypto transactions this year and profits the next, for example, are not able to offset their gains with losses. He elaborated:
Losses from stock trading … can be carried forward and can be deducted from the profits in the following year. From the perspective of tax fairness, you should also allow for deduction carryforward of losses from virtual currency transactions.
Exemptions for Crypto-to-Crypto Trading and Payments
Trading between cryptocurrencies, such as between XRP and BTC, is currently subject to taxation under the current tax law, Fujimaki noted. “The task of calculating profit and loss for each transaction is extremely cumbersome and a heavy burden,” he described, adding:
In order to increase the volume of transactions between virtual currencies and to revitalize the virtual currency market, trading between virtual currencies should be tax exempt.
Another tax exemption the lawmaker has proposed relates to small payments of cryptocurrencies, which he expects to increase as more stores start accepting crypto payments and more people start using them to pay for goods and services.
For example, a person eating at a restaurant and paying with bitcoin will have to calculate their “profit and loss from the bitcoin price and the purchase price of the bitcoin at that point,” and then pay tax if there is profit. Fujimaki emphasized that with the current system, “you cannot hope for the adoption of virtual currency payments in real society,” elaborating:
Virtual currency payments of small amounts should be tax exempt, and virtual currency payments in the real world should be expanded.
What do you think of these four proposed tax changes? Let us know in the comments section below.
Images courtesy of Shutterstock and Takeshi Fujimaki.
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The post Japanese Lawmaker Proposes 4 Tax Cuts for Cryptocurrency Users and Traders appeared first on Bitcoin News.
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