Japan Excludes Company-Issued Crypto From Market Valuation

On May 20, the National Tax Agency of Japan issued a notice clarifying the interpretation of laws and regulations regarding partial revisions to corporate tax rules. The notice revealed that crypto assets, specifically virtual currencies, issued by companies would be excluded from market value valuation under certain conditions. This move is seen as a step forward in improving the business environment for cryptocurrency-related companies operating in Japan.

Tax Reform

The exclusion of company-issued virtual currencies from market valuation has been under discussion for some time, and it was included in the “Ruling Party’s Tax System Reform Charter” for the fiscal year Reiwa 5. With the official notification from the National Tax Agency, the exclusion has now been formally decided upon.

Previously, under existing laws, companies holding virtual currencies were subject to taxation on unrealized gains at the end of the period. This rule has been criticized for burdening companies and impeding innovation in the cryptocurrency and blockchain sectors. Consequently, some companies opted to conduct their business operations outside of Japan. The revision to the tax rules will relax regulations on in-house issued virtual currencies.

The exclusion from market valuation comes with two main conditions. Firstly, the virtual currency must be issued by the company and held continuously since its issuance. Secondly, transfer restrictions must be continuously imposed from the time of issuance, either through technical measures to prevent transfers to others or by meeting specific requirements as trust property.


National Tax Agency’s Notice

The notice from the National Tax Agency has received positive feedback from individuals engaged in virtual currency-related businesses and the Japanese community as a whole. Sota Watanabe, founder of the ASTR Network and an advocate for revising this rule, expressed his joy at the development. However, it’s important to note that this revision only applies to virtual currencies issued in-house. There is still an issue with virtual currencies issued by other companies in terms of corporate tax regulations.

Masaaki Taira, a member of the Liberal Democratic Party and chair of the Web3 project team, commented on this matter. The Web3 project team not only proposes revisions to corporate tax laws but also suggests separate taxation of profits and losses related to virtual currency transactions.