Japan Mulls Lower Crypto Tax Rates in 2025 Overhaul

Japan's financial regulator, the Financial Services Agency (FSA), has proposed a significant overhaul of the country's tax code for fiscal year 2025. A key component of this reform is a potential reduction in the tax rate for cryptocurrency assets.

In a recent request submitted to the government, the FSA advocated for treating cryptocurrencies as traditional financial assets, aligning them with publicly traded investments. This move could pave the way for a more favorable tax environment for crypto holders in Japan.

“Regarding the tax treatment of cryptocurrency transactions, cryptocurrency should be treated as a financial asset that should be an investment target for the public,” the FSA said. 

The FSA's proposal aligns with the growing sentiment among crypto advocates in Japan, who have been petitioning the government to reform the tax on cryptocurrencies, saying that high tax rates on crypto profits are "hindering" the ability to save and invest.

Currently, crypto profits in Japan are subject to a miscellaneous income tax rate ranging from 15% to 55%. The highest rate applies to earnings exceeding 200,000 Japanese yen ($1,377). This compares unfavorably to the 20% maximum tax rate on profits from stock trading.

For corporate entities, the tax burden on unrealized crypto gains is even more substantial, with a flat 30% rate applied at the end of each financial year, regardless of whether a profit has been realized through a sale.

At the WebX Conference held in Tokyo last week, Japanese Minister of Economy, Trade and Industry Takeru Saito said he would help the industry create more use cases by implementing tax reforms to support the development of start-ups, local media reported.

While the FSA's proposal represents a positive step towards a more crypto-friendly tax environment in Japan, the ultimate outcome will depend on the deliberations of the tax system research committee and the country's national legislature. If approved by both houses of the Japanese government, the proposed tax reforms could significantly impact the nation's crypto industry.