Japan releases signals for the development of Web3, and includes tax reform in the reform outline, bringing new opportunities for the industry!

For the first time, the Liberal Democratic Party's manifesto focuses on a breakthrough welcomed by the industry.

The Liberal Democratic Party and Komeito Tax System Investigation Committee recently finalized the tax system reform outline for the fiscal year 2025 (Reiwa 7), and the description of the taxation method for virtual assets has attracted much attention in the market. For the first time, the outline clearly states that it will consider reviewing the tax system for virtual currencies and attempt to position them as an important role in the formation of national assets.

At the same time, it also mentions that in order to achieve a separate taxation system for declaration similar to stocks and other financial products, corresponding laws and regulations must be established first, investor protection must be strengthened, and tax reporting obligations for trading entities must be improved. This not only represents an unprecedented open attitude of the Japanese government towards the cryptocurrency market, but also paves the way for subsequent tax rate adjustments and system improvements such as netting of gains and losses.

Image Source: Junichi Kanda, full meeting of the LDP Tax Investigation Committee

For a long time, Japanese cryptocurrency investors have had a lot of grievances about the high miscellaneous income tax rate of up to 55%. Also, due to the inability to calculate profits and losses across years, many projects and talents with favorable conditions abroad have been lost. In recent years, the development of the Web3 industry has been booming, but it has faced the predicament of overly strict domestic regulations. Now, the new version of the tax reform outline finally clearly writes the intention of "reviewing virtual currency taxation", which is also regarded as a major progress in years of effort.

The threshold is still high, and the Financial Department is fully cooperative.

According to the Japanese media CoinPost, Taro Iwai, the first Minister of Digital Affairs of the Liberal Democratic Party, also went to the Financial Services Agency to present an "Emergency Proposal on Virtual Assets" to Minister Katsunobu Kato, emphasizing the following points:

Change the declaration of cryptocurrency trading profits to separate taxation

Establish a clearer regulatory framework

Increase investment in cybersecurity to enable virtual currencies to truly serve the national economy

Councilor Hirai indicated that Minister Kato generally agreed to the plan, expecting it to promote the implementation of specific system designs. In addition, the outline also requires 'legislation before taxation,' which means that the Financial Services Agency, the National Tax Agency, and trading operators need to cooperate to establish clear regulations, allowing trading information to be reported to the tax authorities more transparently, facilitating the practical implementation of 'separate taxation.' At the same time, more rigorous control will also be imposed on investor protection and the transparency of fund flows.

Image source: X Takuya Hirai, the first digital minister of the Liberal Democratic Party, also personally visited the Financial Services Agency to present an "emergency proposal on virtual assets" to Minister of Financial Services Katsunobu Kato.

Tax reform schedule and scope: Investors await with bated breath

In fact, this outline only mentions the "under review" stage, and there is no guarantee of a significant adjustment to the tax law by 2025. However, before the outline is confirmed, the issue of virtual assets has been excluded from the annual tax reform projects several times, causing concerns about the distant prospect of correction. Therefore, the "formal inclusion in the outline" this time is seen as a crucial step forward. If it successfully passes the legislative process, the future reforms that may be implemented include:

Reported separate taxation, expected tax rate is expected to drop to about 20%

The cross-year profit and loss of investment losses are aggregated

During the cryptocurrency trading process, the currency exchange stage is no longer taxed in real time.

Once these reforms are completed as scheduled, it will undoubtedly be a great encouragement for Japanese startups and investors who are eager to make a big splash in the Web3 and blockchain industry. At the same time, Japan can also retain and attract high-end technology and capital, avoiding the continuous absorption of regional competitiveness by overseas markets.

Has the annual income threshold also been adjusted? Targeting economic revitalization

It is worth mentioning that the outline also mentions adjusting the upper limit of the annual tax barrier to 1.03 million yen, which is expected to be raised to 1.23 million yen, and promises to include the target of 1.78 million yen in the scope of further review next year. Yukihiro Tamaki, the representative of the National Democratic Party, believes that 1.23 million yen is still insufficient and calls for further enhancement to reduce the burden on families. However, from the overall direction, the Japanese government has shown determination to strengthen the development of emerging industries, encourage labor participation and investment willingness.

Overall, the announcement of the tax reform outline for the 2025 fiscal year marks a major turning point for Japan's cryptocurrency tax policy. Although there are still challenges in terms of policy details and the legislative process, the fact that tax reform demands, which have repeatedly failed in the past, are now officially addressed for the first time, is enough to show that the market and the government are aware of the potential value of cryptocurrencies for the economy and innovation. Japanese investors and businesses will closely monitor whether the subsequent discussions can be successfully passed in the parliament, in order to establish a healthier legal foundation for the future development and international competition of the Web3 industry.

Further reading Fireblocks settles in Tokyo, optimistic about tax reform and technological innovation, will Japan become an industry leader? Japan's crypto tax reform questioned by Shigeru Ishiba! Opposition party erupts in anger: What happened to the promised Web3 national strategy? Japan warns unregistered exchanges! 4 popular platforms are all on the list, but why are they useless?

[Disclaimer] The market is risky, and investment should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific circumstances. Invest at your own risk.

The article 'Japan releases Web3 development signal, including cryptocurrency tax reform in the reform outline, and the industry welcomes new opportunities!' was first published in 'Cryptocurrency City'.