Japan is one of the first countries to adopt cryptocurrency as a legal means of payment, which allows it to pay for various goods and services throughout the country.
The National Tax Agency of Japan states that income from virtual currency is taxable. Virtual currency is defined as a means of payment, that has intellectual value.
Taxation for legal entities related to obtaining profits from the use of cryptocurrencies has a multidimensional nature:
- Tax on legal entities’ income from transactions with cryptocurrencies (corporate tax) (mining, purchase and sale of crypto assets as the main activity).
It is taxed in the usual manner, as with any other activity. The national corporate income tax rate in Japan is 23.4%. For corporations with a capital of no more than 100 million yen (about 940 thousand US dollars), a 15% rate is applied to the first 8 million yen of taxable profit. Companies also pay a local tax on business and personal income with an average rate of about 10%. As a result, the effective tax rate for companies, that subject to the base rate of 23.4%, is approximately 34%; for medium-sized businesses, the effective rate is reduced to 30%. Since 2017 after the explanations of the National Tax Agency of Japan, income arising in connection with the use of crypto assets is taxed by analogy with income related to foreign currency, and refers to «miscellaneous income».
2. Tax on income from the increase in the value of crypto assets from legal entities.
The increase in the value of crypto assets received by legal entities in Japan is taxed at the basic corporate income tax rate.
3. Sales tax.
The main indirect tax in Japan is the sales tax, which is set at the central level and is 10%
Due to the recognition of the status of an official means of payment for cryptocurrencies in Japan, on the one hand, and the peculiarities of the sales tax model, on the other hand, transactions with crypto assets are not
subject to indirect taxes in Japan. That is, the circulation of crypto assets is not subject to value added tax, due to the interpretation of the crypto asset as a currency.