Japan exchanges seek reforms for crypto taxation

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Japan’s self-governing crypto exchange body, the Japan Virtual Currency Exchange Association (JVCEA), recently sent a letter to Japan’s Financial Service Agency (FSA) requesting changes on crypto taxes. In the documents, the advocacy group was making specific demands about how taxes on cryptocurrency and crypto traders should be applied.

The JVCEA acknowledged that Japan has made great progress in creating regulations for cryptocurrencies. The country recently made amendments to Japanese Financial law to recognize cryptocurrencies as bona fide financial assets. However, the body feels tax laws in this space still need to be addressed. 

In their letter, JVCEA has outlined many proposals that they believe will help with the taxation process. They specifically noted citizens should have a grace period to obtain documentation regarding their crypto assets, and suggested a three year allowance.

JVCEA is also proposing that crypto derivatives transactions need to be taxed separately. The body added that Small-scale crypto tractions should not be subjected to taxation. In addition, it should allow for the transfer of losses. 

Notably, JVCEA also proposed that crypto-insurance from initial coin offerings (ICOs) should be recognized as a capital transaction rather than a taxable income. The body also wants financial authorities to introduce special tax laws and tax breaks for specific investment deals with the cryptocurrency space.

JVCEA efforts for a better crypto environment recently suffered a blow after one of their allies, Takeshi Fujimaki, lost his seat in the House of Councilors elections. Fujimaki was one of the most influential figures in the Japanese crypto space, pushing for changes in the way crypto coins are taxed.

Earlier this month, financial authorities in the country announced a crackdown on crypto traders that had avoided paying their taxes. Reportedly, about 50 traders and 30 businesses failed to report as much as JPY10 billion ($93 million) in crypto income in the last few years. Days after making the announcement, Japan’s National Tax Agency (NTA) deployed about 200 tax specialists. These specialists were tasked with the duty of investigating undeclared gains from crypto transactions and other online activities.