Japanese Tax Agency clarifies crypto tax obligations
Japanese cryptocurrency traders could soon have a slightly clearer understanding of how to settle their tax obligations. The country’s National Tax Agency (NTA) published a new strategic policy, in conjunction with the Financial Service Agency (FSA) and organizations in the cryptocurrency space, that could ultimately make it easier for tax payments to be made. The new method would automatically calculate profits when digital assets are sold and would provide the seller with the tools to properly determine profits and losses (P&L).
The NTA, the FSA and the Japan Blockchain Association jointly began studying cryptocurrency tax implications and liabilities in April. The study, designed to provide input and opinions on different filing methods and would continue throughout the year, should lead to the creation of a better tax policy prior to the beginning of the tax return filing season in 2019.
One of the bigger issues regarding tax return filings related to cryptocurrency is with how the profits are calculated. Different exchanges use different data storage methods for transactions and there are also problems related to how easily data can be distorted.
The NTA has designed a software application to overcome these issues. The software can automatically calculate P&L and would use a simple formula for the calculations. It will be made available initially for income generated by employees of IT companies, who often pay their staff with crypto.
Generally speaking, profits received from the sale of crypto would be considered miscellaneous income. If an employee earns over $1,780 in cryptocurrency within the given tax year, a crypto tax return would be required.
This is just the first step in the NTA’s quest to reduce the burden of tax filings related to crypto. The agency is also looking into a simplified system for declaration paperwork that would, in theory, provide a more secure tax payment method. It would get rid of confusing paperwork and provide an easier way for investors to file their taxes.
The new plan comes less than a month after Japanese Finance Minister and Deputy Prime Minister Taro Aso suggested that changes were coming. He said in June that, in addition to the improvements, the government was also considering a flat 20% tax on all cryptocurrency-related earnings.
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