Corporate tax rules for virtual currency are being looked at.
It turned out that the ruling party’s plan for tax reform in 2023 will include a rule to exclude crypto assets (virtual currencies) issued by companies from period-end mark-to-market taxation.
On the 16th, the outline of the plan to change the tax system should be made official. So, not all of the content has been released yet, but the Web3 project team (PT) of the Liberal Democratic Party ha shared some of it.
Under current law, a company that owns cryptocurrencies will have to pay taxes at the end of the period on any unrealized gains. People have said for a long time that this rule is hard on businesses and slows down blockchain innovation. The Financial Services Agency and the Ministry of Economy, Trade, and Industry say that self-issued bonds shouldn’t be a part of the new tax law..
As for the future, a “tax system reform outline” will be given to the Cabinet based on a plan for changing the tax system made by the party in power. After that, the Ministry of Finance made a revised bill based on the tax reform plan decided by the Cabinet, and the Diet talked about it. If the Diet passes the revised bill, the law will take effect on the date written in the revised law.
At the moment, the cryptocurrency industry is called the “winter era.” This is because the economy as a whole is in trouble, Terra is in turmoil, and the cryptocurrency exchange FTX went bankrupt.
In the process of making new technologies and becoming citizens, we have had to deal with many problems, such as the volatility of the market and unfairness caused by markets and rules that were not well-developed. Entrepreneurs who didn’t give up when things didn’t go as planned made a lot of creative businesses that will lead the next generation.
Now that we’re facing challenges, we need to rethink what technology is all about, make better decisions about how to invest in businesses, and speed up the development of the business environment to build a safe and secure Web3 ecosystem.
Information not in the outline
On the other hand, even though Web3PT and the virtual currency industry have asked for the following things, this tax reform outline does not include them.
Virtual currencies made by other companies that aren’t meant to be traded quickly will not be taxed at the end of the term when the market value changes.
Profits and losses from personal virtual currency transactions are taxed separately at a rate of 20%. This is done through self-assessment.
Gains and losses from trading between virtual currencies don’t have to be taxed.
When it comes to who owns virtual currencies that were made by other companies, tax laws and accounting rules don’t seem to match up. In this case, Web3PT came up with the following suggestions:
There are also times when tax laws and accounting rules don’t match up. Even if tax laws and accounting rules don’t match up, it is thought that there won’t be any major practical problems with taxing the valuation of virtual currencies at the end of the period.
Due to the different reasons people hold tokens, we should think about changing the accounting rules that apply to the market value of cryptocurrencies with active markets, no matter how people hold them.
He also suggested that derivative transactions should be taxed separately through self-assessment. This was in relation to the tax rules for transactions in virtual currencies. Then, he suggested the following changes to how transactions are taxed.
It’s important to look at how individual transactions are taxed in other countries and compare the results.
We also need to think about how it will affect people’s tax returns and how much money the government will get from taxes.