According to CoinPost report, in the 2025 fiscal year (Reiwa 7th year) tax reform, the review of the taxation system for virtual currencies (crypto assets) has finally taken the first concrete step. In the tax reform outline jointly formulated by the Liberal Democratic Party and Komeito, "review of the virtual currency taxation system" was included in the agenda for the first time, which is expected to improve the long-criticized high taxation and insufficient regulation issues. The following will analyze the background, specific content, and future prospects of this reform in detail.
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ToggleWhat is the tax reform outline?
The tax reform outline is a document formulated by the ruling party at the end of each year, serving as a blueprint for the following year's tax reform. The content recorded in the outline will be deliberated and legislated in the form of a bill in the regular Diet session of the following year. Especially for the review of the virtual currency taxation system, it has been a focus of discussion for many years, and whether it can be successfully included in the outline is seen as an important milestone.
Current status and challenges of the virtual currency taxation system
In the current virtual currency taxation system, trading profits are classified as "miscellaneous income" and subject to a high tax rate of up to 55%. Furthermore, even the exchange between virtual currencies incurs a tax obligation. At the same time, losses cannot be carried over across fiscal years, which has led to many problems, including:
- Outflow of startups and talented personnel overseas
- Decline in international competitiveness in the Web3 field
These challenges have long been criticized and urgently need to be improved.
Meaning of the "tax system review" clearly stated in the outline
In this tax reform outline, virtual currencies are positioned as "financial products that contribute to the formation of national assets". The outline points out that, with reference to the investor protection measures and related regulations for listed stocks, the taxation system for virtual currency transactions should be reviewed. The main points include:
- Studying the introduction of a separate taxation system for crypto asset transactions
- Improving regulations and tax reporting obligations
- Strengthening the legal framework for investor protection
This record makes the review of virtual currency tax rates and loss carryover rules a realistic possibility.
Hirai MP's urgent proposal and the Financial Services Agency's response
Takuya Hirai, a member of the Liberal Democratic Party's Digital Headquarters, submitted a report titled "Urgent Proposal to Develop Crypto Assets as a Driving Force for the National Economy" to the Financial Services Agency. The proposal includes the following three core points:
- Include virtual currency transaction profits and losses in the separate taxation system
- Improve the relevant regulatory framework
- Strengthen cybersecurity protection
It is reported that Financial Services Minister Kato Katsunori has expressed support for this proposal, and the future advancement of the relevant system design is worth looking forward to.
Impact on investors and future prospects
The review of the virtual currency taxation system could bring significant improvements for investors. If a separate taxation system is introduced, investors' tax burden will be significantly reduced compared to the current miscellaneous income tax rate. In addition, the introduction of a loss carryover system will provide investors with a more friendly long-term trading environment.
The record in this outline has greatly increased the possibility of the virtual currency taxation system review becoming a concrete policy package in the 2025 tax reform.
Progress on the issue of the "103 million yen income threshold"
The issue of the "103 million yen income threshold" has also received attention and a solution has been proposed in this reform. The tax-exempt income limit will be raised to 123 million yen, and the leader of the Democratic Party for the People, Tamamura Yuichiro, further called for raising the target to 178 million yen. This issue will remain a focus of future discussions.
Japan's Industrial Upgrade Starts with Tax Reform
This tax reform outline includes a review of the virtual currency tax system, which is undoubtedly a groundbreaking progress for Japan's cryptocurrency industry. With the improvement of regulations and the reduction of tax burden, the domestic market is expected to see more vitality and promote innovative development. Next, the specific system design by the Financial Services Agency and the National Tax Agency will be the key, and the implementation of the 2025 tax reform is worth continued attention.
Risk Warning
Cryptocurrency investment is highly risky, its price may fluctuate violently, and you may lose all your principal. Please evaluate the risks carefully.
