A number of crypto firms in Japan have pushed for authorities to change tax policies that are reportedly driving them out of the country. Recent government policy announcements indicate their calls are unheeded.
Earlier this month, Japan’s ruling coalition approved a tax plan for the 2022 fiscal year that continues to treat token listings as taxable. Once tokens are listed on an active market, issuers are liable to pay tax even if they don’t sell.
A project that lists some of its tokens on exchanges and keeps the rest in its treasury also has to pay taxes on what it holds if its market value goes up.
If the core team doesn’t have the funds to pay the taxes, as is often the case with early-stage startups, it is forced to sell more tokens to public markets. This adversely affects both the token price and the overall health and trajectory of the project.
Certified tax accountant Kenji Yanagisawa has revealed that the tax rate for the token issuer is around 35%.
If a token issuer airdrops a token, both the issuer and the recipient will be taxed.
According to the accountant, the current taxation regime “will not change for at least another year.”
Japan’s corporate tax policy has pushed a number of crypto project founders to dissolve their offerings in Japan and move to other countries.
Mai Fujimoto, founder of Gracone, a blockchain and cryptocurrency consulting company, said that she knows of eight projects that have moved away from Japan already.
One of these is the Astar Network. This is a multi-chain decentralised application (dapp) hub founded by Sota Watanabe. Unclear regulation and high taxes are a “severe problem in Japan,” Watanabe has said.
Tokens are taxed once they are listed on an active market, but there is no clear definition of what an active market is.
Listing on a top exchange like Binance almost undoubtedly constitutes an active market however it is unclear whether listing on a decentralised exchange or an exchange with low trading volume would count as one.
Uncertainties such as this are forcing many project leaders to move from Japan to a country in which crypto regulation is much more straightforward.
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