The Japanese government’s 2024 crypto tax change gets rid of the mark-to-market tax for companies that hold third-party crypto assets. Instead, taxes will be based on sales gains.

At a recent cabinet meeting on December 22, which took place during fiscal 2024, the Japanese government disclosed significant changes to the taxation of businesses that own crypto assets.

Corporations owning crypto assets issued by third parties are no longer subject to the period-end mark-to-market valuation tax, as per a reform proposal by the Japan Crypto Asset Business Association (JCBA).

This is a huge change because it brings companies’ tax structure in line with that of private investors by limiting their tax liability to revenues made from the sale of virtual currencies and tokens.

This update changes how the Corporation Tax Law defines period-end mark-to-market. The disparity between the market value and book value of crypto assets at the end of the fiscal year will no longer be considered for profit or loss purposes by corporations, as long as the asset is deemed to be kept continuously. This further brings companies into line with the investor tax system by limiting taxation to the sale of digital assets.

Businesses that own and manage cryptocurrency will hopefully see a reduction in their tax liability as a result of this smart move. Also, it’s a response to the rising tide of people wanting cryptocurrency from businesses other than the issuer itself to be treated fairly.

Beyond crypto taxes, the tax reform includes measures to lower income and resident taxes by 40,000 yen per person beginning in June 2024. Along with the introduction of a new tax structure for innovation and key industries, this cut is applicable to both people and businesses.

There is a price to pay for this change, even if it is expected to encourage the expansion of Web3 and provide assistance to local entrepreneurs using blockchain technology. Estimates indicate that national and local governments would see a precipitous drop in income of 3,874.3 billion yen as a consequence of the tax cuts, the third-biggest drop since fiscal 1989.

Japan has long been seen as a crypto-friendly haven, attracting many crypto companies. For example, earlier this year, the country allowed venture capital companies to directly participate in cryptocurrency, which is just one example of how the government has routinely executed changes as needed.

Separate taxes (20%) and loss carryover deductions are introduced as part of this tax change, which is a big step towards satisfying the wishes of bitcoin investors. Still up for debate are the following topics: how to determine a cryptocurrency’s profit or loss when selling it, whether or not to impose a lump sum tax on its conversion to legal tender, and whether or not to allow “carry-over” deductions for three years.

Proponents of Japan’s cryptocurrency business have long pushed for changes to the country’s tax regulations governing digital assets. The autonomous Japan Blockchain Association (JBA) petitioned the Japanese government to revise its crypto legislation in three major ways at the end of July.