Japanese National Tax Agency To Implement System To Fight Tax Evasion From Crypto Profits
Japanese news outlet, The Mainichi, quoting “those with knowledge of the policy”, reported that the Japanese government is looking to establish a system to fight the tax evasion of the individuals who have made profits from cryptocurrency transactions.
According to the report, the country’s National Tax Agency (NTA) will be able to legally demand cryptocurrency traders’ details to be provided by the companies operating cryptocurrency exchanges in order to examine if an individual has been evading taxes.
This rule will apply to those traders that have earned at least 10 million yen (~$88,000) in profit and failed to report at least half the profit to the NTA.
The approximation of the date the new rule could be issued hasn’t been disclosed in the report, but it has been said that the system is going to be integrated into the regulatory framework in 2019.
This allegedly well-informed source claims that according to the new set of rules, the country’s taxation authority will also be able to access addresses, 12-digit individual identification numbers and banking information of suspected tax evaders.
The existing regulations
Cryptocurrency trading in Japan falls under the Income Tax rule, according to which every individual who recorded a yearly profit of more than 200,000 yen ($1,800) has to declare those gains to the government as income.
The article in question failed to display any exact numbers, but has speculated that “a large number of people have earned large profits from cryptocurrency transactions after their market values increased sharply in 2017 and 2018.”
However, according to the survey conducted by NTA, allegedly 300 individuals earned 100 million yen (roughly $885,000) during the bull run of 2017, which government demands its share of.
Until now, cryptocurrency exchanges were in no way obligated to share their clients’ financial information, therefore, the government’s tax agency’s hands were tied.
Not the harshest of rules
Japan is the country with highly developed personal information protection mechanism, and in line with that regulation, the new tax evading prevention system will be more lenient than in many western countries.
The National Tax Agency will be entitled only to the information on those cryptocurrency traders considered to have earned a minimum of 10 million yen ($88,527), and only under the condition that the individual has failed to report at least a half of that sum.
The new rule is coming after the specially gathered committee proposed the simplification of the cryptocurrency taxation process to the Japanese government, as a way to improve the tax compliance of cryptocurrency traders in the country.
It is well known that the Japanese government has taken the lenient way in regulating cryptocurrency exchanges operating in the country by appointing the non-governmental organization, Japanese Virtual Currency Exchange Association (JVCEA) to be the supervisor of the industry.
However, since then, two of the major Japanese exchanges were hacked, and possibly, cryptocurrency exchanges failed to provide the NTA with sufficient evidence against traders who violated the taxation law.
All these events possibly motivated the Japanese government to change the approach and start practicing a higher level of scrutiny towards the crypto trading platforms operators.
On December 3, 2018, XBT.net reported that a set of ICO and cryptocurrency regulations are reportedly being drafted by the Japanese government, coming from another “well-informed source”. It is, therefore, possible that practical Japanese are in fact bringing a whole set of regulatory wireframe, exclusively for cryptocurrency-connected businesses.
Be that as it may, one thing is certain, and that is that something stirs on the Japanese cryptocurrency scene. Will it be for the better or for worse, remains to be seen.
(Source: The Mainichi)
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your own research and/or consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.