Japan plans to implement a flat 20% tax on cryptocurrency profits, aligning its tax rate with that of equities and investment trusts. This move aims to foster domestic trading and make Japan a more attractive market for crypto investors.
Under the current system, crypto profits are taxed as "miscellaneous income," with rates ranging from 5% to 45%, plus an additional 10% inhabitant tax for high earners, potentially reaching up to 55%. The proposed reform, which is expected to be introduced as a bill in early 2026, will reclassify digital assets as financial products under the Financial Instruments and Exchange Act. This reclassification will subject cryptocurrencies to the same regulatory standards as traditional securities, including stricter rules against insider trading and increased disclosure obligations.
The new 20% tax rate will be split between national and regional authorities, with 15% going to the central government and 5% to local authorities. The reform is also expected to allow for the offsetting of crypto losses against crypto profits, with potential carry-forwards for multiple years, similar to stock trading rules. This change is seen as a significant victory for the Japan Blockchain Association, which has been advocating for such reforms for years.