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Japanese GAAP and tax rule for criptocurrencies

time 2018/09/27

Accounting handling

The new Japanese GAAP for criptocurrencies was announced in March 2018. Valuation has to be mark-to-market if it has an active trading exchange or market. The difference has to be booked as income or loss (not comprehensive income or loss). Those actively traded criptocurrencies such as Bitcoin, Ethereum, XRP are supposed to be marked to market.

If it does not have active market, the balance sheet value has to be its cost.

J-GAAP

Tax handling

1) Consumption tax
The Japanese government views it as a currency as opposed to “commodities”. Its meaning is important. It is not taxable of the consumption tax which is 8 %. Buying and selling of currencies are not taxable.

2) Income tax
For the income tax, only realized gain is taxable. Unrealized gain on long-held coins are not taxable yet until tit’s sold. Its gain is regarded as Misc Income (雑所得) but not capital gain. Therefore, the tax rate is progressive. If you are in 50% tax bracket, you are taxed 50% on the gain (not 20%).

For non-permanent residents (residents who lived in Japan more than 5 years in total in the past 10 years), the gain is only taxable when they are brought into Japan. In another word, you don’t have to either declare or pay the tax if they were made outside of Japan if you are a non-permanent resident. As you know, a permanent resident is taxable globally.

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