In this guide, we’ll break down everything you need to know about how crypto is taxed in Japan. We’ll discuss how the NTA taxes different types of transactions and share a simple strategy to help you report your taxes in minutes.
Cryptocurrency is subject to income tax: Profits from cryptocurrency are considered ‘miscellaneous income’ subject to income tax. This includes gains from the sale of cryptocurrency and income from activities such as mining and staking.
200k income tax limit: You are not required to file taxes if you’ve earned less than 200,000 JPY of income during the year. This includes your income from all sources (including employment income and crypto income).
Non-permanent residents: Non-permanent residents pay a 20.42% flat tax on all income earned in Japan.
Here are the tax rates that you’ll pay on your income from cryptocurrency and other sources.
In addition to income tax, Japanese residents are required to pay a 10% inhabitant tax. That means your effective tax rate on cryptocurrency will be between 15-55%.
Remember, you won’t pay a flat tax on your income for the year. Instead, you’ll pay different tax rates as you progress through different tax brackets.
Japan’s tax rates on cryptocurrency are some of the highest in the world. Japan’s tax rates on cryptocurrency are significantly higher than the tax on stocks and equity gains, which is capped at 20%.
In Japan, the tax year runs from January 1st to December 31st. Your taxes must be reported by March 15th of the following year.
In general, you’ll pay taxes when you earn or dispose of your cryptocurrency.
When you dispose of cryptocurrency, you’ll recognize income based on how the price of your crypto has changed since you originally received it.
To calculate your income from crypto disposals, you can use the following formula.
In this case, your cost basis is how much it costs to acquire your cryptocurrency. Meanwhile, proceeds are how much you received for disposing of your cryptocurrency.
Here are a few examples of cryptocurrency disposal events.
When you earn cryptocurrency, you’ll recognize income based on the fair market value of your crypto at the time of receipt.
Here are a few examples of cryptocurrency earning events .
Cryptocurrency earned through staking, mining, and airdrops is considered income. You’ll recognize income based on the fair market value of your crypto at the time of receipt.
If you dispose of your earned cryptocurrency, you may be subject to additional income tax based on how the price of your crypto has changed since you originally received it.
There is no tax for the following transactions.
In Japan, cryptocurrency losses can offset gains from cryptocurrency and other sources of ‘miscellaneous income’ within the same tax year.
Crypto losses cannot offset stock gains and income from your job. In addition, individuals cannot carry forward crypto losses into future tax years.
If you’ve used a major exchange in Japan, it’s likely that the NTA already has information about your cryptocurrency transactions. Exchanges are required to register with the FSA IN and follow strict requirements on data sharing to legally operate in Japan.
Today, exchanges are required to register with the FSA IN and follow strict requirements on data sharing in order to operate in Japan.
In addition, it’s important to remember that transactions on blockchains like Bitcoin and Ethereum are publicly visible. In the past, tax agencies around the world have used ‘data matching’ to match known individuals to ‘anonymous' wallets.
You have two options for reporting your crypto income: online or on paper forms.
If you wish to report your taxes online, you can report your taxes through the National Tax Agency’s online portal.
If you’re filing your taxes on paper forms, you’ll be required to report your crypto income on Form A or Form B. It’s likely that most investors will use Form B.
Form A: Form A is limited to those who only have employment income, miscellaneous income (such as pensions, dividend income, or occasional income), and do not have any estimated tax prepayment.
Form B: Form B is appropriate for anyone regardless of the type of income.
You should report your cryptocurrency income on section 6 of the standard tax filing form.
Trying to calculate your gains and losses manually can take serious time and effort. With crypto tax software like CoinLedger, you can file your cryptocurrency taxes in three easy steps.
Step 1: Import your transactions from your exchanges and wallets.
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Step 2: Watch the platform calculate your income and capital gains.
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Step 3: Generate your tax report!
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Let’s cap things off by answering some frequently asked questions about cryptocurrency taxes.
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This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.
