Japanese GAAP & Tax Rules for Cryptocurrencies

round silver and gold coins 730564 - Japanese GAAP & Tax Rules for Cryptocurrencies

The new Japanese GAAP for cryptocurrencies was announced in March 2018. It requires that valuation of a cryptocurrency has to be done using the mark-to-market method if there is an active exchange or market for that currency.  So cryptocurrencies such as Bitcoin, Ethereum, XRP should be marked to the market.

Any difference in valuation should be booked as income or loss (not comprehensive income or loss).

If there is no active market for a cryptocurrency the balance sheet value should be its cost.

Japanese Consumption and Income Tax on Cryptocurrency Gains

1) Consumption tax

The Japanese government views cryptocurrencies as as a currency as opposed to a “commodity.”  So, the purchase and sale of cryptocurrencies are not subject to the consumption tax. 

2) Income tax

Cryptocurrency transactions that result in a gain are taxable via the Japanese income tax. Only realized gains are taxable. Unrealized gains on long-held crypto coins are taxable until they are sold. Gains are treated as miscellaneous income (雑所得), not a capital gain. That means the tax rate is progressive and correspond with your tax bracket. 

Non-permanent residents in Japan (residents who have lived in Japan more than 5 years total in the past 10 years) the gain is only taxable if the cryptocurrencies are brought into Japan. Permanent residents pay tax on all global gains and income.