Guide to Crypto Taxes in Japan
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Japan considers crypto earning over JPY200,000 to be "miscellaneous income," which means they can be taxed at rates up to 55%. This includes permanent resident's profits from cryptocurrency trading, bitcoin mining, and DeFi lending. Considering that Japan taxes stock profits at a flat 20%, its crypto tax rates are very high.
Non-permanent residents of Japan pay a flat 20% tax on all income earned in Japan.
All individual taxes are filed based on the previous year ending 31 December, and they need to be reported by 15 March of the next year. However, there are crypto tax extension options.
Japanese income tax rates
Income tax rates vary depending on your income tax bracket. You could owe significantly less than the 55% maximum tax rate on your cryptocurrency gains.
Below are the income tax brackets and corresponding tax rates on your cryptocurrency, not including the 10% local inhabitant’s flat tax rate.
| Tax Bracket (JPY) | Income Tax Rate |
|---|---|
| Less than 1.95m | 5% |
| 1.95-3.3m | 10% |
| 3.3-6.95m | 20% |
| 6.95-9m | 23% |
| 9-18m | 33% |
| 18-40m | 40% |
| 40m and above | 45% |
These amounts are reported on is currently Section 6 for miscellaneous income, with instructions on completing it from the NTA below.
Reporting crypto losses
Crypto losses may not be carried forward to future years.
Crypto tax regulation in Japan
The high tax on cryptocurrency has led many in Japan to underreport their earnings. In response, Japan has increased crypto tax investigations.
CoinDesk reports that according to the Asahi Shimbun, in 2019 roughly 50 individuals and 30 companies in Japan were found to have failed to properly declare crypto income from the past few years.[1] Investigators focused particularly on entities that appeared to have made significant crypto gains, concluding that many had made efforts to conceal their total earnings.
For example, two companies attempted to hide crypto profit by transfering millions of yen of virtual currencies, billed as "consulting fees," only to then return most of the cryptocurrency to the sender. The fees could then be written off, reducing the income tax amount.
Japan tried a crypto tax evader for the first time in 2021, sentencing him to a one-year prison sentence and a fine of over 22 million yen ($200,000).[2]
Other countries have been requesting client crypto transaction data from exchanges as well, including the United States where, as an example, Coinbase has sent user data to the IRS. Spain, Australia, and Denmark are a few more examples of countries where tax authorities have requested data from cryptocurrency exchanges.
Learn more about crypto taxes in other countries in our Crypto Tax Guide.
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References
Last reviewed by Zac McClure, MBA on December 28, 2022 · Sources