In the early days of crypto, prior to global adoption and extensive regulatory initiatives, Japan was ahead of the curve in positioning itself as a prominent crypto hub. In 2016 Japan recognized crypto as a form of money. 

However, what was originally seen as a welcoming environment for crypto traders and companies underwent a significant regulatory shift, transforming it into one of the most stringent tax frameworks for crypto worldwide. 

Overview of Japan’s Crypto Taxes 

The Japanese National Tax Association (NTA) views crypto as property and taxes it as Miscellaneous Income. Unlike the way in which crypto is treated in many other countries, in Japan taxes on crypto do not differ for individuals and businesses. Any crypto earnings that exceed 200,000 JPY in a tax year must be declared on one’s Income Tax return. 

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Crypto exchanges operating within Japan are required by law to register with the Financial Services Agency. This means that anyone invested in crypto through a Japanese exchange will have their transactions monitored by NTA. 

Due to high tax rates in Japan, there have been serious issues with crypto tax evasion. As a result, the NTA has taken to closely monitoring crypto transactions, making it more important than ever before to accurately report. 

Taxable Crypto Transactions:

  • Selling crypto for fiat currency
  • Trading crypto for crypto
  • Paying for goods or services in crypto
  • Gifting crypto
  • Earning rewards from staking and liquidity pools
  • Mining crypto
  • Airdrops

Untaxed Crypto Transactions

  • Purchasing crypto 
  • Holding crypto 
  • Moving crypto between personal wallets 
  • Crypto earnings that do not exceed ¥200,000

Paying Income Tax on Crypto 

In Japan, earnings on crypto are taxed as part of an individual or business’ Income Tax. Taxes on crypto earnings will depend on the Income Tax bracket under which a tax resident falls, which can range from as low as 5% to as high as 45%. An additional Inhabitant Tax is tacked onto the Personal Income Tax rate, raising all residents' tax burdens by 10%. 

This means that while one’s tax burden might be 45% with respect to Income Tax, when factoring in the Inhabitant Tax it becomes 55%. Similarly, the lowest tax bracket of 5% automatically jumps up to 15%. 

This is a significant distinction from taxes levied on other forms of financial investments such as stocks, which are taxed at a flat rate of 20%. Additionally, in Japan capital losses on crypto investments cannot be used to offset gains. 

Personal Income Tax Brackets:

  • 0-¥1,950,000: 5% tax rate
  • ¥1,950,001-3,300,000: 10% tax rate
  • ¥3,300,001-¥6,950,000: 20% tax rate
  • ¥6,950,001-¥9,000,000: 23% tax rate
  • ¥9,000,001-¥18,000,000: 33% tax rate
  • ¥18,000,001-¥40,000,000: 40% tax rate
  • ¥40,000,000 and above: 45% tax rate

Calculating Taxes on Crypto 

All taxes in Japan must be filed by March 15th and since the Japanese government closely monitors crypto transactions, it's all the more important to accurately report. Crypto gains are to be reported to the NTA using the official Tax Answer No.1524 form.   

If for example an individual’s base income is ¥1,950,000 and they make a profit of ¥300,000 from crypto trading, their total income of ¥2,250,000 is subject to 10% taxation plus 10% Inhabitant tax, making the total tax burden 20%. 

Japan has had notoriously harsh policies governing corporate taxes on crypto. Amidst the growing trend of crypto companies establishing their operations overseas, The NTA recently made an amendment to its tax code which removed the 30% corporate tax rate on unrealized crypto gains.

Remuneration in Crypto 

 When crypto has been used as a means of payment for goods or services, any profits realized on the asset from the time of its acquisition to disposal (in this case, payment) are considered taxable income. 

For Japanese tax residents who receive a salary in crypto, the market value of the crypto in JPY at the time of its receipt must be reported for tax purposes. This includes any crypto received as a form of remuneration for goods or services. 

Compliant Crypto Payments with Rise 

The importance of accurately reporting crypto transactions in Japan cannot be overstated. In 2021 a 56-year-old Japanese man who evaded paying taxes on his crypto investments was sentenced to a year in prison and a fine of $20,000. 

With sky-high penalties for non-compliance and close monitoring from the NTA, there exists no margin for error when transacting in crypto in Japan. For companies paying contractors in crypto in Japan, Rise provides a comprehensive solution for compliance and payroll in fiat and crypto. 

From verifying contractor identity and compliance across more than 150 countries to automating instant global payouts in fiat and crypto, Rise offers an all-in-one platform for streamlining onboarding and payment operations. 

Rise’s flexible routing infrastructure allows companies to fund payroll in the currency of their choice, from crypto in a digital wallet to fiat in a traditional bank account, and for contractors to withdraw payouts in their preferred currency. 

Schedule a demo today to learn how Rise’s next-level crypto and fiat payroll can help scale your global teams and ensure compliance for international payments.