The Japanese government is seeking to impose measures aimed at preventing cryptocurrency traders and investors from evading taxes on the income generated from trading these assets.
According to The Mainichi, the measures would see the country’s tax body, the National Tax Agency (NTA), empowered to demand that cryptocurrency exchanges provide information concerning clients who are suspected of tax evasion.
It is understood that the government will introduce the measures as part of the tax reforms that are set to be published in the fiscal year 2019. The measures could be implemented sometime in 2020 after the publication period has elapsed.
Income Tax Act
Currently, the Income Tax Act places profits generated from trading or investing in cryptocurrencies under the miscellaneous income category. The law requires that salaried workers who earn a minimum of 200,000 yen from cryptocurrency trading and investing annually to declare such earnings as income.
It is understood that a high number of individuals in the country made huge profits from trading and investing in cryptocurrencies following the historic bull run of digital assets towards the end of 2017. Last year, more than 300 individuals declared that they had earned a minimum of 100 million yen from trading and investing in cryptocurrencies. But the NTA is of the view that cases of tax evasion in the sector are increasing and that the number reported was too low as CCN has previously reported.
At the moment, cryptocurrency exchanges are only required to provide information on their clients to the NTA voluntarily. But the reforms that the government is seeking to carry out will give the tax body authority to demand such information from the exchanges. This information includes individual identification numbers, addresses and names.
Information Protection Concerns
However, to prevent abuse of the new measures the government will only allow the NTA to demand information on those believed to have made at least ten million yen from trading in cryptocurrencies. Additionally, the information will only be demanded if the NTA has evidence that a particular individual failed to disclose at least 50% of that income.
This comes less than two months since a committee of tax experts in Japan called for the country’s tax filing process to be simplified.
Japanese Government to Simplify Cryptocurrency Taxation Process https://t.co/3wWcE6cUQV
— CCN Markets (@CCNMarkets) October 20, 2018
At the time, the committee claimed that the process was complicated and this served to discourage cryptocurrency traders and investors from declaring their digital assets when filing tax returns. But by simplifying the process, the committee argued, tax compliance would be enhanced.
Featured image from Shutterstock.