February 16 to March 15 every year is the Japanese tax declaration season, and in 2017, Japan levied taxes on cryptocurrencies, which has a benchmark significance worldwide.
From Apr. 2018 to date, National Tax Agency of Japan reportedly has held six seminars on tax-related issues of the cryptocurrency. On Nov. 30, 2018, National Tax Agency issued the FAQ document which provides detailed answers to tax-related issues in current transactions of cryptocurrency in Japan. In view of the cumbersome payment procedures, Japanese government made the effort to simplify cryptocurrency tax filing which helps investors to report their investment tax gains more accurately. Further, the National Tax Agency set up the "annual transaction report" calculator on the official homepage, so that individuals can calculate the amount of personal income.
In Japan, the profit from cryptocurrency transactions is sorted into miscellaneous income, which runs from 15 percent to 55 percent. The amount of tax depends on the income of the income-earners, the higher the income, the higher the tax rate will be, which may bring about some problems. Such a high tax rate may make a host of people find ways to avoid paying taxes.
The FQA issued by the National Tax Agency also emphasized that the tax rates for cryptocurrency in Japan are progressive and cryptocurrency gains are added to the total income base of the taxpayer, without the ability to reduce and offset gains in the same way as ordinary income. In terms of this regulation, a Japanese lawmaker Fujimaki has proposed that "losses from stock trading... can be carried forward and can be deducted from the profits in the following year. From the perspective of tax fairness, you should also allow for deduction carry forward of losses from virtual currency transactions."
As for specific tax amount, it will depend on following related transactions conditions: cryptocurrency selling condition; cryptocurrency buying condition; currency-currency transaction; cryptocurrency fork condition; mining gains; margin trading gains; inheritance and gift condition, cryptocurrency as wages and other payment of funds.
Notably, Japan is not the only one country trying to levy tax on cryptocurrencies. In the U.S., the Internal Revenue Service in 2014 declared cryptocurrencies to be property, making long-term capital gains on them subject to tax, though at rates lower than Japan.
Although blockchain technology and virtual currency remain huge uncertainties, Japan has made enormous strides on tax on cryptocurrencies.