Update on Virtual Currency Tax Treatment
In the previous News, we mentioned the virtual currency treatment on the individual income tax return. In this News, we will introduce some new topics to be concerned about virtual currency treatment.
(1) Year-end Evaluation under Corporation Tax Law
As the latest media widely covers the news about virtual currencies, the year 2017 is called the “first year of virtual currencies.” Currently, not only individuals but companies possess virtual currencies. Some companies even assume that they should recognize gains or losses on their holding virtual currencies in the same way as trading securities. Under the current Japanese Corporation Tax Law, companies are not required to evaluate the fair market value of their holding virtual currencies at fiscal year-end; thus, unrealized gains or losses of virtual currencies are not required to be reflected in their financial statements.
(2) Exit Tax
Under this rule, a resident individual who holds the relevant assets of JPY100 million or more at the time of leaving Japan is subject to income tax on unrealized capital gains on such financial assets. Since virtual currency is not included in the range of securities, it is not subject to exit tax.
(3) Reporting Requirement of Overseas Assets
Under this rule, a resident individual (excluding a non-permanent) must submit the “Statement of Overseas Assets” to tax offices if he/she holds overseas assets with the total value over JPY50 million as of December 31 of the year. Since the location of virtual currency is determined by the virtual currency holder’s address, it is not treated as overseas assets. Thus, virtual currencies are not required to be declared in the “Statement of Overseas Assets” for 2017.
(4) Reporting Requirement of Assets/Liabilities
Under this rule, an individual who files the income tax return with the certain amount of income condition must submit the “Statement of Assets/Liabilities” to tax offices if he/she holds the assets with the total value of JPY300 million or more or the special assets subject to exit tax with the total value of JPY100 million or more as of December 31 of the year. Not only overseas assets but domestic assets must be declared on the “Statement of Assets/Liabilities,” which is different from the “Statement of Overseas Assets.” Thus, virtual currencies are also subject to reporting to the “Statement of Asset/Liabilities.”
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.