The Journal The Authority on Global Business in Japan

Over the past three or four years, the number of individuals earning profits from the trading of Bitcoin and other crypto­currencies has increased rapidly, and these profits are taxed as miscellaneous income. According to the National Tax Agency, among those with miscellaneous income of more than ¥100 million on their 2017 tax return, 331 reported cryptocurrency trading.

The following cryptocurrency transactions constitute taxable events and are taxed as miscellaneous income:

  • Sale of cryptocurrencies
  • Purchase of products using cryptocurrencies
  • Exchange of one cryptocurrency for another
  • Mining of cryptocurrencies

SELLING
When you sell cryptocurrencies, the difference between the purchase price and the sales proceeds is recognized as income.

Example

    You purchased one Bitcoin (BTC) for ¥200,000 and sold it when the price rose to 1 BTC = ¥1,000,000. Your income is ¥800,000 (¥1,000,000 – ¥200,000).


PURCHASES
When you buy products using cryptocurrencies, the difference between the purchase price of the product and the purchase price of the cryptocurrency is recognized as income.

Example
You purchased one BTC for ¥200,000 and used it to purchase a home appliance that cost ¥800,000 when the price rose to 1 BTC = ¥1,000,000. Your income is ¥600,000 (¥800,000 – ¥200,000).


EXCHANGE

When you exchange one cryptocurrency for another, the difference between the purchase price of the crypto­currency acquired through exchange and the purchase price of the cryptocurrency provided in exchange is recognized as income.

Example
You purchased one BTC for ¥200,000 and exchanged it for Monacoin (MONA) when the price rose to 1 BTC = ¥1,000,000.
Your income is ¥800,000 (¥1,000,000 – ¥200,000).


MINING

Compensation earned from mining (revenue) less cost of mining (expense) is recognized as income.

REPORTING
Income category of profit gained from cryptocurrency
Profit earned from the sale or use of cryptocurrency is generally categorized as miscellaneous income.

Moreover, because the profit earned from cryptocurrency is subject to aggregate taxation as miscellaneous income, it cannot be offset against miscellaneous income subject to separate taxation such as foreign exchange loss.

Even if cryptocurrency transactions are conducted through margin trading, the profit is categorized as miscellaneous income subject to aggregate taxation.

Overseas Asset Reporting and Assets and Liabilities Reporting
Reporting is not required on the Overseas Asset Reporting form as location of cryptocurrencies is determined based on residency of the owner. Reporting is, however, required on the Assets and Liabilities Reporting form.

Yukiteru Abe is a director at Grant Thornton Japan’s Global Mobility Services, providing tax solutions to globally mobile employees, global businesses, and high-net-worth individuals with overseas assets. Abe was an auditor, investigator, and tax consultant at the Tokyo Regional Taxation Bureau for 38 years before joining Grant Thornton.

For more information, please contact your Grant Thornton representative at +81 (0)3 5770 8829 or email us at tax-info@jp.gt.com

www.grantthornton.jp/en

Yukiteru Abe is a director at Grant Thornton Japan’s Global Mobility Services, providing tax solutions to globally mobile employees, global businesses, and high-net-worth individuals with overseas assets. Abe was an auditor, investigator, and tax consultant at the Tokyo Regional Taxation Bureau for 38 years before joining Grant Thornton. www.grantthornton.jp/en