Japan Omits Bitcoin from Consumption Tax

Japan has officially accepted bitcoins as a valid form of payment for goods and services. As the nation readies equipment to accept transfers of the cryptocurrency, many bills pertaining to tax reforms have also been put into consideration. One particular legal issue is the consumption tax’s relationship with digital currencies like bitcoin. Japan’s consumption tax is a municipal law levied on anything that is used to purchase goods and services that functions similarly to VAT, GST or sales tax.


Before the relevant tax bills were ratified, bitcoin and similar digital currencies are subject to JCT, the Japanese Consumption Tax. While Japan’s consumption tax is currently set to eight percent of an item’s price, this is expected to rise to 10 percent by October of 2019.


Japan’s National Diet passed legislation in March 27 that would reform the tax laws, including amending the Fund Settlement Law from last May. These amendments were agreed upon back in December of 2016. As things now stand, the Fund Settlement Law defines virtual currencies like bitcoin as being exempt from JCT, beginning on the 1st of July 2017. The specific legal classification for digital currencies phrases them as “asset-like values” suitable for payment and transfer. This means that while bitcoin transactions no longer face eight percent taxation, trading the digital currency is still affected by capital gains tax.


According to the government of Japan, the profits earned from the trade of bitcoin are considered income that originates from business ventures and miscellaneous endeavors. Conversely, the sale of bitcoin for investment reasons means that it can be taxed for capital gains.


The bitcoin currency was created in 2009 and owes its creation to an allegedly Japanese man who goes by the name Satoshi Nakamoto. This likely explains why bitcoin subunits are known as “satoshis.” Although bitcoin has risen in popularity as the leading form of digital currency, opening itself up to federal examination, it is not the first; Wei Dai created “b-money” and Nick Szabo came up with “bit gold.” Unlike its forebears, bitcoin is more properly classified as the first decentralized form of digital currency.