Japan officially introduced a bill that exempted Bitcoin from consumption tax and the bill officially came into effect as from July 1. This is likely to have a positive effect on all Bitcoin transactions and Bitcoin trading activities are more likely to be on the rise.
According to a report by Deloitte, titled “Japan: Inbound Tax Alert, 2017 Tax Reform proposals”, Bitcoin and other cryptocurrencies will face an 8% tax exemption in Japan. According to the report, cryptocurrencies are not under the exempt sales category, and therefore the sales of the virtual currencies are taxable for Japanese consumption Tax purposes. The new settlement law that was enacted in May 2016 will be amended defining virtual currency as a means of settlement therefore making the sale of virtual currency to be exempted from tax under the new fund settlement law as from 1 July 2017.
Bitcoin in Japan
In March this year, the tax reform proposals made by Deloitte were officially approved by the Japanese National Diet passing the Bitcoin consumption tax bill. The Bill officially came into effect in July 1st and is expected to positively influence the Bitcoin scene as more merchants will adopt the currency and the trading activities of Bitcoin will increase in Japan.
This move, coupled with the move by the Japanese government to officially recognize Bitcoin as a form of legal payment in April has had many positive effect s on the currency leading to a rise in its value. To support the currency further, the Japanese government has been taking initiatives to make the Bitcoin ecosystem friendlier for traders and users in general. The main goal of the initiative was to make trading of cryptocurrencies more smooth while keeping out some factors such as taxes.
To deal with money laundering which is a concern for many countries, the Japanese government regulated the Bitcoin exchange scene well introducing know your customer and anti-money laundering systems. With the strict AML policies, coupled with relaxation of tax and legal barriers Japan is clearly establishing itself as a leading player in the cryptocurrency space, competing with Hong Kong and Singapore as attractive jurisdictions for cryptocurrency companies to operate from.
Effect of the Tax Exemption
Just as the predicted, the tax exemption has led to a rise in the value of Bitcoin from July 1st in Yen terms, and there are chances that the prices will even go higher. The other impact we are expecting to see would be a greater volume of bitcoin trade taking place in Japan; currently this sits at 16.2% but looks likely to move much higher. This will also have the effect of cementing Asia’s larger share of the bitcoin marketplace. Currently this sits at 65% but is likely to move higher as companies in the EU and especially the US deal with an increasingly hostile regulatory environment – something that cannot fail but encourage more companies to headquarter their operations in the Far East where regulators are taking a much more rational approach to regulating the sector.
The tax exemption has been positive for merchants as it has made some of the big merchants in Japan such as Bic camera to start accepting the digital currency. There is a chance that even more merchants will accept the currency which will lead to higher Bitcoin adoption in Japan and a rise in its value due to increased demand of the currency.