Some folks get into crypto for its robust technology, others follow the trends, but many are after those big profits. In the past, making money in crypto was a breeze – no taxes to worry about. However, when bitcoin gains momentum this 2024 we will see a staggering new all time high crossing 60,000 USD and gain immense popularity worldwide and so the tax authorities start paying attention.

If you're an investor, you need to keep good records and make sure to pay your taxes on time to avoid trouble. And let me tell you, the tax rates can be hefty. In Japan, for example, you're looking at income tax rates ranging from 5% to 45% on all your crypto gains, no matter what kind of transactions.

But, here's the thing: there are 5 smart strategies you can use to reduce or avoid crypto taxes in Japan. That's what we're going to talk about in this guide. But before we get into that, let's take a closer look at how crypto taxation works in Japan.

Is Crypto Taxed in Japan?

In Japan, cryptocurrency is considered property and is taxed as Miscellaneous Income under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA).

If you bought or sold cryptocurrency in the past financial year and made over 200,000 JPY, you'll have to report your crypto earnings on your Income Tax return. 

Also, the NTA (National Tax Agency) doesn't make a distinction between individuals and businesses for crypto taxes yet.

If you want to learn in-depth on how crypto is taxed in Japan, take a look at our Japan Crypto Tax Guide.

Here are 5 ways to Avoid Crypto Tax in Japan

1. Buying Cryptocurrency

When you buy cryptocurrency in Japan, you won't be taxed, just like in many other places around the globe.

However, it is important to keep detailed records of your purchases. This helps you figure out the cost basis when you eventually sell or 'dispose' of your crypto, which is when you'll need to pay taxes.

Kryptos serves as more than just a crypto tax software; it's also a handy crypto portfolio tracker. It's the ideal tool for keeping track of when you bought and sold your crypto.

2. Transferring your crypto between your own wallets or accounts

..isn't something the taxman cares about, and it won't trigger any capital gains tax (CGT). However, it's still important to keep tabs on these moves because automated crypto tax tools like Kryptos use this information to track your costs.

For example: let's say Peter buys 4LTC for ¥1,000 on Coinbase, then shifts it to his private LTC wallet. Later, he moves the LTC from his private wallet to his Binance account, where he sells it for ¥2,000, making a ¥1,000 profit.

If Sam wants to use Kryptos for his crypto tax report, he needs to link all three wallets. If he only links Coinbase and Binance, Kryptos won't know that the LTC he transferred to Binance originally came from Coinbase. But once Peter adds his private wallet address, Kryptos can trace the transfer accurately. This ensures a precise tax report.

If Sam can't access his private wallet anymore, he'll need to make manual adjustments using Kryptos's web interface. He'll mark the transfer from Coinbase as "Ignored" to avoid paying taxes on it twice. Then, he'll adjust the value of the incoming transaction to Binance to match the cost basis from Coinbase.

3. HODLing Crypto 

When you're holding onto your crypto, there's no need to worry about paying taxes on it. Whether your crypto stash grows in value or not, you're in the clear. Taxes only come into play when you decide to sell, trade, or give away your crypto.

4. Receiving Crypto as a Gift

If someone gives you crypto as a gift or donation, you won't get taxed on it right away. Actually, it's completely tax-free. Lucky you!

5. Donating Crypto

When you donate crypto in Japan, it's just like giving any other donation – you can deduct it from your taxes if it's going to a registered charity.

Wondering how to use a crypto tax app like Kryptos? It's simple!

1. Sign up for a FREE account.
2. Choose Japan as your country and Yen (JPY) as your currency.
3. Connect your wallets and exchanges. Kryptos works with Coinbase, Binance, bitFlyer, Huobi, Kraken, and 3000 more.
4. Let Kryptos do the math. 
5. Voila! Your data is collected and your complete tax report is ready!
6. Upgrade to a paid plan to download your report.
7. Share the report with your accountant or use it to file your taxes with the NTA. Easy!

FAQs

1. What is the tax situation for cryptocurrency in Japan?

In Japan, cryptocurrency is considered property and is taxed as Miscellaneous Income under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). Individuals who bought or sold cryptocurrency and made over 200,000 JPY in the past financial year are required to report their crypto earnings on their Income Tax return.

2. How can I avoid paying crypto taxes when buying cryptocurrency in Japan?

When you buy cryptocurrency in Japan, you won't be taxed initially. However, it's crucial to keep detailed records of your purchases to determine the cost basis when you eventually sell or dispose of your crypto. Utilizing tools like Kryptos, a crypto tax software and portfolio tracker, can help streamline this process.

3. Are there tax implications when transferring cryptocurrency between wallets or accounts in Japan?

Transferring cryptocurrency between your own wallets or accounts in Japan does not trigger capital gains tax. However, it's important to track these transfers accurately for tax reporting purposes. Automated crypto tax tools like Kryptos rely on this information to generate precise tax reports.

4. What are the tax considerations for holding onto cryptocurrency (HODLing) in Japan?

Holding onto cryptocurrency in Japan does not incur taxes. Taxes only apply when you sell, trade, or give away your crypto. Therefore, individuals can hold onto their crypto without worrying about immediate tax implications.

5. How are gifts and donations of cryptocurrency taxed in Japan?

Gifts and donations of cryptocurrency in Japan are tax-free for the recipient. However, it's essential to ensure proper documentation and compliance with regulations. Additionally, donating cryptocurrency to registered charities in Japan allows individuals to deduct the donation from their taxes.

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All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!