Cryptocurrency has captured the interest of investors for its developing technology, investment trends, and potential returns. In the previous era, cryptocurrency gains were mostly untaxed. But now, with Bitcoin expected to reach approximately $60,000 in 2024, the tax authorities around the globe, including Japan, have begun to scrutinize it more closely.
If you are going to invest in cryptocurrencies in Japan, it is important to be diligent about record keeping and accurate reporting for tax purposes. Tax rates can be high, from 5% up to 45%, on all gains from cryptocurrencies depending on your earnings.
The good news is that there are 5 smart and effective ways to reduce or eliminate cryptocurrency taxes in Japan. How ever, first, it is worth understanding how cryptocurrencies are taxed in Japan.
Is Cryptocurrency Taxed in Japan?
In Japan, cryptocurrencies are classified as property, and cryptocurrency earnings are categorized as Miscellaneous Income under the laws of the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA).
You are required to report your earnings as Miscellaneous Income if you purchased or disposed of cryptocurrency and the total was in excess of 200,000 JPY in a given financial year.
The National Tax Agency (NTA) does not differentiate between individuals and businesses for tax purposes at this time.
For more detail, check out [Japan Crypto Tax Guide] for a more detailed examination for the tax treatment of cryptocurrencies.
5 Ways to Reduce or Avoid Crypto Taxes in Japan
1. Purchasing Cryptocurrencies
If you buy cryptocurrency, it is not a taxable event and does not trigger taxes.
It is advisable to keep all records of your purchases.
When you eventually sell or dispose of your cryptocurrency, it makes it easier to establish the cost basis.
You can use tools like Kryptos to track what you purchased and for the portfolio tracker, which can ultimately help you with taxes.
2. Transferring Crypto Between Your Wallets/Accounts
If you transfer from one account to another- where the accounts belong to you - it is not a taxable event, and you should not be taxed on any capital gains.
But again, you will want to track everything correctly for tax reporting.
For example:
Peter from above buys 4 LTC for ¥1,000 on Coinbase.
He then transfers it to his private LTC wallet and then transfers it to Binance and sells it for ¥2,000.
To complete these transactions in Kryptos for tax purposes, he would have to connect all the wallets.
If a wallet ever becomes inaccessible, you can go in and adjust everything manually in Kryptos, so that you don't get double taxed.
3. HODLing Crypto
Simply holding crypto does not trigger taxes.
Taxes are only triggered when you sell, trade or give away crypto.
HODLing can defer tax until you either sell or dispose of it.
4. Receiving Cryptocurrency as a Gift
If you receive cryptocurrency from someone as a gift or donation, it is not subject to immediate taxation.
No income tax liability occurs when cryptocurrency is gifted.
Be sure to save your records to remain compliant.
5. Donating Cryptocurrency
When you donate cryptocurrency to an approved charity, it is deductible as if it were any other donation to charity.
How to Use Kryptos to Track and Report Your Taxes
Kryptos makes it simple for you to manage crypto taxes in Japan:
Follow These Steps:
- Create a FREE account.
- Select Japan as your country, and JPY as your currency.
- Connect your wallets and exchanges(Coinbase, Binance, bitFlyer, Huobi, Kraken, and over 3,000 other providers).
- Allow Kryptos to calculate your gains and losses.
- You can then pay for a plan to download your complete tax report.
- You can use your tax report to file your taxes with the NTA or share it with your accountant.
| Step | Form | Purpose | Action |
|---|---|---|---|
| 1 | 1099-DA | Reports digital asset sales or exchanges | Use to fill out Form 8949. |
| 2 | Form 1099-MISC | Reports miscellaneous crypto income | Use to fill out Schedule 1 or C. |
| 3 | Form 8949 | Details individual transactions | List each transaction here. |
| 4 | Schedule D | Summarizes capital gains/losses | Transfer totals from Form 8949. |
| 5 | Schedule 1 | Reports miscellaneous income | Include miscellaneous income (if not self-employment). |
| 6 | Schedule C | Reports self-employment income | Include self-employment income and expenses. |
| 7 | Form W-2 | Reports wages (if paid in Bitcoin) | Include wages in total income. |
| 8 | Form 1040 | Primary tax return | Summarize all income, deductions, and tax owed. |
| Date | Event/Requirement |
|---|---|
| January 1, 2025 | Brokers begin tracking and reporting digital asset transactions. |
| February 2026 | Brokers issue Form 1099-DA for the 2025 tax year to taxpayers. |
| April 15, 2026 | Deadline for taxpayers to file their 2025 tax returns with IRS data. |
| Timeline Event | Description |
|---|---|
| Before January 1, 2025 | Taxpayers must identify wallets and accounts containing digital assets and document unused basis. |
| January 1, 2025 | Snapshot date for confirming remaining digital assets in wallets and accounts. |
| March 2025 | Brokers begin issuing Form 1099-DA, reflecting a wallet-specific basis. |
| Before Filing 2025 Tax Returns | Taxpayers must finalize their Safe Harbor Allocation to ensure compliance and avoid penalties. |
| Feature | Use Case Scenario | Technical Details |
|---|---|---|
| Automated Monitoring of Transactions | Alice uses staking on Ethereum 2.0 and yield farming on Uniswap. Kryptos automates tracking of her staking rewards and LP tokens across platforms. | Integrates with Ethereum and Uniswap APIs for real-time tracking and monitoring of transactions. |
| Comprehensive Data Collection | Bob switches between liquidity pools and staking protocols. Kryptos aggregates all transactions, including historical data. | Pulls and consolidates data from multiple sources and supports historical data imports. |
| Advanced Tax Categorization | Carol earns from staking Polkadot and yield farming on Aave. Kryptos categorizes her rewards as ordinary income and investment income. | Uses jurisdiction-specific rules to categorize rewards and guarantee compliance with local tax regulations. |
| Dynamic FMV Calculation | Dave redeems LP tokens for Ethereum and stablecoins. Kryptos calculates the fair market value (FMV) at redemption and during sales. | Updates FMV based on market data and accurately calculates capital gains for transactions. |
| Handling Complex DeFi Transactions | Eve engages in multi-step DeFi transactions. Kryptos tracks value changes and tax implications throughout these processes. | Manages multi-step transactions, including swaps and staking, for comprehensive tax reporting. |
| Real-Time Alerts and Updates | Frank receives alerts on contemporary tax regulations affecting DeFi. Kryptos keeps him updated on relevant changes in tax laws. | Observe regulatory updates and provide real-time alerts about changes in tax regulations. |
| Seamless Tax Reporting Integration | Grace files taxes using TurboTax. Kryptos integrates with TurboTax to import staking and yield farming data easily. | Direct integration with tax software like TurboTax for smooth data import and multi-jurisdictional reporting. |
| Investor Type | Impact of Crypto Tax Updates 2025 |
|---|---|
| Retail Investors | Standardized crypto reporting regulations make tax filing easier, but increased IRS visibility raises the risk of audits. |
| Traders & HFT Users | To ensure crypto tax compliance, the IRS is increasing its scrutiny and requiring precise cost-basis calculations across several exchanges. |
| Defi & Staking Participants | The regulations for reporting crypto transactions for staking rewards, lending, and governance tokens are unclear, and there is a lack of standardization for decentralized platforms. |
| NFT Creators & Buyers | Confusion over crypto capital gains tax in 2025, including the taxation of NFT flips, royalties, and transactions across several blockchains. |
| Crypto Payments & Businesses | Merchants who take Bitcoin, USDC, and other digital assets must track crypto capital gains for each transaction, which increases crypto tax compliance requirements. |
| Event | Consequences | Penalties |
|---|---|---|
| Reporting Failure | The tax authorities can mark uncontrolled revenues and further investigate. | Penalty fines, interest on unpaid taxes and potential fraud fees if they are deliberately occurring. |
| Misreporting CGT | Misreporting CGT Error reporting profits or losses can trigger the IRS audit. | 20% fine on under -ported zodiac signs, as well as tax and interest. |
| Using decentralized exchanges (DEXs) or mixers without records | The IRS can track anonymous transactions and demand documentation. | Possible tax evasion fee and significant fine. |
| Disregarding Bitcoin mining tax liabilities | Mining reward is considered taxable income, and failure of the report can be regarded as tax fraud. | Further tax obligations, punishment and potential legal steps. |
| Foreign crypto holdings: Non-disclosure | Foreign-accepted crypto FATCA may be subject to reporting rules. | Heavy fines (up to $ 10,000 per fracture) or prosecution for intentional non-transport. |
