According to a report today Dec 4, the Japanese tax regulatory body, National Tax Agency (NTA), is set to introduce strategies to curb tax evasion on cryptocurrency transactions from crypto investors.
The country’s tax regulators have urged crypto traders to pay their taxes for every profit they make from crypto-related transactions. The NTA, due to the increased tax evasion, plans to introduce a system to fish out defaulters with large earnings from cryptocurrency transactions. This plan which will be added to the 2019 tax reforms and implemented in 2020.
Crypto Taxation Under Japan’s Income Tax Act
Currently, in Japan, crypto-related transactions and their profit are classified as “miscellaneous income” under Japan’s Income Tax Act.
Since earnings from cryptos have already been listed under a taxable category, all investors who earn over 200,000 yen ($1,773) within a fiscal year are urged to declare such earnings as income.
This is coming after NTA officials suspected that the cases of tax evasion on the crypto transaction had increased rapidly since the rise in the value of digital currencies towards the end of 2017.
A survey conducted by the NTA last year revealed that over 300 respondents declared they made profits of over 100 million yen ($886,760) during the late 2017 and early 2018 crypto boom.
However, according to the NTA, the Information obtained from the respondents during the survey did not correspond with the amount reported by crypto investors. Profits recorded with the tax body were a little too low when compared with the information provided by the respondents.
Crypto Exchanges to Snitch on Crypto Investors
To ensure that crypto investors comply with the soon-to-be-introduced measures, the NTA has instructed cryptocurrency exchanges in the country to submit relevant information about suspicious individuals trying to evade tax payments. Such information includes the customer’s name, identification number, and address.
The Japanese government has stepped in to avert any misuse of this system and has given a directive to the tax body to request for personal information about individuals who are believed to have made over ten million yen over the years.
Additionally, exchanges have been urged by the government to collaborate with the tax body only if they show proof of an individual’s failure to report at least 50% of the income.