Japan’s National Tax Agency has caught onto the cryptocurrency mania gripping the world and investors in digital coins are about to pay the price. Having ruled last year that capital gains on these transactions are a form of "miscellaneous income," investors are now required to declare their profits in annual tax filings due Feb. 16-March 15.
Japan isn’t alone in taxing digital money. In the U.S., the Internal Revenue Service in 2014 declared! cryptocurrencies to be property, like gold or real estate, making long-term capital gains on them subject to tax, though at rates lower than Japan.
Hiroyuki Komiya, who runs a blockchain technology consulting firm in Tokyo, said he managed to cut back on "a few million yen" worth of taxable income by using an "overall average" rather than a "moving average" to do his calculations.
"The government hasn’t clarified certain details, so you’re left unsure whether you’ve got it right or not,” said the 36-year-old.
Komiya also complained that he might have to sell some of his digital coins to get the hard cash he needs to pay his taxes.
In the meantime, the tax agency is creating a data base on cryptocurrency investors and teams based in Tokyo and Osaka are maintaining a close watch electronic trading.
Japan had recognized Bitcoin as a legal method of payment back in April 2017, a step towards helping the government prevent unregulated exchanges from hacks and mismanagement like the Mt. Gox meltdown in 2014.
The US Internal Revenue Service (IRS) also reported today that they have created a 10 person team of investigators aimed at tracking down crypto users that failed to report their profits in their tax declarations.