## Cryptocurrency Tax Rate Overview: How Japan and the US Differ Significantly

Taxation methods for cryptocurrencies vary greatly from country to country. Taking Japan and the US as examples, the differences are clear—from how tax rates are determined, to the timing of taxation, and even to future regulatory policies.

### Features Visible from the US Tax System

The Internal Revenue Service (IRS) in the United States classifies cryptocurrencies as **assets**. This classification directly affects the tax rate, which varies depending on the holding period.

For short-term holdings (less than 1 year), capital gains tax is levied at federal income tax rates ranging from 10% to 37%. Conversely, for holdings of over one year, a lower tax rate of 0% to 20% applies, incentivizing long-term holding.

In the US, unrealized gains held by corporations are currently not taxed. However, the Biden administration has proposed introducing a "wash sale rule" for cryptocurrency transactions, which could be implemented by 2025. This would prevent taxpayers from intentionally claiming losses to reduce their tax burden.

### Japan’s Progressive Tax System

The National Tax Agency (NTA) in Japan classifies cryptocurrencies as **miscellaneous income**. This classification subjects gains to progressive income tax rates ranging from 5% to 45%. Additionally, a 10% local inhabitant tax is added, potentially resulting in a **maximum tax burden of 55%**. The structure makes higher-income earners pay more in taxes.

Unrealized gains held by Japanese companies are currently subject to a 30% corporate tax, but discussions are underway to abolish this in 2024.

### Differences in Taxation Timing

**Tax events in Japan** are broadly defined. They include exchanges between cryptocurrencies and fiat currencies, exchanges between different cryptocurrencies, and use as a payment method. Mining, staking income, and airdrops are also reportable. If earnings exceed 200,000 yen (about $1,600) annually, tax filing is mandatory.

**Tax events in the US** are more limited than in Japan. Taxation occurs upon the sale of cryptocurrencies or exchanges for goods and services. Income from mining, staking, and airdrops is generally treated as ordinary income. However, gifts within the annual gift tax exemption are not immediately taxed.

### Common Tax-Exempt Activities in Both Countries

Interestingly, both countries do not tax certain activities. Simply holding cryptocurrencies or transferring between wallets is non-taxable in either country. In Japan, donations to certified non-profit organizations are also tax-exempt. In the US, gifts within the exemption limit are not taxed.

### Future Regulatory Trends

Japan is moving toward abolishing the taxation of unrealized gains for corporations. Meanwhile, the US is expected to introduce new regulations, such as the wash sale rule for cryptocurrencies, by 2025. Regulatory authorities in both countries are continuously reviewing their tax systems to adapt to the growth of the digital asset market.

Because of the significant differences in tax systems, investors engaging in cryptocurrency activities in Japan and the US need to develop tax strategies that comply with each country's regulations.