The reason why you can’t earn a lot from virtual currencies in Japan 2
In Japan, if you own virtual currencies (VCs) like Bitcoin, Ethereum
In the previous post, I explained how to calculate them for filing tax returns. Perhaps, you’ve already been aware that it’s so difficult to increase your property by owning VCs since the tax rate goes up to 55% maximum.
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Tax Rate
| Taxable Income | Tax Rate | Tax Credit | |
| 1 | ¥200K ~ ¥1.95M | 5% | 0 |
| 2 | ¥1.95M ~ ¥3.3M | 10% | ¥97.5K |
| 3 | ¥3.3M ~ ¥6.95M | 20% | ¥427.5K |
| 4 | ¥6.95M ~ ¥9M | 23% | ¥636K |
| 5 | ¥9M ~ ¥18M | 23% | ¥1.536M |
| 6 | ¥18M ~ ¥40M | 40% | ¥2.796M |
| 7 | Over ¥40M | 45% | ¥4.796M |
Example
Zack works for an ESL school in Japan.
Salary: ¥3.5M
He bought 5 bitcoins for ¥500,000 (¥100,000/bitcoin)
When the value of bitcoin went up to ¥1M/bitcoin, he exchanged 3 bitcoins to Ethereum. So, the income from this transaction is
→ (¥1M × 3 bitcoins) – (¥100,000 × 3 bitcoins) = ¥2.7M.
Then, he bought a ¥1M TV for 1 bitcoin.
→ ¥1M – (¥500,000/ 5 bitcoins) × 1 = ¥900,000
After that, he sold the rest of his bitcoin (= 1 bitcoin).
→ ¥1M – (¥500,000/5) × 1 bitcoin = ¥900,000
This year, his VC income can be calculated like this.
→ ¥2.7M + ¥0.9M + ¥0.9+ = ¥4.5M
This income should be added to his annual income (¥3.5M). Then, based on the table’s figures, he has to figure out how much he has to pay the tax.
The calculation that I did is a bit rough, as I didn’t consider commissions that virtual currency exchanges take from you. However, it looks like this based on the information provided by the National Tax Administration Agency.
Is tax evasion possible?
If you earned ¥100M, your original tax is supposed to be about ¥50M.
However, if you didn’t file your income tax return, you’ll need to pay a lot since a penalty tax will be 20 to 40% of original taxation.
¥50M + ¥8M (failure to file a return) + arrears (yearly rate: 2.6% ~ 8.9%).
Furthermore, in the worst case, ¥16M (a heavy additional tax) will be charged. Therefore, eventually, you’ll pay 60% to 80% of your profits.
When Forex (Foreign exchange) started to be popular among Japanese investors, a number of people received penalty taxes due to tax evasion and they had to pay an enormous sum of money, which is very risky.
Tokyo Bitcoin Meetup/ Photo: http://bitcoinfx.info/
Therefore, this situation can also be seen later this year just like before.
If you’ve already bought luxury cars, shares, lands, buildings, etc, talk to your accountant as soon as possible!
By the way, even your accountant might charge you a lot since this is their first time that they make the tax return paper (Fiscal income tax and surtaxes for reconstruction funding final return form B) for virtual currencies.
It’s time to take action!
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