National Tax Agency of Japan: The tax recovery amount for cryptocurrency tax investigations in 2024 reached 4.6 billion yen, an increase of over 30% compared to the previous year

The National Tax Agency of Japan announced today that the results of the 2024 tax investigation show that a total of 613 on-site investigations were conducted regarding individual cryptocurrency transactions, recovering a total tax amount of approximately 4.6 billion yen, an increase of about 31.4% compared to the previous year's 3.5 billion yen, with the number of investigations also increasing by about 14.6% year-on-year. The National Tax Agency pointed out that cases related to cryptocurrency have significantly higher amounts of tax recovered per case and reported unreported income compared to the overall average level of income tax on-site investigations.

Current focuses of tax investigations include the accuracy of profit and loss calculations, completeness of transaction records, and the reporting of special transactions such as DeFi, airdrops, mining, and staking; if multiple domestic and foreign exchanges are involved, all profits and losses must be reported together, otherwise it may be deemed as unreported. In addition, the National Tax Agency stated that it has continuously strengthened data collection and analysis of internet transactions and introduced AI technology to assist in selecting investigation targets. If unreported or underreported behavior is identified, in addition to paying back taxes, additional taxes and penalties may also be imposed, with unreported cases potentially incurring up to 20% additional tax. If there is intentional concealment or fraud, the additional tax rate can reach as high as 35% to 40%. At the tax system level, the Japanese government and the ruling party are discussing adjusting the taxation of cryptocurrency income from the current comprehensive taxation to a separate taxation similar to that of stocks, with a possible unified tax rate of 20%, and introducing mechanisms for offsetting profits and losses and loss carryforwards. The direction of related reforms is expected to be further clarified in the year-end tax reform outline.