2017 was a year in which many crypto millionaires were made across the world. Thanks to the explosion in the values of most digital currencies, investors saw significant gains from their investments.
$380 Million in Taxes Outside of Employment
Reports from Japan indicate that 331 crypto investors made profits of at least $1 million as a result of their trading according to the National Tax Agency (NTA). At the very least, $331 million in profits were generated by this group.
The NTA report showcased that a total of 21.98 million citizens of Japan declared taxes outside of their normal employment, which amounted to over 41.4 billion yen ($380.1 million). The taxes garnered in 2017 exceeded the 2016 total by three percent, which is mainly due to the strong growth in the economy.
Of those who declared their taxes, 549 of them had non-working or non-operational profits of $1 million, which usually results from investments in the likes of property, assets, and stocks. Of these 549 people, 331 of them had invested in cryptocurrency markets and had generated profits from this trading of $1 million or more.
Crypto Gains Taxed at 55 Percent
As of 2017, the NTA and Financial Services Agency have implemented a tax rate of 55 percent on non-operational profit which comes from investments. Consequently, cryptocurrency gains will be taxed up to 55 percent, especially for those people who have made profits of over 40 million yen.
Having said this, specific details about cryptocurrency taxation have not really been clarified by government authorities, with many investors in the country becoming somewhat disillusioned with the markets in their current state. This means that a lot of cryptocurrency investors are still unclear as to what the best course of action may be for them.
The United States has taken a stricter stance on tracking down cryptocurrency gains for taxation purposes, having tried to get the likes of Coinbase to make sure that cryptocurrency investors pay their necessary taxes.
In Japan, they are taking a softer stance. The 331 investors who made profits of at least $1 million from cryptocurrency trading all declared this income to the authorities, and the NTA is seemingly happy to keep the voluntary declaration of taxes in place for gains made via crypto trading.
Many Crypto Traders Likely to Have not Declared Gains
There are doubts whether this number of investors who have made gains of at least $1 million is accurate and it is likely that a lot of investors did not bother to declare crypto-related earnings to the authorities.
Due to the rapid increase in popularity of the crypto sector and the fact that crypto earnings are not as clear-cut to the taxation authorities as fiat currency, it is likely that many investors did not report their gains.
There is a lot of talk in South Korea at the moment regarding the stance the authorities will take with cryptocurrency trading taxation. They look set to uplift their current ban on initial coin offerings (ICOs) that has been in place since September 2017, and it is likely that they will follow a similar self-voluntary declaration approach as seen in Japan.