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Japanese Government to Track Down Cryptocurrency Income Tax Offenders

The Japanese government will establish a system that would track down individuals who refuse to pay tax on profits made from cryptocurrency transactions.

Tax Payments on Cryptocurrency Capital Gains

News coming from a Japanese newspaper, The Mainichi, reports that according to sources, the Japanese government is planning to form a system that would monitor individuals who make profits from cryptocurrency transactions and catch individuals who refuse to pay taxes on gains from such operations.

The new system would empower the National Tax Agency (NTA) to request transactional details from intermediaries such as cryptocurrency exchanges. These exchanges would provide information on customers whom the agency suspects of tax evasion.

Under Japan’s Income Tax Act, gains gotten from cryptocurrency transactions are categorized as miscellaneous income. By this, individuals who gain a minimum profit of 2000,000 yen per annum fall under Income Tax.

Following the present legislation, cryptocurrency exchanges and other virtual currency businesses can release data on clients voluntarily. The Japanese government would also enable the NTA demand information from these businesses, including clients’ names, the address of the customers, and a 12-digit individual identification number.

The government is, however, considering the protection of personal information. The taxation authority would only demand data on customers earning a minimum of 10 million only when it can verify that the individual failed to report half of the income. Digital currency businesses not in favor of these requests can appeal.

A recent NTA survey revealed that over 300 individuals declared earnings of at least 100 million yen from virtual currency transactions in 2017. This profit was due Bitcoin’s record price of $20,000 in 2017.

The outline for the new taxation system would launch in the 2019 fiscal year.

Regulating the Local Cryptocurrency Landscape

Japan is not relenting in its bid to regulate the cryptocurrency industry, improve security, and protect investors. The country which is home to two of the biggest hacks on virtual currency exchanges has tightened regulatory rules for digital currency exchanges in the country.

Reports recently revealed that Japan’s regulatory body, the FSA, had plans to regulate Initial Coin Offerings (ICO). This move by the FSA was to curtail fraudulent ICOs and limit individual’s investment in ICOs to protect them.

EWN also reported that Japan made its registration process stricter for cryptocurrency exchanges who wanted to operate in the country. This move was in response to the Coincheck hack that saw the loss of $538 million worth of XEM and to prevent the future disappearance of customers’ funds.

The FSA also granted self-regulatory status to the Japan Virtual Currency Exchange Association (JVCEA), This body would monitor exchanges in the country and sanction erring businesses.

Image courtesy of Shutterstock.

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South Korea Mulls Imposing Taxes on Cryptocurrency ICO

The South Korean government reportedly has plans to tax cryptocurrency and ICOs, despite the lack of a regulatory framework.

Cryptocurrency ICO Taxation Policy

According to The Korea Times, Hong Nam-Ki, Finance Minister nominee, revealed that the South Korean government is planning to tax cryptocurrency and initial coin offerings (ICO). Nam-Ki submitted his written answer before the South Korean National Assembly in response to a question based on taxation of digital currency.

The nominee further stated that the tax method for virtual currencies would be finalized in line with the taxation infrastructure and progress by global stakeholders. Furthermore, Nam-Ki said:

A task force consisting of experts from relevant government agencies including the National Tax Service and the private sector will be formed to examine overseas examples and hammer out the taxation plan.

With the current ICO ban in South Korea, the Finance Minister nominee said that the government would reach a definite stance on ICOs after studying various factors. These factors include market conditions, investor protection issues, and global trends.

Also, Nam-Ki said that results from the survey done by the financial regulatory market and experts would form the government’s orientation concerning ICOs.

The nominee, speaking on virtual currencies, described them as a phenomenon with no generally acceptable regulatory structure. With 2,000 digital currencies traded worldwide and 160 traded domestically, Nam-Ki called for caution when regulating the industry.

Hong Nam-Ki added that the government would nurture blockchain technology, citing that 90% of business fall under blockchain-related businesses. These businesses, excluding virtual currency exchanges, can be classified as venture companies.

Korean Cryptocurrency Exchanges Helpless in the Face of Chinese Influx

The South Korean market is receiving an influx of Chinese virtual currency exchanges. Major virtual currency exchanges like Binance, OkEx, and Huobi, have penetrated the Korean space.

OKEx recently announced its move into the South Korean market and Huobi initially declared it would enable traders to use the Korean won to trade cryptocurrency. Binance has also made moves to spread within the South Korean community. With the influx of these Chinese exchanges, however, local cryptocurrency exchanges are powerless.

The Korean government has been inconsistent in providing a regulatory framework the cryptocurrency industry. Towards the end of Q2 2018, the country declared that it would regulate digital currency exchanges, bringing some relief. However, less than a week after the announcement, the government deliberately postponed regulations.

The Korean cryptocurrency exchange community express growing concerns over the avalanche of Chinese exchanges into the country. Domestic cryptocurrency companies find it challenging to expand abroad because of money laundering concerns.

The Korea Bar Association recently urged the government to create laws that would develop the cryptocurrency industry in the country and improve investors’ protection.

Images courtesy of Shutterstock

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Arizona Lawmakers Strip Crypto Mentions From Tax Payments Bill

Arizona’s long-in-the-making cryptocurrency tax payments bill has been further stripped down – so much so that it no longer mentions the technology at all.

The final version of Senate Bill 1091 does not mention cryptocurrencies in any way, despite three previous versions of the bill all specifically including cryptocurrencies as a possible payment method, public filings show. The version of the bill approved by both the House of Representatives and the State Senate does say that the Department of Revenue “may develop, adopt and use a payment system that enables the immediate remittance and collection of tax.”

It goes on to explain:

“The Department of revenue may design, develop and provide for trial demonstrations of the adaptation, application and use of technology to enable immediate remittance and collection of transaction privilege tax payments, at the option of the taxpayer, at the point of sale and for payments of additional amounts after audit.”

However, it is unclear whether this technology refers to cryptocurrencies or a traditional banking system.

The bill originally sought to enable Arizona’s Department of Revenue to collect cryptocurrencies, like bitcoin, for tax payments. The bill was introduced in January and quickly passed through several committees before being referred to the House, as previously reported. Committees in the House similarly approved the bill’s passage, but it stalled at the beginning of March.

Representative Jeff Weninger, one of the bill’s cosponsors, later told CoinDesk that the bill was being modified to become more neutral. While the original version specifically mentioned bitcoin, the new version was supposed to be “agnostic” about which cryptocurrencies could be collected, he explained.

Following the revamp, the bill was approved by the House Rules Committee and sent up to Ways and Means.

However, a new version was passed by the full House at the end of April. Rather than enabling the Department of Revenue to collect taxes through cryptocurrencies, the bill directed the Department to study “whether a taxpayer may pay the taxpayer’s income tax liability by using a payment gateway.” Possible gateways included bitcoin and litecoin, among other cryptocurrencies.

Senators Warren Petersen and David Farnsworth and Representative Jeff Weninger, the sponsor and cosponsors respectively, did not immediately respond to requests for comment. Representative Travis Grantham could not be reached.

Arizona/US flags image via Shutterstock

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Arizona's Bid to Accept Crypto for Taxes Suffers Setback

Arizona’s cryptocurrency tax payments bill was passed by the state’s House of Representatives, but with a caveat: it is now almost completely different.

Public records show that the Arizona House of Representatives passed Senate Bill 1091 on April 30 by a 43-14 vote. That comfortable passage aside, the measure is now starkly different from the one originally submitted – and later passed – in the Arizona Senate.

Now, the two chambers enter talks to reconcile the differences, with lawmakers from the House and the Senate being named to undertake the task.

By far the biggest change is that the mandate aimed at Arizona’s Department of Revenue – which would have cleared the way for it to accept cryptocurrency as payment for tax liabilities – has been walked back.

If implemented as-is, the House version would merely require the Department to study the issue and that it “may develop, adopt and use a payment system that enables the immediate remittance and collection of tax in real time at the point of sale, including payments of additional amounts after audit.”

As the bill explains further:

“The Department shall study whether a taxpayer may pay the taxpayer’s income tax liability by using a payment gateway, such as bitcoin, litecoin or any other cryptocurrency that uses electronic peer-to-peer systems. The Department shall study the conversion of cryptocurrency payments to United States dollars at the prevailing rate after receipt and shall study the process of crediting the taxpayer’s account with the converted dollar amount actually received less any fees or costs incurred by the Department for conversion.”

The bill does not define when this study would begin or how long it might take for the results to be compiled into a report. It is further unclear whether Arizona would allow its tax officials to collect payments using cryptocurrencies at a later date.

Senator Warren Petersen’s office did not immediately respond to a request for comment.

Bitcoin and money image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.