On Saturday, July 1, the revised consumption tax law went into effect throughout Japan, and bitcoin transactions no longer incur consumption tax of 8%. On the same day, Australia also ended bitcoin double taxation. Bitcoin.com talked to Yuzo Kano, CEO of the largest Japanese bitcoin exchange by volume, to find out the real implications of this change in Japan.
Also read: Japanese Exchanges Roll Out Insurance to Help Merchants Accept Bitcoin Instantly
Bitcoin Exempt from Consumption Tax in Japan
The Japanese government has approved the exemption of digital currencies, such as bitcoin, from consumption tax. The “Cabinet Order for Partial Revision of the Order for Enforcement of the Consumption Tax Act” went into effect on July 1. Bitflyer explained:
Effective July 1, 2017, virtual currency transactions [purchases / sales] will become exempt from consumption tax.
The Japanese consumption tax rate is currently 8%, which was scheduled to increase in April of this year. However, on June 1, 2016, Prime Minister Shinzo Abe announced that “the rise in the consumption tax to 10% and the introduction of the reduced tax rate would be postponed until October 2019,” Japan External Trade Organization detailed.
While the revised law abolishes consumption tax on digital currencies, there remain other taxes such as personal income tax, capital gains tax, or corporate income tax that they are subject to. “If income obtained from virtual currency is earned at the individual level, this is (per Japanese taxation standards) treated as miscellaneous income and subject to tax on aggregate income,” Bitflyer detailed. “For corporations, it is treated as operating revenue.”
The Wider Implications of Removing Consumption Tax
Bitflyer’s CEO, Yuzo Kano, told Bitcoin.com on Friday that having no consumption tax on bitcoin in Japan will lead to three significant considerations.
The first is that “users will no longer need to buy more expensive bitcoins, so Japanese users can send BTC abroad without [paying] a price gap,” he conveyed.
In addition, Kano explained that this will have a “psychologically positive” effect on the Japanese people since the cryptocurrency will be seen more like a “real currency”. Nonetheless, he reiterated how bitcoin is a legal method of payment under the Japanese law and not a currency.
The third and the most important consideration, Kano believes, is that:
Bitcoin exchanges will be able to buy bitcoins abroad. This is very important since resident exchanges have been taxed for buying virtual currencies (BTC and altcoins) from non-residents. Japan will finally have access to global markets.
Australia Removed Bitcoin Double Taxation on July 1
On July 1, Australia also enacted legislation that has led to less taxation of digital currencies. “Australia’s GST [Goods and Services Tax] is equivalent to consumption taxes in other parts of the world,” explained Easy GST Refunds, a network of professionals providing GST refund services globally.
After over a year of promise, the Australian government finally announced in its 2017-18 budget that digital currencies will no longer be double taxed. “From July 1, purchases of digital currency will no longer be subject to the GST, allowing digital currencies to be treated just like money for GST purposes.”
Previously, Australian consumers using bitcoin could find themselves paying GST twice: once on the purchase of the bitcoin itself, and the other on its use in exchange for other goods and services that are subject to the GST, according to the budget.
What do you think will be the real effects of removing consumption tax on bitcoin? Let us know in the comments section below.
Images courtesy of Shutterstock and Bitflyer
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Source: News Bitcoin