Japan unveils NFT tax guidelines
The government of Japan has announced plans to tax non-fungible token (NFT) transactions under new laws.
Japan unveils NFT tax guidelines
The Japanese National Tax Agency (NTA) has issued new guidelines for NFT-related taxes. According to the latest update, NFT transactions will be taxed under the law. The newly-issued guidelines aim to provide clarity for the nation’s NFT traders and collectors and also cover taxes related to blockchain and NFT gaming.
According to the regulatory update, citizens must pay an income tax on any NFTs sold to a third party. Specifically, primary NFT sales will fall within the business or miscellaneous income category, while “transfer income” will apply to secondary sales. NFT creators will also be required to pay consumption tax if they profit from a sale made directly to a Japanese customer.
Japan is, for the most part, a crypto-friendly country, taking proactive steps to regulate and oversee the industry. Recently, the country has seen notable developments in terms of crypto-related regulation.
In December 2022, Japan’s Financial Services Agency (FSA) announced that foreign-issued stablecoins would no longer be prohibited. Still, in December 2022, the Japanese government passed a proposal exempting cryptocurrency companies from paying taxes on unrealized capital gains from their digital asset holdings.
Japan taxes blockchain gaming
The guidelines issued by the government also address blockchain and NFT games. Income made through blockchain-based games will also be taxed, including profits made through the play-to-earn model in the form of in-game currency. Taxes will not be charged if the asset (NFT or in-game currency) is not transferred outside the game.
In the United States, cryptocurrency earned in play-to-earn games is subject to income and capital gains tax as it is considered a form of property by the IRS. When an individual disposes of cryptocurrency earned within a game, they will incur a capital gain or capital loss depending on how the price of their tokens has changed since they originally obtained them.
Governments move to tax NFTs while individuals aim to circumvent expenses
Japan is not the first to implement tax regulations for NFTs, as other countries have begun to do the same. The United States and the United Kingdom have introduced similar tax rules for NFTs, charging either capital gains or income taxes for these digital assets. However, while governments are looking to tax NFTs, individuals have found a new way to offset their taxes by unloading unwanted tokens onto Unsellable.
The Unsellable platform allows users to dispose of unwanted or worthless NFTs by selling them for a small fee of $0.01, resulting in a loss equal to the original purchase price minus $0.01. This loss can be claimed on taxes to offset capital gains and save the seller a significant amount of money.
In addition to allowing users to buy NFTs, Unsellable also allows users to sell their unwanted NFTs in bulk. The platforms markets itself known as an “Instant Liquidity” service and a “Web3 junk removal.”
