The Japanese government is planning to establish a system to prevent people from evading taxes on their cryptocurrency earnings. The government is resorting to the decision after considering the large profits made by people during the bullish market that ensured earlier this year. According to a survey by the National Tax Agency [NTA], over 300 individuals declared that they have earned at least 100 million yen, majorly from cryptocurrency trade in 2017.
According to a report by Mainichi.jp, the NTA will be able to demand information from transaction mediation businesses on customers. These customers will be those who are suspected of evading taxes on their crypto earnings. This system will be incorporated into the tax reform for the next fiscal year.
The profits gained from the cryptocurrency were, till now, declared as miscellaneous income under the Income Tax Act but after the system is introduced, they will have to be declared as income. As for the evaders, the NTA is determined to take stringent measures against them as the report says that the cases of tax evasion are increasing with the growth of crypto trading.
At the moment, the NTA just has the power to ask virtual currency trading and other businesses to provide information of their customers voluntarily. Following the reform, this provision will change to the NTA being able to demand information like the customers’ names, addresses, and even their 12-digit identification numbers.
However, adhering to personal information protection, the government will allow the tax authority to ask information on only those who are suspected to have earned at least 10 million yen from crypto transactions. The authority will have to confirm this suspicion or that the customer has failed to report at least half of that income. The NTA would also have the power to demand banking information opened under false names used for tax evasion.
According to the publication, the ruling coalition is aiming to formally introduce the system after the fiscal, starting in April 2020.