The Japanese government (1) was one of the first to issue non-fungible tokens (NFTs) as an additional reward for local authorities who used digital technology to address local problems. According to a CoinPost story (2), the Cabinet Secretariat presented the prizes during the "Summer Digi Denkoshien 2022" celebration, which was also attended by Fumio Kishida, the nation's prime minister.
Sakata (3) was one of seven mayors who were honored for the concepts they had developed that focused on the digital economy. Using electric vehicles for a local delivery was suggested by the Yamagata Prefecture administration (4). Another NFT prize was given to Maebashi (5) in the Gunma Prefecture for the concept of a platform that uses portable devices to monitor changes in real-time traffic conditions.
In addition, Hazama Base, the same platform that previously distributed NFTs during an event hosted by the Liberal Democratic Party Youth Bureau, issued proof-of-attendance POAP NFTs (6) based on Ethereum. Since these assets are non-transferable, they cannot be sold in secondary markets.
Even the prime minister has expressed interest in using NFTs on several occasions. With the recent initiative from the government, NFTs may soon become a tradition in Japan, a nation well known for always setting the pace in terms of technology. In this innovative nation, cryptocurrency has been regulated by the government as a trading asset.
Contrarily, the corporate taxation system for virtual currency allows for the removal of capital gain liabilities for unused corporate crypto assets at the end of each year, as well as a change in the classification of virtual assets to maximize capital gains since the applicable tax rate is now 20% instead of 55%.
Unrealized capital gains from virtual currencies are to be recognized as income under the current tax laws, resulting in income tax liabilities. Additionally, individual and corporate crypto earnings of over 200,000 yen will be classified as miscellaneous income and subject to tax rates ranging from 15% to 55%, inclusive of the resident's tax rate. In contrast, the highest level of taxation for earnings made from trading stocks and currencies will be 20%.
All crypto-income generating activities, such as decentralized financial lending, Bitcoin mining, or simple cryptocurrency trading, must be taxed according to miscellaneous income. It will also be impossible to carry forward any capital losses resulting from crypto operations in the coming years. Even foreign permanent residents of Japan are subject to nominal rates of 55% and higher.
Astar Network, a decentralized network hub on Polkadot, has now decided to issue tokens overseas to avoid strict tax payments and is willing to create good momentum for the Web3 industry. Most industry experts claim that the high tax liabilities faced by Japanese crypto startups play a vital role in shifting corporate domiciles abroad.