• The Japanese Tax Agency has signaled an intention to tax NFT sales and crypto gaming profits.
• NFT traders have been advised to make declarations and pay capital gains tax on their profits, while those receiving NFT giveaways may also have to pay tax.
• The NTA has clarified that NFTs qualify as a form of intangible property under national law, and that tokens that were stolen or disappeared may not be subject to taxation.
The Japanese Tax Agency (NTA) has recently released an FAQ-type document that provides guidelines on how to tax non-fungible token (NFT) sales and the profits earned by crypto and blockchain gamers. The guidelines, while not yet enshrined into the Japanese tax code or other laws, will likely be used by local or central tax authorities and NTA officers until parliament amends the relevant legislation.
For NFT traders, the NTA has advised that declarations should be made and capital gains tax should be paid on any profits. However, those making declarations will be able to deduct expenses from their declarations. Meanwhile, those receiving NFT giveaways may also have to pay tax on the tokens they receive. Additionally, the NTA has clarified that NFTs qualify as a form of intangible property under national law, and that tokens that have been „stolen or disappeared due to unauthorized [wallet] access“ may not be subject to taxation.
In regards to crypto and blockchain gamers, the NTA has conceded that “it is complicated to evaluate each individual transaction” in the case of play-to-earn (P2E) titles. As such, the agency is advising tax officers and those wishing to declare their transactions to “confirm” “details of calculation methods” for taxation when making annual tax returns with “experts” and officers specializing in the matter.
The guidelines released by the NTA signal a clear intention to tax NFT sales and the profits earned by crypto and blockchain gamers. The NTA is likely to use the guidelines until relevant legislation is amended, and those making declarations have been advised to assess their own situation with experts and officers specializing in the matter. Those receiving NFT giveaways may also have to pay tax, however, the NTA has clarified that tokens that have been “stolen or disappeared due to unauthorized [wallet] access” may not be subject to taxation.