Taxation events that individuals should be aware of after acquiring crypto assets

After individuals acquire crypto assets, they may be concerned about which actions they are taxed on.

• Are mark-to-market gains at the end of the year taxed?
• Are we taxed if we exchange crypto assets for another crypto asset?

There are probably many questions like these.

The three main taxable events that occur after individuals acquire crypto assets are:

• Selling crypto assets to obtain currency
• Purchasing goods or services with crypto assets
• Exchanging for another crypto asset

To think of it in terms of how it works, the change of acquired crypto assets into another asset is recognized as a taxable event.

Therefore, mark-to-market gains arising from ownership are not taxed.

Sell ​​crypto assets to get currency

It is probably easiest to understand that tax is levied on the act of selling crypto assets at an exchange and obtaining currency.

For example, if you acquire 1 BTC for 3 million yen and then sell it for 10 million yen, it is easy to understand that the difference of 7 million yen is subject to taxation.

Buying goods and services with cryptocurrencies

It may be wonder why there is taxation when buying goods with cryptocurrencies.

It is easier to understand if you break down the transaction of purchasing goods or services with cryptocurrencies into two transactions.

1. Sell cryptocurrencies and obtain currency.
2. Purchase assets with the currency obtained from the sale.

Although assets are purchased directly with cryptocurrencies, they are considered to have been converted into currency before being acquired.

As a result, purchasing goods or services with cryptocurrencies is recognized as a taxable event.

Exchange for another cryptocurrency

You may be familiar with the fact that tax is levied when you exchange Japanese yen for dollars and then exchange dollars back for Japanese yen.

Similarly, if you exchange cryptocurrency that you have already acquired for another cryptocurrency, tax will be levied.

Conclusion

In this article, I have written about taxable events that individuals should be aware of after acquiring crypto assets.

Because crypto assets have characteristics as a means of exchange, similar to currency, it may be difficult to understand which actions are subject to taxation.

Hope that this article has helped you understand crypto asset taxation.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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