For years, blockchain-based assets have dealt with a tricky taxation environment. After existing without any taxation policies in most of the world, regulators began putting crypto-related tax codes in place in the mid to late-2010s. Then, NFTs came on the scene and there was the need to create tax codes to accommodate them as well.
One of the latest developments in this sector comes from Japan. This comes as its national taxation agency has released new guidelines which specifically cover the taxation of NFT-related transactions. As per reports, these guidelines are meant to simplify the process of taxing NFT transactions especially because they are often numerous.
Details About the Policy
Those who deal in NFT transactions will tell you that an asset can be moved around multiple times in a month, especially if it is within a game. This is something that the agency acknowledged in its new policy, adding that, “In-game currency (tokens) are frequently acquired and used, and it is complicated to evaluate each transaction.”
As such, its solution to this is to calculate the income made by players at the end of each year and based on the in-game currency. Furthermore, tax is only charged if the assets are exchanged outside of the game. Should the assets remain within the game and never swapped, taxation would not apply.
And this is coming at a very crucial time given that NFTs are making a big splash in the gaming world and as such, in-game assets are becoming very popular. But this lack of regulation can easily put players in the dark. Many are not sure if they need to pay tax on the NFTs that they earn within games and some might have undue anxiety about this. Luckily, this new policy shed some more light on the legal situation for players.
Some information was also given about the tax status of the creators of NFTs. Those who create assets to sell to Japanese users will be subject to consumption tax, though more information is expected to be released soon. Overall, it appears that the Japanese government is being more proactive when it comes to NFTs.
This comes months after the government gave out NFT awards to members of the civil service and just as the digital assets market is gaining more ground all over Asia.
The Matter of Tax
This ongoing wave of crypto and NFT tax laws around the world show how mainstream, visible, and profitable the blockchain space has become. In the space of a few years, they have gone from not being regulated at all to being given some regulations (which were not always adequate) to now having more thorough taxation guidelines.
For the individuals within the industry, this means that they can conduct their business without running afoul of the law and thus, with more peace of mind. And for the industry as a whole, it means that it can pursue adoption without constantly being at odds with regulators.