Statutory definition

Selling crypto assets does not incur consumption tax. Finding the statutory basis takes some effort, however, because the main text of the Consumption Tax Act contains no provision expressly exempting transfers of crypto assets. The basis is divided between Appended Table 2 of the Act and Article 9(4) of its Enforcement Order. First, consider item (ii) of Appended Table 2.

“(ii) Transfers of securities prescribed in Article 2(1) (Definitions) of the Financial Instruments and Exchange Act (Act No. 25 of 1948) and similar instruments prescribed by Cabinet Order (excluding those prescribed by Cabinet Order as pertaining to rights to use golf courses or other facilities), and means of payment prescribed in Article 6(1)(vii) (Definitions) of the Foreign Exchange and Foreign Trade Act (excluding collectors' items and other items prescribed by Cabinet Order) and similar instruments prescribed by Cabinet Order (referred to as ‘securities, etc.’ in Appended Table 2-2).”

Appended Table 2 lists transactions on which consumption tax is not imposed. Yet the term “crypto assets” does not appear anywhere in item (ii). It refers only to “means of payment (excluding collectors' items and other items prescribed by Cabinet Order) and similar instruments prescribed by Cabinet Order.” The content of “prescribed by Cabinet Order” is delegated to Article 9(4) of the Order for Enforcement of the Consumption Tax Act.

“(4) Instruments prescribed by Cabinet Order as similar to means of payment under item (ii) of Appended Table 2 of the Act shall be electronic payment instruments, crypto assets prescribed in Article 2(14) of the Payment Services Act, and special drawing rights prescribed in Article XV of the Articles of Agreement of the International Monetary Fund.”

Only here does “crypto assets” appear. Their transfers are exempt through a two-step structure: Article 9(4) of the Order places crypto assets within the category “instruments prescribed by Cabinet Order as similar to means of payment” in item (ii) of Appended Table 2. Both the Act and the Order are needed to establish the basis.

Nor does the Consumption Tax Act independently define “crypto assets.” It adopts the definition in the Payment Services Act.

“In this Act, ‘crypto assets’ means the following, excluding those representing rights prescribed in Article 29-2(1)(viii) of the Financial Instruments and Exchange Act: (i) Property value usable to pay unspecified persons when purchasing or leasing goods or receiving services, and purchasable and saleable with unspecified persons (limited to value recorded electronically on electronic devices or other objects, and excluding Japanese and foreign currencies, currency-denominated assets, and electronic payment instruments (other than those constituting currency-denominated assets); the same applies in the following item), which can be transferred using an electronic data processing system; (ii) Property value exchangeable with unspecified persons for the assets listed in the preceding item and transferable using an electronic data processing system.”

The definition places first the ability to settle consideration with unspecified persons—in other words, use as payment. The definition's structure is related to the decision to place crypto assets alongside means of payment for consumption tax purposes.

Overview

“Instruments similar to means of payment,” rather than “securities”

Item (ii) of Appended Table 2 is one long sentence containing two groups. One is the securities group: “securities prescribed in Article 2(1) (Definitions) of the Financial Instruments and Exchange Act (Act No. 25 of 1948) and similar instruments prescribed by Cabinet Order.” The other is the payment group: “means of payment prescribed in Article 6(1)(vii) (Definitions) of the Foreign Exchange and Foreign Trade Act (excluding collectors' items and other items prescribed by Cabinet Order) and similar instruments prescribed by Cabinet Order.” Item (ii) collectively calls both “securities, etc.” and exempts their transfers.

Crypto assets belong to the latter group. Article 9(4) begins, “Instruments prescribed by Cabinet Order as similar to means of payment under item (ii) of Appended Table 2 of the Act shall be...” They are not designated as similar to securities. This is a key point in reading the provision.

Transfers are exempt whichever group applies. Still, the distinction matters: it determines which provisions to examine when amendments occur and reveals how tax law classifies crypto assets.

The same distinction can be confirmed in income and corporation tax. Article 61(1) of the Corporation Tax Act includes crypto assets within “short-term trading commodities, etc.” Its parenthetical wording refers to “assets prescribed by Cabinet Order as acquired to profit from short-term price fluctuations (excluding securities) and crypto assets prescribed in Article 2(14) (Definitions) of the Payment Services Act (Act No. 59 of 2009),” expressly excluding securities before listing crypto assets. Article 48-2 of the Income Tax Act likewise structures necessary-expense deductions for crypto assets as part of “calculating business income or miscellaneous income,” rather than as securities transfers.

Across consumption, income and corporation tax, crypto assets are not treated as securities. For consumption tax, they were placed alongside securities in the means-of-payment category. Their placement beside electronic payment instruments and special drawing rights in Article 9(4) also illustrates this character.

When did the exemption begin?

July 1, 2017. This was established in the FY2017 Tax Reform Outline (Cabinet decision of December 22, 2016). Chapter IV, “Consumption Taxation,” states:

“(2) Review of taxation relating to virtual currency”

“(1) Transfers of virtual currency under the Payment Services Act shall be exempt from consumption tax.”

“(ii) Other necessary measures shall be taken.”

“(Note 1) The above amendments shall apply to transfers of assets, etc. and taxable purchases made by businesses in Japan on or after July 1, 2017.”

That is all. This short description was the starting point for what we now read as Article 9(4) of the consumption tax Order.

The wording “shall be exempt from consumption tax” means that these transactions were previously taxable. That reading is also supported by the transitional measures discussed below, which presuppose taxable purchases and input tax credits for virtual currency acquired before the amendment. Until June 30, 2017, domestic crypto asset purchases attracted consumption tax and sales generated taxable sales; this changed on July 1.

Transitional measures prevented last-minute stockpiling

Once a changeover date is set, boundary issues inevitably arise. The FY2017 outline included two measures in its notes.

“(Note 2) For virtual currency acquired before the above amendments, the purchase classification when calculating input tax credits using the itemized method shall be ‘taxable purchases required solely for transfers of taxable assets, etc.’”

This provided relief for purchases made before the amendment. Since crypto asset sales from July 1 became exempt sales, purchases corresponding to those sales would otherwise fall into the noncreditable category under the itemized method. The measure therefore classified pre-amendment acquisitions as “taxable purchases required solely for transfers of taxable assets, etc.”

However, that relief alone would create a loophole: taxpayers could buy large amounts by June 30, claim input tax credits, then sell tax-exempt from July 1. Note 3 addressed this.

“(Note 3) Where a business holds virtual currency worth at least JPY 1 million excluding tax on June 30, 2017 (limited to currency acquired domestically), and its quantity held that day exceeds the average daily quantity held from June 1 through June 30, 2017, the input tax credit shall not be allowed for consumption tax on taxable purchases corresponding to that increase.”

The wording is formal, but the mechanism is simple. Compare the average holdings over the month immediately before the changeover with the balance on the relevant date; if holdings increased, deny credits for that increase. This limits last-minute acquisitions. The requirements can be divided into three parts.

A distinctive feature is that the comparison concerns “quantity held,” not value. A price increase alone does not bring a holder within the measure; only an actual increase in quantity does. The choice of measure shows what it sought to prevent.

Consumption tax was the first tax law to address these assets

Crypto assets now have provisions across several taxes: Income Tax Act Article 48-2, Corporation Tax Act Article 61, and consumption tax Order Article 9(4). Reading earlier Tax Reform Outlines makes the sequence clear.

The outlines for FY2010 through FY2016 contain no occurrence of “virtual currency.” Its first appearance is in Chapter IV, “Consumption Taxation,” of the FY2017 outline. Tax law thus first addressed this asset through consumption tax, before income or corporation tax.

Dedicated income and corporation tax provisions followed two years later. The FY2019 Tax Reform Outline (Cabinet decision of December 21, 2018) prescribed moving average or total average valuation for individuals' year-end virtual currency holdings and introduced the market value method for corporations, among other measures.

“(2) Measures including introduction of the market value method shall be taken as follows regarding valuation methods, etc. for virtual currency under corporation tax.”

“(1) For virtual currency held by a corporation at fiscal year-end for which an active market exists, valuation gains and losses shall be recognized through market valuation.”

This sequence matters. Consumption tax addressed the initial question of whether the transaction was taxable. Income and corporation tax addressed how much income arose. The threshold question was settled first, followed by the calculation rules.

The outlines changed terminology from “virtual currency” to “crypto assets” beginning with the FY2020 outline, following the entry into force of amendments to the Payment Services Act and related legislation. Quotations here from FY2017 and FY2019 retain “virtual currency” because that is the original wording. Amendments continued, and the FY2026 outline includes a shift to separate assessment taxation for individuals' crypto asset income (Key points of the FY2026 tax system revision outline). The FY2026 reform also moved crypto assets for consumption tax purposes from the category “similar to means of payment” to “similar to securities.” This article has examined the structure before those amendments apply. Transfers remain exempt after application, but calculation of the taxable sales ratio changes.

Points that require care in practice

• Consider an exchange between crypto assets: does the asset surrendered give rise to an exempt transfer? The provision exempts “transfers,” so the starting point is how the exchange is classified.
• Consider the taxable sales ratio. Under the pre-amendment system treating crypto assets as means of payment, etc., transfer proceeds enter neither the numerator nor the denominator. Exempt treatment does not mean the full sale proceeds enter the denominator. The FY2026 reform changes this to include 5% of transfer proceeds in the denominator. Application begins January 1 of the year following the year in which the Act Partially Amending the Financial Instruments and Exchange Act and the Payment Services Act takes effect. The specific application year depends on that Act's effective date.
• Consider fees paid to an exchange for buying or selling crypto assets. Fees for intermediary services for domestic trades are generally taxable. For crypto assets purchased for trading, these fees are classified under the itemized method as taxable purchases required solely for exempt sales. Their treatment must be considered separately from transfers of the crypto assets themselves.
• Consider crypto assets acquired through mining, staking or similar activities. Item (ii) of Appended Table 2 exempts “transfers”; acquisition must be examined separately.
• Consider a business receiving crypto assets as payment for goods. The classification issue is whether an exempt transfer arises separately from the underlying sale, or whether this is simply a payment method.
• Means of payment in item (ii) of Appended Table 2 exclude “collectors' items and other items prescribed by Cabinet Order.” A question of interpretation is whether this exclusion also extends to crypto assets classified as “similar to means of payment” under Article 9(4) of the Order.
• Consider the boundary with electronic payment instruments. Article 2(14) of the Payment Services Act excludes from crypto assets “currency-denominated assets and electronic payment instruments (excluding those constituting currency-denominated assets).” The applicable branch of the provisions depends on the classification.
• Consider the domestic-versus-overseas determination: whether a sale through an overseas exchange constitutes a “transfer of assets, etc. made by a business in Japan.”

None of these questions is resolved by the statutory wording alone; the actual transaction must be examined. Confirm the treatment in light of the individual circumstances when filing a return.

Legal basis

• Consumption Tax Act, Appended Table 2, item (ii) / Quoted wording: “Transfers of securities prescribed in Article 2(1) (Definitions) of the Financial Instruments and Exchange Act (Act No. 25 of 1948) and similar instruments prescribed by Cabinet Order (excluding those prescribed by Cabinet Order as pertaining to rights to use golf courses or other facilities), and means of payment prescribed in Article 6(1)(vii) (Definitions) of the Foreign Exchange and Foreign Trade Act (excluding collectors' items and other items prescribed by Cabinet Order) and similar instruments prescribed by Cabinet Order (referred to as ‘securities, etc.’ in Appended Table 2-2).”
• Order for Enforcement of the Consumption Tax Act, Article 9(4) / Quoted wording: “Instruments prescribed by Cabinet Order as similar to means of payment under item (ii) of Appended Table 2 of the Act shall be electronic payment instruments, crypto assets prescribed in Article 2(14) of the Payment Services Act, and special drawing rights prescribed in Article XV of the Articles of Agreement of the International Monetary Fund.”
• Payment Services Act, Article 2(14) (Definitions) / Quoted wording: “In this Act, ‘crypto assets’ means the following, excluding those representing rights prescribed in Article 29-2(1)(viii) of the Financial Instruments and Exchange Act.”
• Corporation Tax Act, Article 61(1) (Gains and losses on transfers and market valuation of short-term trading commodities, etc.) / Quoted wording: “Assets prescribed by Cabinet Order as acquired to profit from short-term price fluctuations (excluding securities) and crypto assets prescribed in Article 2(14) (Definitions) of the Payment Services Act (Act No. 59 of 2009).”
• Income Tax Act, Article 48-2(1) (Calculation of the cost of transferred crypto assets, etc. and their valuation methods) / Quoted wording: “When calculating the amount to be included in necessary expenses in calculating a person's business income or miscellaneous income under Article 37(1) (Necessary expenses) for a resident's crypto assets (meaning crypto assets prescribed in Article 2(14) (Definitions) of the Payment Services Act (Act No. 59 of 2009); hereinafter the same in this Article).”
• FY2017 Tax Reform Outline (Cabinet decision of December 22, 2016), IV Consumption Taxation / Quoted wording: “Transfers of virtual currency prescribed in the Payment Services Act shall be exempt from consumption tax.” “The above amendments shall apply to transfers of assets, etc. and taxable purchases made by businesses in Japan on or after July 1, 2017.”
• FY2017 Tax Reform Outline, IV Consumption Taxation, Note 2 / Quoted wording: “For virtual currency acquired before the above amendments, the purchase classification when calculating input tax credits using the itemized method shall be ‘taxable purchases required solely for transfers of taxable assets, etc.’”
• FY2017 Tax Reform Outline, IV Consumption Taxation, Note 3 / Quoted wording: “Where a business holds virtual currency worth at least JPY 1 million excluding tax on June 30, 2017 (limited to currency acquired domestically), and its quantity held that day exceeds the average daily quantity held from June 1 through June 30, 2017, the input tax credit shall not be allowed for consumption tax on taxable purchases corresponding to that increase.”
• FY2019 Tax Reform Outline (Cabinet decision of December 21, 2018), III Corporate Taxation / Quoted wording: “Measures including introduction of the market value method shall be taken as follows regarding valuation methods, etc. for virtual currency under corporation tax.”

Additional Authorities and Sources

• National Tax Agency: Tax Treatment of Crypto-Assets, etc. (FAQ), December 26, 2025
• National Tax Agency, “Notice of Consumption Tax Act Amendments under the FY2026 Tax Reform,” page 4
• Ministry of Finance, Comparative Text of Cabinet Order No. 96 of 2026 (Supplementary Provisions, Article 1(iii) and (v), and Article 3)

Sources checked September 7, 2026.