Where This Edition Fits

On December 20, 2019, the National Tax Agency published Tax Treatment of Virtual Currencies (Information). The index link wording matches the November 21, 2018 edition exactly, but the content changed more substantially than in any of the ten editions.

Questions increased by 11, from 21 to 32: five additional income tax questions and six in a new corporation tax chapter. Previously, the FAQ covered common income and corporation tax matters, income tax, inheritance and gift tax, withholding, consumption tax, and statutory returns without a dedicated corporation tax chapter. This edition introduced it.

Overview

Why Was a Corporation Tax Chapter Needed?

The trigger was FY2019 tax reform. Its outline, Cabinet-approved December 21, 2018, states under III. Corporate Taxation:

Measures including introduction of the market value method will be taken for valuation of virtual currency and related corporation tax treatment as follows.

It then lists year-end market valuation, timing of disposal gain and loss recognition, disposal cost calculation, and deemed settlement of open credit and similar positions. The statutory default disposal cost method was cost based on moving average.

The outline applies these changes to corporation tax for fiscal years ending on or after April 1, 2019. For years beginning before and ending on or after that date, transitional measures allow omission of market valuation and deemed settlement of credit positions if the virtual currency is not marked to market in accounting.

A changed regime raises application questions. The outline's measures correspond to the new question headings as follows.

What Changed for Individuals?

The same outline's I. Personal Income Taxation states:

For virtual currencies defined by the Payment Services Act held by individuals, year-end holdings used to determine deductible necessary expenses will be valued at acquisition cost calculated by moving or total average, with necessary related measures.

The key term is valuation. The previous Question 11 concerned changing the acquisition cost calculation method: how to calculate cost and how to change that method.

This edition replaces it with notification of a valuation method and procedures for changing it. Calculation method becomes valuation method, and an initial notification question precedes changes. The structure now begins with notification upon acquisition rather than action only when changing methods. For the methods themselves, see Which Should You Choose: Total Average or Moving Average? We are dealing with that.

What Gaps Did the Four New Questions Fill?

The four new individual questions each occupy a clear position.

• Question 7 on timing of gross revenue recognition leads the income tax section, paired with corporate Question 20 on disposal gain and loss timing. Both individuals and corporations now have a question on which calendar or fiscal year to use.
• Question 10, Cost of Virtual Currency Disposals, has the same heading as corporate Question 21, placing the same issue in both contexts.
• Question 16, Treatment of Below-Market Transfers of Virtual Currencies, first appears here. In June 2021, its heading expands to below-market or gratuitous transfers and similar disposals of crypto assets.
• Question 19 on credit transactions is new. The previous margin transaction question remains as 18, beside the new credit transaction question. Corporate Questions 23–25 also address credit transactions, bringing the total across individuals and corporations to four. For the approach, see When Are Gains and Losses on Crypto Asset Credit Transactions Recognized? summarizing in

What Did Question 22 on Year-End Market Valuation Begin?

Of the six additions, Question 22 on year-end market valuation develops most substantially in later editions. The outline's wording was as follows.

“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.”

The mechanism recognizes valuation gains and losses merely from holding assets at fiscal year-end without selling. Individual taxation had focused on actions such as selling, spending, or exchanging; corporate taxation considers the holding itself. This difference became an explicit question in this edition. For the full mechanism, see Are Corporations Taxed Simply for Holding Crypto Assets? We are dealing with that.

The question later branches out. December 2023 split corporation tax into 3-1, Crypto Assets, and 3-2, Electronic Payment Instruments, and added seven crypto questions including active markets, staking lockups, and specified self-issued assets. December 2024 added 3-1-11 on specified transfer-restricted assets. This one question was the starting point.

Points that require care in practice

• Corporate year-end virtual currency holdings may produce valuation gains and losses without sale. The dividing line is an active market, but this edition's 32 questions contain no separate question solely on that test. A dedicated question appears in December 2023.
• Fiscal years beginning before and ending on or after April 1, 2019 have transitional measures. Check application for each fiscal year.
• Notification of an individual's valuation method upon acquiring virtual currency first became a separate question here. Time can pass without the taxpayer realizing the procedure exists.
• From this edition, individual margin and credit transactions are separate Questions 18 and 19. Check the exchange agreement and transaction reports to identify which applies.
• This is the last edition using virtual currency; December 18, 2020 replaces it with crypto assets. Establish which edition you are reading when consulting historical materials. Differences are summarized in How Has the National Tax Agency's Crypto Asset FAQ Changed Across Ten Editions?. For the previous edition, see November 2018 Edition, and for the following edition, see December 2020 Edition the relevant article.

Sources

• National Tax Agency: Tax Treatment of Virtual Currencies (Information), December 20, 2019 PDF
• National Tax Agency: Archived Information on Crypto-Assets List
• FY2019 Outline of Tax Reform, Cabinet Decision of December 21, 2018: I. Personal Income Taxation and III. Corporate Taxation