The following article is based on the former Consumption Tax law. Regarding consumption taxes & virtual currency On May 25, 2016, revisions were made to Japan's laws regarding payments services (hereafter, the Payment Services Act). The Revised Payment Services Act defines virtual currency, as well as identifies those who trade and manage virtual currency professionally as subject to regulation. Under the Revised Payment Services Act, virtual currency, represented by Bitcoin, has for the first time become a target of regulation in Japan. However, as the revisions do not concern taxation, the long-disputed handling of virtual currency under the Consumption Tax Act remains unclear. Nevertheless, the currency consists of electronic data already in wide circulation, and as an "object" with value, it is assessable as property under the Consumption Tax Act, and its transfer is considered to be a transfer of property. The Consumption Tax Act imposes a comsumption tax on the transfer of property, on loans, or on the rendering of services. The Act also exempts certain transactions that are not considered taxable. Currency, checks, and promissory notes fall under the payment methods governed by the Foreign Exchange and Foreign Trade Act (henceforth, the Foreign Exchange Act) and are exempt from taxation under the Consumption Tax Act. In addition, the prepaid methods of payment (which electronic money is generally considered to be) that are governed by the Payment Services Act are considered under the Consumption Tax Act to be "physical certificates" and are exempt from the consumption tax.https://www.nta.go.jp/taxes/shiraberu/taxanswer/shohi/6201.htm Just like other currencies, virtual currency is generally spent by delivering it to others who recognize its value. As it is difficult to envision other uses for virtual currency, it can be considered to be essentially identical to the methods of payment that fall under the Foreign Exchange Act. On the other hand, virtual currency does not fall under any of the payment methods or "physical certificates" to which the Consumption Tax Act applies. As no other tax exemption is considered to apply to virtual currency, it is—for the moment, at least—not treated as exempt from taxation, and if the transfer of virtual currency takes place within Japan, a consumption tax is considered to apply (*). How it is to be determined whether or not the transfer of virtual currency takes place within Japan is currently unclear under the Consumption Tax Act. Under this act, if the location where a transfer of property takes place is unclear, then a unilateral determination is made based on the address of the office of the party transferring the currency. For example, if the address or office of the party who transferred the virtual currency is in Japan, then the transaction is considered domestic, and a consumption tax applies. The taxation relationship affecting the trade of virtual currency by Japanese corporations subject to the consumption tax is considered to be as follows: Cross-border virtual currency transactions Consumption tax responsibility chart Case Case 1 (Domestic transaction) Case 2 (International transaction) Case 3 (Domestic + international transaction) Party Clearing house (Japan) Client (Japan) Clearing house (overseas) Client (Japan) Clearing house (overseas) Clearing house (Japan) Client (Japan) Responsibility for consumption tax 0 0 NA 8 taxed NA 8 taxed 0 Shift the taxed portion to the transaction price? Case Case 1 (Domestic transaction) Party Clearing house (Japan) Client (Japan) Responsibility for consumption tax 0 0 Case Case 2 (International transaction) Party Clearing house (overseas) Client (Japan) Responsibility for consumption tax NA 8 taxed Case Case 3 (Domestic + international transaction) Party Clearing house (overseas) Clearing house (Japan) Client (Japan) Responsibility for consumption tax NA 8 taxed 0 Shift the taxed portion to the transaction price?