A study on tax treatment of NFT(Non-Fungible Token) transactions in Japan

Abstract

Recently, digitalization has been progressing in various fields, especially the use of blockchain technology used in virtual assets such as Bitcoin. Based on blockchain technology, new paradigms are emerging, such as creating non-fungible tokens that cannot be forged or altered, and establishing a system that provides financial services and products without intermediaries. In particular, with the advent of NFT, digital content is given asset and economic value, and as a result, transactions such as issuance and transfer occur, income increases. For this reason, the necessity of taxation was emphasized, and for that reason, the taxation relationship began to be analyzed, but it is difficult to judge the taxation relationship because the judicial legal relationship surrounding the NFT, such as the rights of the NFT holder, is not clear. In this regard, Japan's tax processing guidelines, which clarify the tax relationship between issuing and transferring digital art and reselling, have its own meaning. If you look at the contents, the copyright is usually reserved only by the creator in the case of the NFT transaction that connects digital art, and the NFT is often granted only rights such as permission to use the work. Therefore, in primary distribution, it is subject to miscellaneous income or business income, and in secondary distribution, where rights are transferred due to the transfer of NFT, it is subject to transfer income or business income. Non-fungible tokens, on the other hand, are used in various fields in terms of their properties and functions. Therefore, we have to consider how to deal with various issues individually and specifically. In terms of tax law, it is also necessary to categorize NFT in consideration of this and then tax them according to economic substance. In this study, the taxation relationship was examined by classifying it into securities-type NFT, payment-type NFT, and other NFT.