Earning profits from XRP (Ripple) trading may require filing a tax declaration and paying corresponding taxes if certain conditions are met. Neglecting this obligation can lead to regrettable consequences. Below, we explain the relationship between cryptocurrency and taxes.
⚠️ Disclaimer: This article is based on the tax laws effective as of May 27, 2025. Tax regulations are subject to frequent amendments, especially for crypto assets, where significant reforms like separate declaration taxation and loss carryforward deductions are under discussion (as of March 2025). Always verify the latest information with the National Tax Agency or a tax professional.
What Is XRP (Ripple)?
XRP is the currency used within the Ripple Network, a payment system operated by Ripple Inc. Its development traces back to 2004, when Canadian engineer Ryan Fugger conceptualized the "Ripple payment protocol." In 2012, Chris Larsen and others founded OpenCoin (now Ripple Inc.), advancing XRP as a solution for global asset transfers—particularly in cross-border payments. This has drawn attention from banking and credit card industries.
Taxes on Cryptocurrency Transactions
Profits from cryptocurrency trading are classified as miscellaneous income. Key points:
- Salaried employees: Must declare if annual miscellaneous income (including crypto profits) exceeds ¥200,000.
- Non-salaried individuals (e.g., students, homemakers): Declaration required if profits exceed the ¥480,000 basic deduction.
- Self-employed/freelancers: Must file annually regardless of profit amount.
Taxable Events:
- Selling Cryptocurrency: Profit = Sale price − Purchase price.
- Exchanging Cryptocurrencies: Profit = Higher value of the received crypto − Original cost.
- Purchasing Goods with Crypto: Profit = Item’s value − Crypto’s acquisition cost.
⚠️ Note: Losses from crypto transactions cannot offset other income types and cannot be carried forward to subsequent years.
Tax Calculation Methods
Taxable amounts are combined with other income for progressive tax rates. Below is the 2025 income tax table (excluding the 2.1% reconstruction tax):
| Taxable Income (¥) | Rate | Deduction (¥) |
|---|---|---|
| <1,950,000 | 5% | 0 |
| 1,950,000–3,300,000 | 10% | 97,500 |
| 3,300,000–6,950,000 | 20% | 427,500 |
| 6,950,000–9,000,000 | 23% | 636,000 |
| 9,000,000–18,000,000 | 33% | 1,536,000 |
| 18,000,000–40,000,000 | 40% | 2,796,000 |
| ≥40,000,000 | 45% | 4,796,000 |
Example: For ¥6,500,000 taxable income:
(¥6,500,000 × 20%) − ¥427,500 = ¥872,000 (rounded down).
Cost Basis Methods
1. Moving Average Method
Recalculates the average acquisition cost after each purchase. More accurate but complex.
2. Total Average Method
Averages all annual purchases. Simpler but less precise during price volatility.
The National Tax Agency permits both but recommends the moving average method.
Filing Cryptocurrency Tax Returns
Key Steps:
- Understand Deadlines: File between February 16 and March 15 (extended if the deadline falls on a holiday).
- Use Tools: Apps or e-Tax streamline paperwork. Benefits include faster refunds and reduced documentation (e.g., omitting withholding slips).
- Submit: Mail or file digitally via e-Tax, which supports 24/7 submissions.
👉 Simplify your crypto tax filing with these tips
Consequences of Non-Compliance
Failure to declare income may result in:
- Late Filing Penalty: 5–30% of owed tax (higher if prompted by authorities).
- Delinquency Tax: 2.4–8.7% annual interest on late payments.
Case Example: In 2017, tax authorities penalized undisclosed crypto traders using exchange customer lists.
Future of Crypto Taxation
Reforms under discussion for 2026 may introduce:
- Separate Declaration Taxation: Flat 20.315% rate (like stocks).
- Loss Carryforward: Deduct losses over up to 3 years.
- Tax-Free Crypto-to-Crypto Swaps.
Monitor updates via the National Tax Agency.
FAQ
Q1: Do I need to declare crypto profits under ¥200,000?
A1: Only if filing for other reasons (e.g., medical deductions).
Q2: Can I deduct crypto losses from salary income?
A2: No. Crypto losses can only offset other miscellaneous income.
Q3: Is e-Tax secure for crypto declarations?
A3: Yes, it’s the official platform with encrypted submissions.
👉 Explore crypto tax strategies here