If you made a profit from crypto asset trading, you may need to file a final income tax return. However, income from crypto assets can arise not only from selling but also from swapping one crypto asset for another or from receiving crypto as a reward, so cases of unreported or under-reported income are not uncommon.
For context, as of July 2026, under Japan's current tax rules, gains from selling crypto assets are classified as miscellaneous income and taxed under the aggregate (progressive) taxation system together with a taxpayer's other income. Losses from crypto assets can only be offset against other miscellaneous income — they cannot be offset against employment income or other income categories. Separately, on July 15, 2026, Japan's Diet passed an amended Financial Instruments and Exchange Act (FIEA) that reclassifies crypto assets as financial instruments; a shift to a flat 20% separate self-assessment tax rate is expected to take effect from the year after the amended law comes into force, likely around January 2028.
Some people assume, "a tax audit will never come for me." However, crypto asset transactions are an area that Japan's national tax authorities are actively monitoring. In one reported case, a man in his 40s working as a company employee in Tokyo was assessed additional taxes exceeding 200 million yen (roughly $1.3 million USD, at approximately ¥150/USD) after failing to report crypto income.
He did not realize that gains from swapping crypto assets needed to be reported, and filed his tax return only for the amount he had converted to cash. Last September, the tax office pointed out the unreported income, and the additional tax assessed — including the under-reporting penalty — exceeded 200 million yen.
Source:Yomiuri Shimbun Online
Given this backdrop, some people who suspect they may have under-reported or failed to report past crypto transactions may be anxious about when a tax audit might happen. This article explains when a crypto tax audit in Japan is likely to happen, the kinds of cases that may be targeted, what happens once the tax office makes contact, and which records you should check in advance.
When does a crypto tax audit happen in Japan?
There is no fixed schedule for when a crypto tax audit will happen. Contact does not always come immediately after filing — it may come later, based on a review of past transactions and filing content.
For this reason, it is risky to assume an audit will come in a specific month or a fixed number of years after filing. If you have not reported crypto gains, or if there are errors in what you reported, it is worth checking your situation before the tax office contacts you.
There is no fixed timing for when a tax audit occurs
Even the National Tax Agency (NTA)'s own materials do not specify a particular time when a tax audit for crypto transactions will occur. The timing therefore varies depending on individual circumstances. That said, there is a time limit on how long the tax office can act to reassess or determine a tax amount.
The period during which a tax office can issue a "reassessment" (correcting a filed return) or a "determination" (setting a tax amount for an unfiled return) is, in principle, five years from the statutory filing deadline. This period extends to seven years in cases involving fraud or other wrongful conduct to evade tax (Source: About Tax Procedures | National Tax Agency).
In other words, the fact that some time has passed since the filing deadline without contact does not necessarily mean there is no issue. If you suspect past crypto transactions may involve unreported or under-reported income, rather than assuming "if it hasn't come this year, I'm in the clear," it is important to review your filing content early.
When a tax audit does occur, advance notice is generally given
When a tax audit is conducted, taxpayers are, in principle, given advance notice of details such as the audit's start date and time, location, the tax items under review, and the period covered. This means that for a typical voluntary audit, the process does not begin suddenly without any prior contact. Once advance notice is received, the next step is to confirm the tax items and period under review and organize the necessary records.
That said, it is also explained that in cases where advance notice would make it difficult to accurately grasp the facts, or where it could interfere with the proper conduct of the audit, a tax audit may be carried out without advance notice (Source: About Tax Procedures | National Tax Agency).
Crypto transactions can be subject to tax audits
Crypto transactions can be subject to tax audits. Gains from selling crypto assets, gains from swaps between crypto assets, and staking rewards can all be subject to income tax reporting.
In particular, because crypto transactions often span multiple exchanges and wallets, this is an area where unreported income is likely to occur. Transactions that a taxpayer assumes are simple asset transfers may, in fact, include taxable transactions.
The NTA publishes the results of its audits of individuals engaged in crypto transactions. According to the status of income tax and consumption tax audits for the 2024 program year (Reiwa 6), 613 field audits were conducted on individuals trading crypto assets and similar assets. The NTA also states that it analyzes information gathered through every available channel from multiple angles to conduct effective audits.
To enable effective audits, the National Tax Agency gathers information through every available opportunity, analyzes the information collected from multiple angles, and conducts rigorous audits of malicious taxpayers who attempt to wrongfully evade their tax burden.
Source:Status of Income Tax and Consumption Tax Audits for the 2024 Program Year | National Tax Agency
Given this, crypto transactions should not be treated as something that "won't be found out" if left unreported. Whether you use domestic exchanges only, or also use overseas exchanges or wallets, it is necessary to organize your transaction history and the flow of deposits and withdrawals.
What happens once a tax audit contact is received
Because crypto transactions can span multiple exchanges and wallets, the more transactions there are, the more time it takes to organize the records. For this reason, knowing the general flow of a tax audit in advance can help you respond calmly rather than panicking if contact is received.
This section explains the general flow of a crypto-related tax audit in Japan. Note that the actual process can vary depending on individual circumstances.
The tax office provides advance notice
When a tax audit is conducted, taxpayers generally receive advance notice from the tax office covering details such as the audit's start date and time, location, the tax items under review, and the period covered.
Once advance notice is received, the first step is to confirm the tax items and period subject to review. For crypto transactions, it is important to understand which fiscal year's income is being examined.
Once the relevant period is confirmed, you can organize the transaction history, deposit and withdrawal records, and past filing documents for that period. If you work with a tax accountant, it is a good idea to share the notice with them and confirm your response approach.
Coordinating the audit schedule
Even after receiving advance notice of a tax audit, you may not always be able to accommodate the specified date. In such cases, if there is a reasonable justification, you can request to discuss changing the audit date and time (Source: About Tax Procedures | National Tax Agency).
The NTA's internal operational guidelines also state that, prior to advance notice, the tax office is to hear from the taxpayer or their tax representative about their availability and adjust the audit schedule as needed before determining the audit start date and time to be included in the advance notice.
Prior to advance notice, care should be taken to hear from the taxpayer and tax representative about their availability, adjust the audit schedule as necessary, and then determine the audit start date and time to be communicated in the advance notice.
So, if the scheduled date genuinely does not work, you should explain the circumstances to the auditor in charge. That said, this only means there may be room for schedule adjustment — it does not mean the audit can be postponed indefinitely without a valid reason.
Preparing the necessary records before the audit date
The period leading up to the audit date is your time to organize the necessary records. According to NTA materials, during a tax audit taxpayers are expected to answer questions accurately under the tax authority's right to question and inspect, and to present or submit ledgers and documents as requested by the auditor.
During a tax audit, please answer accurately to questions asked under the right to question and inspect. Please also present or submit ledgers and documents as requested by the auditor in charge.
For crypto transactions, you should check exchange transaction histories, deposit and withdrawal records, wallet-to-wallet transfer records, and any records used for calculating gains and losses. If you use overseas exchanges or DeFi in addition to domestic exchanges, you will also need to organize those records.
Also, if deemed necessary for the audit, the auditor may — with the taxpayer's consent — take custody of submitted ledgers and documents. In that case, a receipt is issued, and the materials are returned once no longer needed.
Follow-up questions and explanation of results after the audit
A tax audit does not necessarily end with the confirmations made on the day itself — you may later receive additional requests for documents or questions. If the audit finds errors in the filed content, or determines that a filing obligation existed but was not fulfilled, the results of the audit will be explained to you.
On the other hand, if no errors are found in the filing content, or if it is determined that no filing obligation existed, you will be notified of this in writing. In other words, a tax audit results in some form of conclusion being communicated, whether or not unreported income is found.
Records to check in preparation for a crypto tax audit
To prepare for a crypto tax audit, you need to organize records that can explain your past transactions. Crypto activity is not limited to buying and selling on an exchange — it can also involve wallet-to-wallet transfers, use of overseas exchanges, and DeFi activity.
If records are insufficient, it becomes difficult to explain which transactions were trades and which were simple asset transfers. Because gathering these records after a tax audit notice arrives can take time, it is important to check them early if you have any concerns.
Exchange transaction and deposit/withdrawal history
The first records to check are the transaction history and deposit/withdrawal history from your crypto asset exchange service provider(s). You should check not only your buy/sell history but also yen deposits and withdrawals, and crypto asset transfers and receipts.
In particular, if you use multiple exchanges, calculating gains and losses using records from only some of them can result in under-reported income. If you bought a crypto asset on one exchange, transferred it to another, and sold it there, you cannot accurately determine gains and losses without looking at the full flow across exchanges.
It is also important to check whether you can still log in to exchanges you used in the past. Even for exchanges you no longer use, past transaction history from them may be needed to verify your filing content.
Wallet-to-wallet transfer records
If you have moved crypto assets into your own wallet, you should also check your wallet-to-wallet transfer records. A transfer between your own wallets does not typically generate a taxable gain in itself, but without records, it becomes hard to explain whether a given transfer was simply moving your own assets or a transfer to a third party.
For example, if you sent funds from an exchange to a wallet such as MetaMask and then used it in DeFi, exchange records alone will not give the full picture. Organizing wallet addresses, transfer dates and times, transfer amounts, and the purpose of each destination makes it easier to explain the transaction history later.
While crypto transactions are recorded on the blockchain, that alone does not fully explain them for tax purposes. It is important to be able to demonstrate which addresses you control and which transfers represent movement of your own assets.
Past tax returns and gain/loss calculation records
If you have previously reported crypto income, you should check your past tax returns together with your gain/loss calculation records. A tax return alone does not make clear which transactions the reported income was based on.
If you still have the transaction history used for the gain/loss calculation, output data from calculation software, or materials submitted to a tax accountant, you can verify the basis for your calculations at the time. This makes it easier to explain the assumptions behind your filing if you are later audited.
On the other hand, comparing your past tax returns with your transaction history may itself reveal unreported income. If that happens, you should not leave it unaddressed — check whether an amended return or a late filing is needed.
Records related to overseas exchanges, DeFi, and rewards
If you use overseas exchanges, DeFi, staking rewards, airdrops, or similar, you should also check the related records. These are often not captured in the annual transaction reports provided by domestic exchanges.
Overseas exchanges may differ from domestic exchanges in the format and retention period of their transaction records. It is safer to download your transaction and deposit/withdrawal history while you can still access your account.
For DeFi and staking, the timing of when a reward was received, and when it was later sold or exchanged, can both be relevant. If the transaction types involved are complex, it is safer to consult a tax accountant experienced in crypto taxation rather than judging on your own.
What to do if you notice unreported income before a tax audit contact
If you notice unreported crypto income, you should not wait for a tax audit contact. First, check your transaction history against your filing content and work out which fiscal years, and to what extent, may involve unreported income.
According to NTA materials, if you paid too little tax or received too large a refund, errors in your filing can be corrected through an amended return. It is also explained that if you voluntarily file an amended return before a tax audit, the under-reporting penalty will not be imposed — although late-payment interest tax may still apply.
First, compare your transaction history against your filing content
If you suspect unreported income, first compare your past transaction history with your tax return. Crypto income needs to be confirmed by combining all your transactions, not just the gains from any single exchange.
You should check whether transactions such as crypto asset sales, swaps between crypto assets, payments for goods or services made with crypto, and crypto received as a reward are all included in your filing.
What matters at this stage is not judging based on a vague sense that "it's probably fine." Without actually reviewing your transaction history, you risk overlooking transactions with gains or reward receipts that should have been reported.
If unreported income is found, consider an amended or late return
If you previously filed a tax return but crypto income was left out, you should consider filing an amended return. If you did not file a return at all, a late filing may be necessary.
Filing an amended or late return means paying the previously unpaid tax amount. Depending on the circumstances, late-payment interest tax or additional penalty taxes may also apply. That said, voluntarily filing an amended return before a tax audit contact can change how the under-reporting penalty is treated.
If you voluntarily file an amended return before receiving advance notice of a tax audit, no under-reporting penalty will be imposed. If you file an amended return after receiving advance notice of a tax audit (but before the audit results in a reassessment that you had reason to anticipate), an under-reporting penalty of 5% will be imposed on the additional tax due. However, for the portion of the additional tax due that exceeds the greater of the originally reported tax amount or 500,000 yen, the penalty rate is 10%.
Source:When You Made a Mistake on Your Tax Return | National Tax Agency
Consult a tax accountant if the judgment is difficult
If you have a large volume of crypto transactions, or if overseas exchanges, DeFi, or staking rewards are involved, it can be difficult to judge the correct treatment on your own. This is because the timing of income recognition and the calculation method can vary depending on the type of transaction.
In such cases, consulting a tax accountant is recommended. Only tax accountants are legally permitted to provide tax representation services, and as professionals in the field, they can handle tax representation, preparation of tax documents, and tax consultation together.
Consulting a tax accountant as soon as you notice possible unreported income — rather than waiting to panic once a tax audit contact arrives — makes it easier to organize your records and refile smoothly. A tax accountant experienced in crypto taxation can also advise on organizing transaction history and calculating gains and losses.
Summary: For crypto tax audits, checking early matters more than waiting for a specific timing
There is no fixed schedule for when a crypto tax audit will happen in Japan. That said, when a tax audit does occur, taxpayers are, in principle, given advance notice covering the audit's start date and time, location, the tax items under review, and the period covered.
If you discover an issue with your past filings, it is recommended to file an amended return yourself rather than waiting for advance notice, since doing so voluntarily avoids the under-reporting penalty. That said, filing again without fully resolving the underlying issue defeats the purpose, so it is best to organize your situation with the help of a tax accountant.
Taking action before a tax audit contact arrives makes it easier to prepare the necessary records and to move quickly on reviewing and correcting your filing content.
This article is for informational purposes only and does not constitute financial or investment advice. Please consult a qualified professional before making investment decisions.
