[DigitalToday reporter Hyunwoo Chu (추현우)] Japan’s National Tax Agency has tightened checks on filings related to cryptocurrency transactions as it begins full operation of its next-generation tax system, KSK2. CoinPost, a blockchain outlet, reported on Monday that the agency began official operation of KSK2 on Sept. 24, the first major core-system update in about 25 years.

The existing KSK managed data separately by tax category, including income and corporate taxes. KSK2 integrates individual and corporate data based on My Number and corporate identification numbers. It also strengthens detection of false filings using AI.

Cryptocurrency investors and traders have also come within its scope. Progo, a tax accountant office, said cryptocurrency transactions have become a key target of AI-based analysis, drawing on annual transaction reports submitted by exchanges, bank account inflow and outflow records, and CRS data exchanged with foreign tax authorities.

The tax agency is also reviewing information posted on the web, social media posts and online service usage histories. It said the likelihood has increased that it will compare posts claiming profits from cryptocurrency with actual filing data to narrow down audit targets.

With individual and corporate data integrated, it has also become easier to track the flow of funds. When individuals invest through a private company or buy cryptocurrency with gifted or inherited funds, it has become easier to identify mismatches between income and assets on a single screen.

As a result, cryptocurrency investors increasingly need to keep annual transaction reports issued by exchanges and transaction histories, and to file final tax returns without omissions when profits occur.

Since KSK2 went live, some counter services have also been delayed. After delays emerged in tax office counter services such as the issuance of tax payment certificates, the agency instructed tax offices nationwide to handle those services as replacements using the old system.