Order for Enforcement of the Act on Special Measures Concerning Taxation(Limited to the provisions related to nonresidents and foreign corporations (Tentative translation))

Link to law: http://www.japaneselawtranslation.go.jp/law/detail_download/?ff=08&id=2201
Published: 2009

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Order for Enforcement of the Act on Special Measures Concerning Taxation (Limited to the provisions related to nonresidents and foreign corporations (Tentative translation))

Chapter II Special Provisions for the Income Tax Act

Section 1 Special Provisions for Interest Income and Dividend Income

(Special Provisions for Taxation on Interest on Book-Entry Transfer National Government Bonds, etc.)

Article 3 (1) The amount calculated as specified by Cabinet Order prescribed in Article 5-2, paragraph (1) and paragraph (3) of the Act shall be the amount specified respectively in the following items for the category of cases listed in the relevant items:

(i) Where the first day of the holding period prescribed in Article 5-2, paragraph (1) of the Act (hereinafter referred to as the "holding period" in this Article) for book-entry transfer national government bonds prescribed in the said paragraph (hereinafter referred to as "book-entry transfer national government bonds" in this Article) held by a nonresident or foreign corporation falls on or before the first day of the accounting period for interest on the said book-entry transfer national government bonds: The amount of interest for the said accounting period

(ii) Where the first day of the holding period for book-entry transfer national government bonds held by a nonresident or foreign corporation falls after the first day of the accounting period for interest on the said book-entry transfer national government bonds: The amount calculated by multiplying the amount of interest for the said accounting period by the number of days in the said holding period and then dividing the result by the number of days in the said accounting period

(iii) Where the first day of the holding period for book-entry transfer local government bonds prescribed in Article 5-2, paragraph (1) of the Act (hereinafter referred to as "book-entry transfer local government bonds" in this Article) held by a nonresident or foreign corporation falls on or before the first day of the accounting period for interest on the said book-entry transfer local government bonds: The amount of interest for the said accounting period

(iv) Where the first day of the holding period for book-entry transfer local government bonds held by a nonresident or foreign corporation falls after the first day of the accounting period for interest on the said book-entry transfer local government bonds: The amount calculated by multiplying the amount of interest for the said accounting period by the number of days in the said holding period and then dividing the result by the number of days in the said accounting period.

(2) Where a nonresident or foreign corporation that is the trustee of a qualified foreign securities investment trust prescribed in Article 5-2, paragraph (2) of the Act (hereinafter referred to as a "qualified foreign securities investment trust" in this Article) seeks the application of the provisions of Article 5-2, paragraph (1) of the Act with respect to interest on book-entry transfer national government bonds or book-entry transfer local government bonds to be received thereby for the trust property under the said qualified foreign securities investment trust, the said nonresident or foreign corporation shall submit, for each qualified foreign securities investment trust accepted thereby, a written application for tax exemption of book-entry transfer national government bonds prescribed in Article 5-2, paragraph (1), item (i), (a) of the Act (hereinafter referred to as a "written application for tax exemption of book-entry transfer national government bonds" in this Article) and a statement of the holding period of book-entry transfer national government bonds prescribed in Article 5-2, paragraph (1), item (i), (b) of the Act (referred to as a "statement of the holding period of book-entry transfer national government bonds" in paragraphs (7) to (9)), or a written application for tax exemption of book-entry transfer local government bonds prescribed in Article 5-2, paragraph (1), item (ii), (a) of the Act (hereinafter referred to as a "written application for tax exemption of book-entry transfer local government bonds" in this Article) and a statement of the holding period of book-entry transfer local government bonds prescribed in Article 5-2, paragraph (1), item (ii), (b) of the Act (referred to as a "statement of the holding period of book-entry transfer local government bonds" in paragraph (7), paragraph (8) and paragraph (11)), to the district director of the tax office prescribed in prescribed in Article 5-2, paragraph (1), item (i), (a) of the Act pursuant to the provisions of Article 5-2, paragraph (1), item (i), (a) and (b) of the Act, or the district director of the tax office prescribed in Article 5-2, paragraph (1), item (ii), (a) of the Act pursuant to the provisions of Article 5-2, paragraph (1), item (ii), (a) and (b) of the Act.

(3) Where a nonresident or foreign corporation makes, for the first time, entries or records under the book-entry transfer system (meaning entries or records under the book-entry transfer system prescribed in Article 5-2, paragraph (5), item (vi) of the Act; hereinafter the same shall apply in this Article) with regard to book-entry transfer national government bonds (limited to those bearing interest; hereinafter referred to as "interest-bearing book-entry transfer national government bonds" in this paragraph, paragraph (5) and paragraph (22)) in the account listed respectively in the following items, if the person specified in the relevant items for the category of accounts listed in the relevant items has, when the said entries or records under the book-entry transfer system are made, prepared a document containing the name of the said nonresident or foreign corporation and his/her or its address as prescribed in Article 5-2, paragraph (1), item (i), (a) of the Act (hereinafter referred to as "address" in this paragraph, paragraph (5) and paragraph (22)) and any other matters specified by Ordinance of the Ministry of Finance (hereinafter referred to as a "document on special measures for book-entry transfer national government bonds" in this paragraph and the following paragraph) and submitted the said document on special measures for book-entry transfer national government bonds to the district director of the tax office prescribed in Article 5-2, paragraph (1), item (i), (a) of the Act (in the case where the specified book-entry transfer institution, etc. (meaning a specified book-entry transfer institution, etc. prescribed in paragraph (1) of the said Article; hereinafter the same shall apply in this Article) pertaining to the person specified in the relevant items is a specified account management institution prescribed in Article 5-2, paragraph (5), item (ii) of the Act (hereinafter referred to as a "specified account management institution" in this Article), submission shall be made to the said district director of the tax office via a specified book-entry transfer institution prescribed in paragraph (5), item (i) of the said Article (hereinafter referred to as a "specified book-entry transfer institution" in this Article); in the case where the specified book-entry transfer institution, etc. pertaining to the person specified in the relevant items is a specified indirect account management institution prescribed in paragraph (5), item (iii) of the said Article (hereinafter referred to as a "specified indirect account management institution" in this Article), submission shall be made to the said district director of the tax office via [1] the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said interest-bearing book-entry transfer national government bonds (in the case where the said specified book-entry transfer institution, etc. pertaining to the person specified in the relevant items makes entries or records under the book-entry transfer system regarding the interest-bearing book-entry transfer national government bonds through any other specified indirect account management institution, submission shall be made via the said other specified indirect account management institution and the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said interest-bearing book-entry transfer national government bonds) and [2] a specified book-entry transfer institution), the said nonresident or foreign corporation shall be deemed to have submitted a written application for tax exemption of book-entry transfer national government bonds pursuant to the provisions of Article 5-2, paragraph (1), item (i), (a) of the Act with respect to the said interest-bearing book-entry transfer national government bonds; provided, however, that this shall not apply where the name and address to be entered in the said document on special measures for book-entry transfer national government bonds are inconsistent with the name and address of the said nonresident or foreign corporation for which a confirmation has been provided pursuant to the provisions of paragraph (9) of the said Article (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article) with respect to book-entry transfer local government bonds (hereinafter referred to as a "confirmation concerning book-entry transfer local government bonds" in this paragraph, the following paragraph and paragraph (22)) or a confirmation has been provided pursuant to the provisions of Article 41-12, paragraph (12) of the Act with respect to short-term national government bonds, etc. (meaning national government bonds listed in paragraph (9), items (i) to (viii) of the said Article that fall under the category of specified short-term government or company bonds prescribed in the said paragraph, and principal-only book-entry transfer national government bonds and coupon-only book-entry transfer national government bonds prescribed in paragraph (12) of the said Article) (including a confirmation provided pursuant to the provisions of Article 26-18, paragraph (6); hereinafter referred to as a "confirmation concerning short-term national government bonds, etc." in this Article):

(i) An account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning book-entry transfer local government bonds: The head of the business office, etc. prescribed in Article 5-2, paragraph (1) of the Act (hereinafter referred to as the "business office, etc." through to paragraph (8)) of the specified book-entry transfer institution, etc. that provides a confirmation concerning the said book-entry transfer local government bonds, or the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a notice pursuant to the provisions of Article 5-2, paragraph (14) of the Act from the head of the specified overseas business office, etc. prescribed in paragraph (5), item (v) of the said Article (hereinafter referred to as the "specified overseas business office, etc." through to paragraph (7)) of the qualified foreign intermediary prescribed in item (iv) of the said paragraph (hereinafter referred to as the "qualified foreign intermediary" in this Article) that provides a confirmation concerning the said book-entry transfer local government bonds

(ii) An account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning short-term national government bonds, etc.: The head of the business office, etc. of the specified book-entry transfer institution, etc. that provides a confirmation concerning the said short-term national government bonds, or the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a document prescribed in paragraph (14) of Article 41-12 of the Act pursuant to the provisions of the said paragraph from the head of the specified overseas business office, etc. of the qualified foreign intermediary that provides a confirmation concerning the said short-term national government bonds

(4) In the case referred to in the preceding paragraph, the head of the business office, etc. of the specified book-entry transfer institution, etc. who has submitted a document on special measures for book-entry transfer national government bonds pursuant to the provisions of the said paragraph shall, without delay after the date of the submission, give a notice of the submission of the document on special measures for book-entry transfer national government bonds to the nonresident or foreign corporation that shall be deemed to have submitted a written application for tax exemption of book-entry transfer national government bonds pursuant to the provisions of the said paragraph (in the case where a confirmation concerning book-entry transfer local government bonds or a confirmation concerning short-term national government bonds, etc. with regard to the said nonresident or foreign corporation is provided by the head of a specified overseas business office, etc. of a qualified foreign intermediary, a notice shall be given to the said nonresident or foreign corporation via the head of the said specified overseas business office, etc.).

(5) Where a nonresident or foreign corporation makes, for the first time, entries or records under the book-entry transfer system with regard to book-entry transfer local government bonds in an account listed respectively in the following items, if the person specified in the relevant items for the category of accounts listed in the relevant items has, when the said entries or records under the book-entry transfer system are made, prepared a document containing the name of the said nonresident or foreign corporation and his/her or its address and any other matters specified by Ordinance of the Ministry of Finance (hereinafter referred to as a "document on special measures for book-entry transfer local government bonds" in this paragraph and the following paragraph) and submitted the said document on special measures for book-entry transfer local government bonds to the district director of the tax office prescribed in Article 5-2, paragraph (1), item (ii), (a) of the Act via the person who pays interest on the said book-entry transfer local government bonds (in the case where the specified book-entry transfer institution, etc. pertaining to the person specified in the relevant items is a specified account management institution, submission shall be made to the said district director of the tax office via a specified book-entry transfer institution and the said person who pays the interest; in the case where the specified book-entry transfer institution, etc. pertaining to the person specified in the relevant items is a specified indirect account management institution, submission shall be made to the said district director of the tax office via [1] the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said interest-bearing book-entry transfer local government bonds (in the case where the said specified book-entry transfer institution, etc. pertaining to the person specified in the relevant items makes entries or records under the book-entry transfer system regarding the interest-bearing book-entry transfer local government bonds through any other specified indirect account management institution, submission shall be made via the said other specified indirect account management institution and the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said interest-bearing book-entry transfer local government bonds), [2] a specified book-entry transfer institution, and [3] the said person who pays the interest), the said nonresident or foreign corporation shall be deemed to have submitted a written application for tax exemption of book-entry transfer local government bonds pursuant to the provisions of Article 5-2, paragraph (1), item (ii), (a) of the Act with respect to the said interest-bearing book-entry transfer local government bonds; provided, however, that this shall not apply where the name and address to be entered in the said document on special measures for book-entry transfer local government bonds are inconsistent with the name and address of the said nonresident or foreign corporation for which a confirmation has been provided pursuant to the provisions of paragraph (9) of the said Article (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article; hereinafter the same shall apply in this paragraph) with respect to other book-entry transfer local government bonds (hereinafter referred to as a "confirmation concerning other book-entry transfer local government bonds" in this paragraph, the following paragraph and paragraph (23)), a confirmation has been provided pursuant to the provisions of paragraph (9) of the said Article with respect to interest-bearing book-entry transfer national government bonds (hereinafter referred to as a "confirmation concerning interest-bearing book-entry transfer national government bonds" in this paragraph, the following paragraph and paragraph (23)) or a confirmation concerning short-term national government bonds, etc. has been provided:

(i) An account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning other book-entry transfer local government bonds: The head of the business office, etc. of the specified book-entry transfer institution, etc. that provides a confirmation concerning the said other book-entry transfer local government bonds, or the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a notice pursuant to the provisions of Article 5-2, paragraph (14) of the Act from the head of the specified overseas business office, etc. of the qualified foreign intermediary that provides a confirmation concerning the said other book-entry transfer local government bonds

(ii) An account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning interest-bearing book-entry transfer national government bonds: The head of the business office, etc. of the specified book-entry transfer institution, etc. that provides a confirmation concerning the said interest-bearing book-entry transfer national government bonds, or the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a notice pursuant to the provisions of Article 5-2, paragraph (14) of the Act from the head of the specified overseas business office, etc. of the qualified foreign intermediary that provides a confirmation concerning the said interest-bearing book-entry transfer national government bonds

(iii) An account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning short-term national government bonds, etc.: The head of the business office, etc. of the specified book-entry transfer institution, etc. that provides a confirmation concerning the said short-term national government bonds, or the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a document prescribed in paragraph (14) of Article 41-12 of the Act pursuant to the provisions of the said paragraph from the head of the specified overseas business office, etc. of the qualified foreign intermediary that provides a confirmation concerning the said short-term national government bonds.

(6) In the case referred to in the preceding paragraph, the head of the business office, etc. of the specified book-entry transfer institution, etc. who has submitted a document on special measures for book-entry transfer local government bonds pursuant to the provisions of the said paragraph shall, without delay after the date of the submission, give a notice of the submission of the document on special measures for book-entry transfer local government bonds, to the nonresident or foreign corporation that shall be deemed to have submitted a written application for tax exemption of book-entry transfer local government bonds pursuant to the provisions of the said paragraph (in the case where a confirmation concerning other book-entry transfer local government bonds, a confirmation concerning interest-bearing book-entry transfer national government bonds or a confirmation concerning short-term national government bonds, etc. with regard to the said nonresident or foreign corporation is provided by the head of a specified overseas business office, etc. of a qualified foreign intermediary, the notice shall be given to the said nonresident or foreign corporation via the head of the said specified overseas business office, etc.).

(7) The head of a business office, etc. of a specified book-entry transfer institution, etc. or head of a specified overseas business office, etc. of a qualified foreign intermediary shall, where a statement of the holding period of book-entry transfer national government bonds or statement of the holding period of book-entry transfer local government bonds has been submitted, confirm whether or not the holding period and other matters specified by Ordinance of the Ministry of Finance with regard to the book-entry transfer national government bonds or book-entry transfer local government bonds entered in the said statement of the holding period of book-entry transfer national government bonds or statement of the holding period of book-entry transfer local government bonds are consistent with the day on which entries or records under the book-entry transfer system were made with regard to the book-entry transfer national government bonds or book-entry transfer local government bonds and other matters specified by Ordinance of the Ministry of Finance as entered or recorded in the books prescribed in Article 5-2, paragraph (13) of the Act (referred to as the "books for book-entry transfer" in paragraph (9), paragraph (11) and paragraph (24)).

(8) Where a nonresident or foreign corporation submits a statement of the holding period of book-entry transfer national government bonds or a statement of the holding period of book-entry transfer local government bonds via a qualified foreign intermediary to the district director of the tax office set forth in Article 5-2, paragraph (1), item (i), (b) or item (ii), (b) of the Act (including the cases where a qualified foreign intermediary submits the document set forth in the following paragraph pursuant to the provisions of the said paragraph as applied mutatis mutandis pursuant to paragraph (10)), the head of the business office, etc. of the specified book-entry transfer institution, etc. that has received a notice set forth in paragraph (14) of the said Article pursuant to the provisions of the said paragraph shall confirm whether or not the holding period and other matters specified by Ordinance of the Ministry of Finance with regard to the book-entry transfer national government bonds or book-entry transfer local government bonds entered in the said statement of the holding period of book-entry transfer national government bonds or statement of the holding period of book-entry transfer local government bonds or the said document are consistent with the day on which entries or records under the book-entry transfer system were made with regard to the book-entry transfer national government bonds or book-entry transfer local government bonds and other matters specified by Ordinance of the Ministry of Finance as entered or recorded in the books prescribed in the said paragraph.

(9) Where a specified book-entry transfer institution, etc. has, pursuant to the provisions of Article 5-2, paragraph (9) of the Act (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article), prepared and preserved a copy of a document prescribed in paragraph (9) of the said Article that has been presented thereto by a nonresident or foreign corporation, and the said nonresident or foreign corporation receives payment of interest on the book-entry transfer national government bonds for which he/she or it has made entries or records under the book-entry transfer system through the said specified book-entry transfer institution, etc., if the said specified book-entry transfer institution, etc. has, no later than the day preceding the day on which the said nonresident or foreign corporation is to receive payment of such interest, prepared a document containing the holding period and any other matters specified by Ordinance of the Ministry of Finance with regard to the book-entry transfer national government bonds held by the said nonresident or foreign corporation based on the books for book-entry transfer that the said specified book-entry transfer institution, etc. keeps, and submitted the document to the district director of the tax office set forth in paragraph (1), item (i), (b) of the said Article (in the case where the said specified book-entry transfer institution, etc. is a specified account management institution, submission shall be made to the said district director of the tax office via a specified book-entry transfer institution; in the case where the said specified book-entry transfer institution, etc. is a specified indirect account management institution, submission shall be made to the said district director of the tax office via [1] the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds (in the case where the said specified book-entry transfer institution, etc. makes entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds through any other specified indirect account management institution, submission shall be made via the said other specified indirect account management institution and specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds) and [2] a specified book-entry transfer institution), the said nonresident or foreign corporation shall be deemed to have submitted a statement of the holding period of book-entry transfer national government bonds pursuant to the provisions of item (i), (b) of the said paragraph with respect to the interest receivable thereby.

(10) The provisions of the preceding paragraph shall apply mutatis mutandis where a nonresident or foreign corporation receives payment of interest on the book-entry transfer national government bonds for which he/she or it has made entries or records under the book-entry transfer system through a qualified foreign intermediary. In this case, in the said paragraph, the term "to the district director of the tax office set forth in paragraph (1), item (i), (b) of the said Article" shall be deemed to be replaced with "to the district director of the tax office set forth in paragraph (1), item (i), (b) of the said Article via the specified book-entry transfer institution, etc. pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds"; the term "(in the case where the said specified book-entry transfer institution, etc. is a specified account management institution, submission shall be made to the said district director of the tax office via a specified book-entry transfer institution; in the case where the said specified book-entry transfer institution, etc. is a specified indirect account management institution" shall be deemed to be replaced with "(in the case where the said specified book-entry transfer institution, etc. is a foreign further indirect account management institution prescribed in paragraph (5), item (vii) of the said Article (hereinafter referred to as a "foreign further indirect account management institution" in this paragraph"; the term "the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds (" shall be deemed to be replaced with "the foreign indirect account management institution prescribed in paragraph (5), item (viii) of the said Article (hereinafter referred to as "foreign indirect account management institution" in this paragraph) pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds ("; the term "any other specified indirect account management institution" shall be deemed to be replaced with "any other foreign further indirect account management institution"; and the term "the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds) and [2] a specified book-entry transfer institution" shall be deemed to be replaced with "the foreign indirect account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds) and [2] the specified book-entry transfer institution, etc. pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds."

(11) Where a specified book-entry transfer institution, etc. has, pursuant to the provisions of Article 5-2, paragraph (9) of the Act (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article), prepared and preserved a copy of a document prescribed in paragraph (9) of the said Article that has been presented thereto by a nonresident or foreign corporation, and the said nonresident or foreign corporation receives payment of interest on the book-entry transfer local government bonds for which he/she or it has made entries or records under the book-entry transfer system through the said specified book-entry transfer institution, etc., if the said specified book-entry transfer institution, etc. has, no later than the day preceding the day on which the said nonresident or foreign corporation is to receive payment of such interest, prepared a document containing the holding period and any other matters specified by Ordinance of the Ministry of Finance with regard to the book-entry transfer local government bonds held by the said nonresident or foreign corporation based on the books for book-entry transfer that the said specified book-entry transfer institution, etc. keeps, and submitted the document to the district director of the tax office set forth in paragraph (1), item (ii), (b) of the said Article via the person who pays interest on the said book-entry transfer local government bonds (in the case where the said specified book-entry transfer institution, etc. is a specified account management institution, submission shall be made to the said district director of the tax office via a specified book-entry transfer institution and the said person who pays the interest; in the case where the specified book-entry transfer institution, etc. is a specified indirect account management institution, submission shall be made to the said district director of the tax office via [1] the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds (in the case where the said specified book-entry transfer institution, etc. makes entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds through any other specified indirect account management institution, submission shall be made via the said other specified indirect account management institution and the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds), [2] a specified book-entry transfer institution, and [3] the said person who pays the interest), the said nonresident or foreign corporation shall be deemed to have submitted a statement of the holding period of book-entry transfer local government bonds pursuant to the provisions of item (ii), (b) of the said paragraph with respect to the interest receivable thereby.

(12) The provisions of the preceding paragraph shall apply mutatis mutandis where a nonresident or foreign corporation receives payment of interest on the book-entry transfer local government bonds for which he/she or it has made entries or records under the book-entry transfer system through a qualified foreign intermediary. In this case, in the said paragraph, the term "via the person who pays interest on the said book-entry transfer local government bonds" shall be deemed to be replaced with "via the specified book-entry transfer institution, etc. pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds and the person who pays interest on the said book-entry transfer local government bonds"; the term "(in the case where the said specified book-entry transfer institution, etc. is a specified account management institution, submission shall be made to the said district director of the tax office via a specified book-entry transfer institution and the said person who pays the interest; in the case where the specified book-entry transfer institution, etc. is a specified indirect account management institution" shall be deemed to be replaced with "(in the case where the said specified book-entry transfer institution, etc. is a foreign further indirect account management institution prescribed in paragraph (5), item (vii) of the said Article (hereinafter referred to as a "foreign further indirect account management institution" in this paragraph"; the term "the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds (" shall be deemed to be replaced with "the foreign indirect account management institution prescribed in paragraph (5), item (viii) of the said Article (hereinafter referred to as a "foreign indirect account management institution" in this paragraph) pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer national government bonds ("; the term "any other specified indirect account management institution" shall be deemed to be replaced with "any other foreign further indirect account management institution"; and the term "the specified account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds), [2] a specified book-entry transfer institution" shall be deemed to be replaced with "the foreign indirect account management institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds), [2] the specified book-entry transfer institution pertaining to the entries or records under the book-entry transfer system regarding the said book-entry transfer local government bonds."

(13) The interest specified by Cabinet Order prescribed in Article 5-2, paragraph (3) of the Act shall be the interest listed as follows:

(i) Interest to be received by a nonresident listed in Article 164, paragraph (1), item (i) of the Income Tax Act, which is attributed to a business that is conducted by the said nonresident in Japan through a fixed place of business as prescribed in Article 164, paragraph (1), item (i) of the said Act

(ii) Interest to be received by a nonresident listed in Article 164, paragraph (1), item (ii) or item (iii) of the Income Tax Act, which is attributed to a business prescribed in these provisions that is conducted by the said nonresident.

(14) A person who intends to obtain the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act shall attach, to a document containing the person's name and the location of the person's head office or principal office and any other matters specified by Ordinance of the Ministry of Finance, a document in which a specified book-entry transfer institution certifies that the person is a foreign account management institution prescribed in paragraph (5), item (vii) of the said Article and any other document specified by Ordinance of the Ministry of Finance, and submit such documents, in the case of book-entry transfer national government bonds, to the district director of the tax office prescribed in paragraph (1), item (i), (a) of the said Article via the specified book-entry transfer institution pertaining to the said book-entry transfer national government bonds, or in the case of book-entry transfer local government bonds, to the district director of the tax office prescribed in item (ii), (a) of the said paragraph via the specified book-entry transfer institution pertaining to the said book-entry transfer local government bonds and the person who pays interest on the said book-entry transfer local government bonds.

(15) Where a written application set forth in the preceding paragraph has been submitted, the district director of the tax office shall, when he/she makes a disposition to approve or dismiss the application, give a notice in writing to the person who has submitted the application to that effect.

(16) Where a written application set forth in paragraph (14) has been submitted, if a disposition to approve or dismiss the application has not been made by the final day of the month following the month that includes the day on which the written application was submitted, it shall be deemed that approval has been granted as of the said day.

(17) The district director of the tax office shall, when he/she makes a disposition to rescind approval pursuant to the provisions of Article 5-2, paragraph (7) of the Act, give a notice in writing to the person who has obtained the approval to that effect.

(18) With respect to the application of the provisions of paragraph (14) in the case where a person who intends to obtain the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act with regard to book-entry transfer national government bonds has already obtained the approval set forth in paragraph (5), item (iv) of the said Article with regard to book-entry transfer local government bonds, in paragraph (14), the term "a specified book-entry transfer institution certifies" shall be deemed to be replaced with "the specified book-entry transfer institution pertaining to book-entry transfer national government bonds certifies"; the term "other matters specified by Ordinance of the Ministry of Finance" shall be deemed to be replaced with "and a document that certifies that the person has obtained the approval set forth in item (iv) of the said paragraph with regard to book-entry transfer local government bonds"; the term "submit such documents, in the case of book-entry transfer national government bonds, to" shall be deemed to be replaced with "submit such documents to"; the term "to the district director of the tax office prescribed in paragraph (1), item (i), (a) of the said Article via the specified book-entry transfer institution pertaining to the said book-entry transfer national government bonds, or in the case of book-entry transfer local government bonds, to the district director of the tax office prescribed in item (ii), (a) of the said paragraph via the specified book-entry transfer institution pertaining to the said book-entry transfer local government bonds and the person who pays interest on the said book-entry transfer local government bonds" shall be deemed to be replaced with "to the district director of the tax office prescribed in paragraph (1), item (i), (a) of the said Article via the specified book-entry transfer institution pertaining to the said book-entry transfer national government bonds." In this case, where the written application set forth in paragraph (14) has been submitted, it shall be deemed that the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act has been granted at the time of such submission.

(19) With respect to the application of the provisions of paragraph (14) in the case where a person who intends to obtain the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act with regard to book-entry transfer local government bonds has already obtained the approval set forth in paragraph (5), item (iv) of the said Article with regard to book-entry transfer national government bonds, in paragraph (14), the term "a specified book-entry transfer institution certifies" shall be deemed to be replaced with "the specified book-entry transfer institution pertaining to book-entry transfer local government bonds certifies"; the term "other matters specified by Ordinance of the Ministry of Finance" shall be deemed to be replaced with "and a document that certifies that the person has obtained the approval set forth in paragraph (5), item (iv) of the said Article with regard to book-entry transfer national government bonds"; the term "submit such documents, in the case of book-entry transfer national government bonds, to the district director of the tax office prescribed in paragraph (1), item (i), (a) of the said Article via the specified book-entry transfer institution pertaining to the said book-entry transfer national government bonds, or in the case of book-entry transfer local government bonds, to" shall be deemed to be replaced with "submit such documents to"; the term "item (ii), (a) of the said paragraph" shall be deemed to be replaced with "paragraph (1), item (ii), (a) of the said Article." In this case, where the written application set forth in paragraph (14) has been submitted, it shall be deemed that the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act has been granted at the time of such submission.

(20) With respect to the application of the provisions of paragraph (14) in the case where a person who intends to obtain the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act with regard to book-entry transfer local government bonds has already obtained the approval set forth in paragraph (5), item (iv) of the said Article with regard to other book-entry transfer local government bonds, in paragraph (14), the term "a document in which a specified book-entry transfer institution certifies that the person is a foreign account management institution prescribed in paragraph (5), item (vii) of the said Article and any other document specified by Ordinance of the Ministry of Finance" shall be deemed to be replaced with "a document that certifies that the person has obtained the approval set forth in paragraph (5), item (iv) of the said Article with regard to other book-entry transfer local government bonds"; the term "submit such documents, in the case of book-entry transfer national government bonds, to the district director of the tax office prescribed in paragraph (1), item (i), (a) of the said Article via the specified book-entry transfer institution pertaining to the said book-entry transfer national government bonds, or in the case of book-entry transfer local government bonds, to" shall be deemed to be replaced with "submit such documents to"; the term "item (ii), (a) of the said paragraph" shall be deemed to be replaced with "paragraph (1), item (ii), (a) of the said Article." In this case, where the written application set forth in paragraph (14) has been submitted, it shall be deemed that the approval set forth in Article 5-2, paragraph (5), item (iv) of the Act has been granted at the time of such submission.

(21) The document specified by Cabinet Order prescribed in Article 5-2, paragraph (9) of the Act shall be any of the documents specified respectively in the following items for the category of persons listed in the relevant items (in the case where the person listed in the relevant items is the trustee of a qualified foreign securities investment trust, any of the documents specified in the relevant items and the prospectus of the said qualified foreign securities investment trust or any other document similar thereto):

(i) Nonresident: The nonresident's certificate of alien registration, receipt for national tax or local tax, certificate of tax payment or any other document specified by Ordinance of the Ministry of Finance

(ii) Foreign corporation: The foreign corporation's certificate of registered matters of the corporation, receipt for national tax or local tax, certificate of tax payment or any other document specified by Ordinance of the Ministry of Finance.

(22) Where a nonresident or foreign corporation makes, for the first time, entries or records under the book-entry transfer system regarding interest-bearing book-entry transfer national government bonds in the account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning book-entry transfer local government bonds or the account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning short-term national government bonds, etc., or submits a written application prescribed in Article 5-2, paragraph (10) of the Act pursuant to the provisions of paragraph (10) of the said Article with regard to interest-bearing book-entry transfer national government bonds (hereinafter referred to as a "written application for a change of book-entry transfer national government bonds" in this paragraph, paragraph (24) and paragraph (25)), in terms of the said entries and records under the book-entry transfer system or submission, the fact that the identification documents set forth Article 5-2, paragraph (9) of the Act (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article; hereinafter the same shall apply in this paragraph) have been presented pursuant to the provisions of paragraph (9) of the said Article with regard to a confirmation concerning book-entry local government bonds or that the identification documents set forth in Article 41-12, paragraph (12) of the Act have been presented pursuant to the provisions of paragraph (12) of the said Article with regard to a confirmation concerning short-term national government bonds, etc. (including the cases where the identification documents set forth in Article 26-18, paragraph (5) have been presented pursuant to the provisions of paragraph (5) of the said Article) shall be deemed to mean that the document specified by Cabinet Order set forth in Article 5-2, paragraph (9) of the Act has been presented pursuant to the provisions of paragraph (9) of the said Article, and the fact that a confirmation concerning the said book-entry transfer local government bonds or a confirmation concerning the said short-term national government bonds, etc. has been provided shall be deemed to mean that a confirmation has been provided pursuant to the provisions of the said paragraph, respectively; provided, however, that this shall not apply where the name and address entered in a written application for tax exemption of book-entry transfer national government bonds or a written application for a change of book-entry transfer national government bonds to be submitted by the said nonresident or foreign corporation are inconsistent with the name and address of the said nonresident or foreign corporation for which a confirmation concerning the said book-entry transfer local government bonds or a confirmation concerning the said short-term national government bonds, etc. has been provided.

(23) The provisions of the preceding paragraph shall apply mutatis mutandis where a nonresident or foreign corporation makes, for the first time, entries or records under the book-entry transfer system regarding book-entry transfer local government bonds in the account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning other book-entry transfer local government bonds, the account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning interest-bearing book-entry transfer national government bonds or the account pertaining to the entries or records under the book-entry transfer system covered by a confirmation concerning short-term national government bonds, etc., or submits a written application prescribed in Article 5-2, paragraph (11) of the Act pursuant to the provisions of paragraph (11) of the said Article with regard to book-entry transfer local government bonds (such written application shall be referred to as a "written application for a change of book-entry transfer local government bonds" in paragraph (26)). In this case, in the preceding paragraph, the term "pursuant to the provisions of paragraph (9) of the said Article with regard to a confirmation concerning the said book-entry local government bonds" shall be deemed to be replaced with "pursuant to the provisions of paragraph (9) of the said Article with regard to a confirmation concerning other book-entry local government bonds or a confirmation concerning interest-bearing book-entry transfer national government bonds"; the term "a confirmation concerning the said book-entry transfer local government bonds or" shall be deemed to be replaced with "a confirmation concerning other book-entry transfer local government bonds, a confirmation concerning the said interest-bearing book-entry transfer national government bonds or"; the term "a written application for tax exemption of book-entry transfer national government bonds or written application for a change of book-entry transfer national government bonds" shall be deemed to be replaced with "a written application for tax exemption of book-entry transfer local government bonds or written application for a change of book-entry transfer local government bonds."

(24) When a person who has submitted a written application for tax exemption of book-entry transfer national government bonds (including one who shall be deemed to have submitted a written application for tax exemption of book-entry transfer national government bonds pursuant to the provisions of paragraph (3); hereinafter the same shall apply in this paragraph, the following paragraph and paragraph (28)) has made entries or records under the book-entry transfer system regarding book-entry transfer national government bonds through a specified book-entry transfer institution, etc. or qualified foreign intermediary, or submitted a written application for a change of book-entry transfer national government bonds to a specified book-entry transfer institution, etc. or qualified foreign intermediary, the said specified book-entry transfer institution, etc. or qualified foreign intermediary shall, on each occasion, for each person who has submitted the said written application for tax exemption of book-entry transfer national government bonds (in the case where the person who has submitted the said written application for tax exemption of book-entry transfer national government bonds is the trustee of a qualified foreign securities investment trust, for each person who has submitted the said written application for tax exemption of book-entry transfer national government bonds and for each qualified foreign securities investment trust accepted thereby), enter or record in the books for book-entry transfer the matters prescribed in Article 5-2, paragraph (13) of the Act, and preserve the said books for book-entry transfer pursuant to the provisions of Ordinance of the Ministry of Finance.

(25) When a person who has submitted a written application for tax exemption of book-entry transfer national government bonds has made entries or records under the book-entry transfer system regarding book-entry transfer national government bonds through a qualified foreign intermediary, or submitted a written application for a change of book-entry transfer national government bonds to a qualified foreign intermediary, the said qualified foreign intermediary shall, for each person who has submitted the said written application for tax exemption of book-entry transfer national government bonds (in the case where the person who has submitted the said written application for tax exemption of book-entry transfer national government bonds is the trustee of a qualified foreign securities investment trust, for each person who has submitted the said written application for tax exemption of book-entry transfer national government bonds and for each qualified foreign securities investment trust accepted thereby), notify the matters prescribed in Article 5-2, paragraph (14) of the Act to the specified book-entry transfer institution, etc. prescribed in the said paragraph of the said qualified foreign intermediary pertaining to the said book-entry transfer national government bonds.

(26) The provisions of paragraph (24) shall apply mutatis mutandis where a person who has submitted a written application for tax exemption of book-entry transfer local government bonds (including one who shall be deemed to have submitted a written application for tax exemption of book-entry transfer local government bonds pursuant to the provisions of paragraph (5); hereinafter the same shall apply in this paragraph and paragraph (28)) has made entries or records under the book-entry transfer system regarding book-entry transfer local government bonds through a specified book-entry transfer institution, etc. or qualified foreign intermediary, or submitted a written application for a change of book-entry transfer local government bonds to a specified book-entry transfer institution, etc. or qualified foreign intermediary; and the provisions of the preceding paragraph shall apply mutatis mutandis where a person who has submitted a written application for tax exemption of book-entry transfer local government bonds has made entries or records under the book-entry transfer system regarding book-entry transfer local government bonds through a qualified foreign intermediary, or submitted a written application for a change of book-entry transfer local government bonds to a qualified foreign intermediary. In this case, in paragraph (24), the term "the said written application for tax exemption of book-entry transfer national government bonds" shall be deemed to be replaced with "the said written application for tax exemption of book-entry transfer local government bonds"; in the preceding paragraph, the term "the said written application for tax exemption of book-entry transfer national government bonds" shall be deemed to be replaced with "the said written application for tax exemption of book-entry transfer local government bonds," and the term "pertaining to the said book-entry transfer national government bonds" shall be deemed to be replaced with "pertaining to the said book-entry transfer local government bonds."

(27) The means specified by Cabinet Order prescribed in Article 5-2, paragraph (14) of the Act shall be a means of using an electronic data processing system or another means of using information and communications technology that is specified by Ordinance of the Ministry of Finance.

(28) Where a specified book-entry transfer institution, etc. has received the notice prescribed in paragraph (25) (including the cases where it is applied mutatis mutandis pursuant to paragraph (26)), it shall, on each occasion of receiving the notice, for each person who has submitted a written application for tax exemption of book-entry transfer national government bonds or written application for tax exemption of book-entry transfer local government bonds (in the case where the person who has submitted the said written application for tax exemption of book-entry transfer national government bonds or written application for tax exemption of book-entry transfer local government bonds is the trustee of a qualified foreign securities investment trust, for each person who has submitted the said written application for tax exemption of book-entry transfer national government bonds or written application for tax exemption of book-entry transfer local government bonds and for each qualified foreign securities investment trust accepted thereby), enter or record in the books prescribed in Article 5-2, paragraph (14) of the Act the matters mentioned in the said notice, and preserve the said books pursuant to the provisions of Ordinance of the Ministry of Finance.

(29) The national government bonds specified by Cabinet Order prescribed in Article 5-2, paragraph (15), item (i) of the Act shall be the book-entry transfer national government bonds specified respectively in the following items for the category of persons listed in the relevant items:

(i) Nonresident or foreign corporation (excluding those listed in the following item): The book-entry transfer national government bonds for which the nonresident or foreign corporation made entries or records under the book-entry transfer system (limited to those subject to the provisions of Article 5-2, paragraph (1) of the Act in terms of interest thereon)

(ii) Nonresident or foreign corporation that falls under the category of financial institution prescribed in Article 8, paragraph (1) of the Act or the category of financial instruments business operator, etc. prescribed in paragraph (2) of the said Article: The book-entry transfer national government bonds for which the nonresident or foreign corporation made entries or records under the book-entry transfer system

(30) The means specified by Cabinet Order prescribed in Article 5-2, paragraph (15), item (iii) of the Act shall be a means of using an electronic data processing system or another means of using information and communications technology that is specified by Ordinance of the Ministry of Finance.

(31) A specified book-entry transfer institution, etc. pertaining to the entries or records under the book-entry transfer system regarding the book-entry transfer national government bonds held by a nonresident or foreign corporation shall, where it has received the notice pursuant to the provisions of Article 5-2, paragraph (15), item (iii) of the Act by means of a document, preserve the said document pursuant to the provisions of Ordinance of the Ministry of Finance.

(32) The specified book-entry transfer institution, etc. set forth in the preceding paragraph shall, where it has received the notice pursuant to the provisions of Article 5-2, paragraph (15), item (iii) of the Act by the means prescribed in paragraph (30), preserve the document or microfilm produced by outputting the matters contained in the said notice using input-output devices of an electronic data processing system prescribed in the said paragraph (limited to those specified by Ordinance of the Ministry of Finance), pursuant to the provisions of Ordinance of the Ministry of Finance.

(33) The national government bonds specified by Cabinet Order prescribed in Article 5-2, paragraph (16), item (i) of the Act shall be the book-entry transfer national government bonds specified respectively in the following items for the category of persons listed in the relevant items:

(i) Nonresident or foreign corporation (excluding those listed in the following item): The book-entry transfer local government bonds for which the nonresident or foreign corporation made entries or records under the book-entry transfer system (limited to those subject to the provisions of Article 5-2, paragraph (1) of the Act in terms of interest thereon)

(ii) Nonresident or foreign corporation that falls under the category of financial institutions prescribed in Article 8, paragraph (1) of the Act or the category of financial instruments business operator, etc. prescribed in paragraph (2) of the said Article: The book-entry transfer local government bonds for which the nonresident or foreign corporation made entries or records under the book-entry transfer system

(34) The means specified by Cabinet Order prescribed in Article 5-2, paragraph (16), item (iii) of the Act shall be a means of using an electronic data processing system or another means of using information and communications technology that is specified by Ordinance of the Ministry of Finance.

(35) The provisions of paragraph (31) shall apply mutatis mutandis where the said specified book-entry transfer institution, etc. has received the notice pursuant to Article 5-2, paragraph (16), item (iii) of the Act by means of a document.

(36) The specified book-entry transfer institution, etc. set forth in paragraph (31) as applied mutatis mutandis pursuant to the preceding paragraph shall, where it has received the notice pursuant to the provisions of Article 5-2, paragraph (16), item (iii) of the Act by the means prescribed in paragraph (34), preserve the document or microfilm produced by outputting the matters contained in the said notice using input-output devices of an electronic data processing system prescribed in the said paragraph (limited to those specified by Ordinance of the Ministry of Finance), pursuant to the provisions of Ordinance of the Ministry of Finance.

(Special Provisions for Taxation on Interest on Foreign-issued Company Bonds)

Article 3-2 (1) The company bonds specified by Cabinet Order, prescribed in Article 6, paragraph (1) of the Act, shall be the company bonds listed as follows:

(i) Where the interest in whole or in part from bonds issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act is attributed to a business which is conducted by the said foreign corporation in Japan through a fixed place of business prescribed in the said item, the said company bonds

(ii) Where the interest in whole or in part on company bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act is attributed to a business that is conducted by the said foreign corporation as prescribed in these items, the said company bonds.

(2) The amount specified by Cabinet Order, prescribed in Article 6, paragraph (1) of the Act, shall be an amount listed as follows:

(i) The part of the amount equivalent to the interest to be received with regard to the general foreign-issued company bonds (meaning the general foreign-issued company bonds prescribed in Article 6, paragraph (1) of the Act; hereinafter the same shall apply in this Article) issued by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act, which is attributed to a business that is conducted by the said foreign corporation in Japan through a fixed place of business as prescribed in the said item

(ii) The part of the amount equivalent to the interest to be received with regard to the general foreign-issued company bonds issued by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act, which is attributed to a business that is conducted by the said foreign corporation as prescribed in these items

(3) The amount specified by Cabinet Order, prescribed in Article 6, paragraph (2) of the Act, shall be an amount listed as follows:

(i) The part of the amount equivalent to the interest to be paid to a resident or a domestic corporation with regard to the general foreign-issued company bonds issued by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act, which is attributed to a business that is conducted by the said foreign corporation in Japan through a fixed place of business as prescribed in the said item

(ii) The part of the amount equivalent to the interest to be paid to a resident or a foreign corporation with regard to the general foreign-issued company bonds issued by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act, which is attributed to a business that is conducted by the said foreign corporation as prescribed in these items

(4) The place for paying income tax on the interest on general foreign-issued company bonds issued by a foreign corporation that is to be collected and paid pursuant to the provisions of Article 6, paragraph (2) of the Act shall be at the location of the principal office of the said foreign corporation in Japan.

(5) The foreign corporation specified by Cabinet Order, prescribed in Article 6, paragraph (4) of the Act, shall be a foreign corporation listed as follows:

(i) A foreign corporation that has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) A foreign corporation whose tax imposed on the income is not more than 25% of the total income for a business year as prescribed in Article 2, paragraph (2), item (xix) of the Act that includes the day on which it issued general foreign-issued company bonds pertaining to the interest for which it seeks the application of the provisions of Article 6, paragraph (4) of the Act (referred to as "business year of issuing foreign-issued company bonds" in paragraph (7), item (iii))

(6) The provisions of Article 25-19, paragraph (2) shall apply mutatis mutandis to the determination as to whether or not a foreign corporation that issues general foreign-issued company bonds (referred to as a "foreign corporation issuing foreign-issued company bonds" in the following paragraph to paragraph (9)) falls under the category of the foreign corporation listed in item (ii) of the preceding paragraph. In this case, the term "each business year" in paragraph (2), item (i) of the said Article shall be deemed to be replaced with "the business year of issuing foreign-issued company bonds (meaning the business year of issuing foreign-issued company bonds prescribed in Article 3-2, paragraph (5), item (ii); hereinafter the same shall apply in this paragraph)," and the term "each business year" in item (ii) of the said paragraph shall be deemed to be replaced with "the business year of issuing foreign-issued company bonds."

(7) Where a foreign corporation issuing foreign-issued company bonds meets all of the following requirements, it shall not be included in the category of foreign corporations listed in the items of paragraph (5):

(i) Its principal business does not fall under any of the categories of the holding of shares (including capital contributions; referred to as "shares, etc." in paragraphs (9) to (11)) or bonds, the provisions of industrial property rights or any other rights concerning technology, production methods involving special technology or any other equivalent rights or methods (including the right to use such rights) or copyrights (including publication rights, neighboring rights and any other equivalent rights), or the lending of vessels or aircraft.

(ii) It has an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in the state or territory where its head office or principal office is located (referred to as the "state of the head office" in (b) of the following item), and takes charge of managing, controlling, and operating the business on its own account.

(iii) It falls under any of the cases specified as follows for the respective categories of its principal businesses that it conducts in the business year of issuing foreign-issued company bonds:

(a) Wholesale business, banking business, trust business, financial instruments business, insurance business, water transportation business, or air transportation business: The cases specified as follows for the categories of its principal businesses listed respectively as follows:

1. Wholesale business: Where, out of the total revenue from selling inventory assets (meaning inventory assets prescribed in Article 2, item (xx) of the Corporation Tax Act; the same shall apply in 1.) for the business year of issuing foreign-issued company bonds (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets, such revenues shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of sales transactions" in 1.), the ratio of the sum of the amount of sales transactions with a person other than affiliated persons exceeds 50 percent, or out of the sum of the acquisition costs for acquiring inventory assets for the business year of issuing foreign-issued company bonds (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets, such acquisition costs shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of purchase transactions" in 1.), the ratio of the sum of the amount of purchase transactions with a person other than affiliated persons exceeds 50 percent

2. Banking business: Where, out of the sum of the total interest received for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said interest to be received from a person other than affiliated persons exceeds 50 percent, or out of the sum of the total interest paid for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said interest to be paid to a person other than affiliated persons exceeds 50 percent

3. Trust business: Where, out of the sum of the total trust charge for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said trust charge to be received from a person other than affiliated persons exceeds 50 percent

4. Financial instruments business: Where, out of the sum of the total commissions received (including profits from the buying and selling of securities) for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said commissions to be received from a person other than affiliated persons exceeds 50 percent

5. Insurance business: Where, out of the sum of the total premium income for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said premium income to be received from a person other than affiliated persons (where the said premium income pertains to reinsurance, limited to premium income from insurance for assets held by a person other than affiliated persons or damages incurred by a person other than affiliated persons) exceeds 50 percent

6. Water transportation business or air transportation business: Where, out of the total revenue from the operation or rental of vessels or operation or rental of aircrafts for the business year of issuing foreign-issued company bonds, the ratio of the sum of the said revenue to be received from a person other than affiliated persons exceeds 50 percent.

(b) Business other than those listed in (a): The cases specified as follows for the respective categories of its principal businesses listed as follows:

1. Real estate business: Where conducting a buying and selling or rental business of real estate (including acts to let others use the said real estate) (real estate shall include the rights thereon; hereinafter the same shall apply in 1.) mainly located in the state of the head office, providing agent or intermediary services for the buying and selling or rental business of the said real estate, and managing the said real estate

2. Rental and leasing business: Where conducting a rental business for goods to be provided for use mainly in the state of the head office

3. Business other than those listed in (a) above, and in 1. and 2.: Where conducting a business mainly in the state of the head office.

(8) Where transactions between a foreign corporation issuing foreign-issued company bonds and an affiliated person related to the said foreign corporation issuing foreign-issued company bonds are conducted indirectly via a person other than an affiliated person related to the said foreign corporation issuing foreign-issued company bonds (hereinafter referred to as a "non-affiliated person" in this paragraph), transactions between the said foreign corporation issuing foreign-issued company bonds and the said non-affiliated person shall be deemed to have been conducted directly between the said foreign corporation issuing foreign-issued company bonds and the said affiliated person, and the provisions of item (iii), (a) of the preceding paragraph shall apply, except in the case where there are reasonable grounds for having the said non-affiliated person intervene in such transactions.

(9) The affiliated person prescribed in paragraph (7), item (iii), (a) and the preceding paragraph shall be a person listed as follows:

(i) When there is a relationship between a foreign corporation issuing foreign-issued company bonds and any other corporation whereby either of them directly or indirectly holds over 50 percent of the total number or total amount of the other corporation's issued shares or capital contributions (excluding either of the said corporations' own shares held by the said corporation itself; hereinafter referred to as the "issued shares, etc." in this paragraph to paragraph (11)), the said other corporation (excluding a corporation falling under the category of persons listed in the following item)

(ii) When there is a relationship whereby over 50 percent of the total number or total amount of the issued shares, etc. of a foreign corporation issuing foreign-issued company bonds and any other corporation are respectively held directly or indirectly by the same person (where the said person is an individual, the said individual and an individual who has a special relationship as prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the said other corporation.

(10) In the case referred to in item (i) of the preceding paragraph, whether or not one of the two corporations directly or indirectly holds over 50 percent of the total number or the total amount of the other corporation's issued shares, etc. shall be determined according to the ratio obtained by adding the ownership ratio for the shares, etc. pertaining to the said other corporation held directly by the said one of the two corporations (meaning the ratio of the number or the amount of the said other corporation's shares or capital contributions held by the said one of the two corporations out of the total issued shares, etc. of the said other corporation) and the ownership ratio for the shares, etc. pertaining to the said other corporation held indirectly by the said one of the two corporations.

(11) The ownership ratio for the shares, etc. held indirectly that is prescribed in the preceding paragraph shall be a ratio specified in the following items for the category of cases listed in the respective items (where falling under both of the following cases, the sum of the ratios specified as follows):

(i) Where over 50 percent of the total number or the total amount of the issued shares, etc. of a corporation which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (viii)-2 of the Income Tax Act; the same shall apply in the following item) of the other corporation set forth in the preceding paragraph are held by the said one of the two corporations set forth in the preceding paragraph: The ratio of the number or the amount of shares, etc. of the said other corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of the other corporation set forth in the preceding paragraph (excluding a corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item) and the said one of the two corporations set forth in the preceding paragraph and has(have) a linkage with them through holding the issued shares, etc. (hereinafter such intervening corporation(s) shall be referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where over 50 percent of the total number or the total amount of the issued shares, etc. of each of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held by the said one of the two corporations or a capital contribution-related corporation(s) (such one of the two corporations or capital contribution-related corporation(s) shall be limited to those, over 50 percent of the total number or the total amount of whose issued shares, etc. are held by the said one of the two corporations or other capital contribution-related corporation(s))): The ratio of the number or the amount of shares, etc. of the said other corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(12) The person in charge of handling payment as specified by Cabinet Order prescribed in Article 6, paragraph (4) of the Act shall be the person prescribed in Article 2-2, paragraph (2) who is in Japan, and the person who provides, outside Japan, intermediary, brokerage or agent services (referred to as the "intermediary services, etc." in paragraph (21) and paragraph (35)) for the receipt of interest on foreign-issued company bonds prescribed in Article 6, paragraph (1) of the Act (referred to as "foreign-issued company bonds" in paragraph (33)) as the person's own operations or in relation to such operations.

(13) A written application for tax exemption pursuant to the provisions of Article 6, paragraph (4) of the Act (referred to as a "written application for tax exemption" in the following paragraph to paragraph (17)) shall be submitted, on each occasion of receiving payment of interest on general foreign-issued company bonds, to the district director of the tax office prescribed in Article 6, paragraph (4) of the Act, via the person who pays the interest (in the case where the said interest is paid via a person in charge of handling payment as prescribed in paragraph (4) of the said Article (hereinafter referred to as a "person in charge of handling payment" in this Article), submission shall be made via the said person in charge of handling payment and the person who pays the interest).

(14) A person who submits a written application for tax exemption shall, upon submitting it, present a document that certifies that the person falls under the category of nonresidents or foreign corporations (limited to such document that contains the name and domicile or residence or the location of the person's head office or principal office (hereinafter referred to as "domicile, etc." in this paragraph, the following paragraph and paragraph (19)), each of which is located outside Japan; the same shall apply in the said paragraph), to a person who pays interest based on the said written application for tax exemption (in the case where the said interest is paid via a person in charge of handling payment, the document shall be presented to the said person in charge of handling payment; hereinafter the same shall apply in this paragraph and the following paragraph), and the said person who pays interest shall confirm, by the document presented thereto, the name and domicile, etc. located outside Japan as entered in the said written application for tax exemption.

(15) A person who pays interest on general foreign-issued company bonds shall, when he/she has confirmed, by the document prescribed in the preceding paragraph, the name or domicile etc. located outside Japan as entered in the written application for tax exemption pertaining to the interest on the said general foreign-issued company bonds which has been submitted thereto, enter in the said written application for tax exemption to that effect that such confirmation has been provided as well as the name and domicile, etc. of the said person who pays interest.

(16) A person who pays interest on general foreign-issued company bonds shall, when he/she has received a written application for tax exemption pertaining to the interest on the said general foreign-issued company bonds, submit the said written application for tax exemption to the district director of the tax office prescribed in Article 6, paragraph (4) of the Act no later than the final day of the month that includes the day on which the person has received the written application.

(17) A person who pays interest on general foreign-issued company bonds shall, when he/she has received a written application for tax exemption pertaining to the interest on the said general foreign-issued company bonds, prepare and preserve a copy of the said written application for tax exemption (including its equivalent), pursuant to the provisions of Ordinance of the Ministry of Finance.

(18) The interest specified by Cabinet Order prescribed in Article 6, paragraph (4) and paragraph (10) of the Act shall be the interest listed as follows:

(i) Interest to be received by a nonresident listed in Article 164, paragraph (1), item (i) of the Income Tax Act, which is attributed to a business that is conducted by the said nonresident in Japan through a fixed place of business as prescribed in Article 164, paragraph (1), item (i) of the said Act

(ii) Interest to be received by nonresidents listed in Article 164, paragraph (1), item (ii) or item (iii) of the Income Tax Act, which is attributed to a business prescribed in these provisions that is conducted by these nonresidents.

(19) A nonresident or foreign corporation who seeks the application of Article 6, paragraph (7) of the Act with respect to interest on specified foreign-issued company bonds prescribed in paragraph (7) of the said Article (hereinafter referred to as "specified foreign-issued company bonds" through to paragraph (29)) shall, upon entrusting a person in charge of handling payment with custody of the said specified foreign-issued company bonds, pursuant to the provisions of Ordinance of the Ministry of Finance, notify the said person in charge of handling payment of his/her or its name and domicile, etc. located outside Japan, and obtain a confirmation with regard to the matters contained in the notification, by presenting a document that certifies that he/she or it falls under the category of nonresidents or foreign corporations or by any other method equivalent thereto.

(20) Where a nonresident or foreign corporation who seeks the application of Article 6, paragraph (7) of the Act with respect to interest on specified foreign-issued company bonds entrusts a person in charge of handling payment with custody of the said specified foreign-issued company bonds, if he/she or it has already obtained a confirmation pursuant to the provisions of the preceding paragraph when entrusting the said person in charge of handling payment with custody of other specified foreign-issued company bonds or the case falls under any of those specified by Ordinance of the Ministry of Finance as equivalent thereto, notwithstanding the provisions of the said paragraph, the nonresident or foreign corporation shall not be required to give a notification pursuant to the provisions of the said paragraph when entrusting custody of the said specified foreign-issued company bonds.

(21) The person in charge of handling custody and payment prescribed in Article 6, paragraph (7) of the Act (hereinafter referred to as the "person in charge of handling custody and payment" through to paragraph (26)) shall, on each occasion of receiving the delivery of interest on specified foreign-issued company bonds, of which the person is entrusted with custody, in the course of the intermediary services, etc. for the receipt of such interest, no later than the day preceding the day on which the person is to receive the delivery, give a notice pursuant to the provisions of paragraph (7) of the said Article (hereinafter referred to as a "notice" through to paragraph (23)) to provide interest recipient information prescribed in paragraph (7) of the said Article (hereinafter referred to as "interest recipient information" through to paragraph (27)) which pertains to the interest to be delivered thereto to the person who pays the interest (in the case where the interest is delivered via any other person in charge of handling payment with whom the said person in charge of handling custody and payment has further entrusted custody, a notice shall be given to the person who pays the interest via such other person in charge of handling payment). In this case, if the person in charge of handling custody and payment receives the delivery of interest on the said specified foreign-issued company bonds, for the first time, on or after the day on which 40 days have elapsed since the day on which the said specified foreign-issued company bonds were issued, the notice of interest recipient information pertaining to the interest to be delivered thereto shall be given on or after the said day on which the 40-day period has expired.

(22) Where a person in charge of handling custody and payment receives the delivery of interest on specified foreign-issued company bonds, of which the person is entrusted with custody, on or after the day on which the person has received the delivery of interest pertaining to the interest recipient information of which the said person gave a notice to the person who pays interest on the said specified foreign-issued company bonds (limited to such information provided in the notice stating to the effect that Article 6, paragraph (7), item (i) of the Act shall apply; hereinafter the same shall apply in this paragraph), if the person in charge of handling custody and payment has confirmed that all persons who are to receive payment of the interest (excluding interest subject to the provisions of Article 3-3, paragraph (3) or paragraph (6) of the Act; hereinafter the same shall apply in this paragraph) to be delivered thereto fall under the category of nonresidents or foreign corporations, the said person in charge of handling custody and payment may omit to give a notice of interest recipient information pertaining to the interest to be delivered thereto.

(23) The provisions of the preceding paragraph shall apply only where the person in charge of handling custody and payment set forth in the said paragraph has obtained approval in advance, pursuant to the provisions of Ordinance of the Ministry of Finance, from the person who pays interest set forth in the said paragraph with regard to the omission of a notice prescribed in the said paragraph. In this case, if the said person in charge of handling custody and payment has not given, by the day preceding the day on which the person is to receive the delivery of interest on the relevant specified foreign-issued company bonds, a notice of interest recipient information pertaining to the interest to be delivered thereto, a notice of interest recipient information shall be deemed to have been given, as of the said day, by the said person in charge of handling custody and payment to the person who pays interest, stating to the effect that Article 6, paragraph (7), item (i) of the Act shall apply.

(24) Where a person in charge of handling custody and payment is entrusted by subcontract with custody of other specified foreign-issued company bonds with the same issue as that of the specified foreign-issued company bonds of which the person is directly entrusted with custody, when the person has received a notice, as the relay point via which the notice shall be given pursuant to the provisions of Article 6, paragraph (7) of the Act, with regard to the interest recipient information pertaining to the interest on the said other specified foreign-issued company bonds, the person may, pursuant to the provisions of Ordinance of the Ministry of Finance, give a notice to provide the interest recipient information pertaining to the specified foreign-issued company bonds of which the person is directly entrusted with custody together with the interest recipient information of which the person has received a notice as such relay point, to the person who pays the interest (in the case where the interest is delivered via any other person in charge of handling payment with whom the said person in charge of handling custody and payment has further entrusted custody, a notice shall be given to the person who pays the interest via such other person in charge of handling payment). In this case, the said notice shall be deemed to be a notice of interest recipient information given pursuant to the provisions of paragraph (7) of the said Article.

(25) When a person who is entrusted by subcontract with custody of specified foreign-issued company bonds (excluding such person who is deemed to be a person in charge of handling custody and payment who is entrusted with custody of other specified foreign-issued company bonds with the same issue as that of the said specified foreign-issued company bonds; hereinafter referred to as a "person in charge of handling payment based on entrustment by subcontract" in this paragraph and the following paragraph) has received a notice, as the relay point via which the notice shall be given pursuant to the provisions of Article 6, paragraph (7) of the Act, with regard to two or more pieces of interest recipient information pertaining to the interest on the said specified foreign-issued company bonds, the person may, pursuant to the provisions of Ordinance of the Ministry of Finance, give a notice to provide these pieces of interest recipient information of which the person has received a notice as such relay point together, to the person who pays the interest (in the case where the interest is delivered via any other person in charge of handling payment with whom the said person in charge of handling custody and payment has further entrusted custody, a notice shall be given to the person who pays the interest via such other person in charge of handling payment). In this case, the said notice shall be deemed to be a notice of interest recipient information given pursuant to the provisions of paragraph (7) of the said Article.

(26) The provisions of paragraph (22) and paragraph (23) shall apply mutatis mutandis in the following cases:

(i) Where the person in charge of handling custody and payment or person in charge of handling payment based on entrustment by subcontract gives a notice, as the relay point via which a notice shall be given pursuant to the provisions of Article 6, paragraph (7) of the Act, to provide the interest recipient information pertaining to the interest on the specified foreign-issued company bonds of which the person is entrusted with custody directly or by subcontract, to the other person in charge of handling payment as prescribed in paragraph (7) of the said Article

(ii) Where the person in charge of handling payment based on entrustment by subcontract gives a notice pursuant to the provisions of the preceding paragraph to provide the interest recipient information pertaining to the interest on the specified foreign-issued company bonds of which the person is entrusted with custody by subcontract, to the person who pays interest on the said specified foreign-issued company bonds.

(27) A person who pays interest on specified foreign-issued company bonds shall, when paying such interest, prepare an interest recipient confirmation document prescribed in Article 6, paragraph (7) of the Act (hereinafter referred to as an "interest recipient confirmation document" in the following paragraph) based on the interest recipient information provided in the notice given thereto pursuant to the provisions of paragraph (21), paragraph (24) or paragraph (25) (including the interest recipient information of which a notice shall be deemed to have been given pursuant to the provisions of paragraph (23) (including the cases where it is applied mutatis mutandis pursuant to the preceding paragraph)).

(28) A person who pays interest on specified foreign-issued company bonds shall submit an interest recipient confirmation document prepared pursuant to the provisions of the preceding paragraph to the district director the tax office prescribed in Article 6, paragraph (7) of the Act no later than the final day of the month following the month that includes the day on which the interest pertaining to the said interest recipient confirmation document has been paid.

(29) A person who pays interest on specified foreign-issued company bonds shall enter in the books the interest recipient information provided in the notice given thereto pursuant to the provisions of paragraph (27), and preserve the said books pursuant to the provisions of Ordinance of the Ministry of Finance.

(30) The financial institution or financial instruments business operator specified by Cabinet Order prescribed in Article 6, paragraph (8) of the Act shall be any of the following:

(i) A bank, shinkin bank, Federation of Shinkin Banks, the Shoko Chukin Bank Limited, the Norinchukin Bank, a life insurance company, and casualty insurance company

(ii) A financial instruments business operator prescribed in Article 2, paragraph (9) of the Financial Instruments and Exchange Act (limited to one engaged in a Type I financial instruments business prescribed in Article 28, paragraph (1) of the said Act).

(31) The provisions of paragraphs (13) to (17), and paragraphs (19) to (29) shall apply mutatis mutandis where a domestic financial institution, etc. prescribed in Article 6, paragraph (8) of the Act shall be subject to the provisions of the main clause of paragraph (4) of the said Article as well as paragraph (6) and paragraph (7) of the said Article, all of which shall be applied mutatis mutandis pursuant Article 6, paragraph (8) of the Act. In this case, in paragraph (14), the term "the name and domicile or residence or the location of the person's head office or principal office (hereinafter referred to as "domicile, etc." in this paragraph, the following paragraph and paragraph (19)), each of which is located outside Japan" and the term "name and domicile, etc. located outside Japan" shall be deemed to be replaced with "name and the location of the person's head office or principal office"; in paragraph (15) and paragraph (19), the term "name and domicile, etc. located outside Japan" shall be deemed to be replaced with "name and the location of the person's head office or principal office"; and in paragraph (22), the term "nonresident or foreign corporation" shall be deemed to be replaced with "nonresident or foreign corporation, or domestic financial institution, etc. prescribed in Article 6, paragraph (8) of the Act."

(32) The state designated by Cabinet Order prescribed in Article 6, paragraph (11) of the Act shall be Switzerland.

(33) The requirements specified by Cabinet Order prescribed in Article 6, paragraph (11) of the Act shall be the requirements listed as follows:

(i) Redemption of the principal of the relevant foreign-issued company bonds and payment of interest thereon are made in the designated state prescribed in Article 6, paragraph (11) where the said foreign-issued company bonds were issued, using the currency of the said designated state

(ii) In the underwriting contract, etc. (meaning an underwriting contract, etc. prescribed in Article 6, paragraph (9), item (i) of the Act) concluded by the person who issues the said foreign-issued company bonds, it is provided that the person who performs the underwriting, etc. prescribed in paragraph (9), item (i) of the said Article (referred to as the "underwriting, etc." in the following item) of the said foreign-issued company bonds shall not have a resident or a domestic corporation acquire or buy the said foreign-issued company bonds by way of an offering or secondary distribution, dealing in an offering or secondary distribution, or any other operations equivalent thereto (referred to as the "offering or secondary distribution, etc." in the following item) under the said underwriting contract, etc.

(iii) All persons who have performed the underwriting, etc. of the relevant foreign-issued company bonds have, pursuant to the provisions of Ordinance of the Ministry of Finance, submitted a document stating to the effect that the requirement set forth in the preceding item has been satisfied during the performance of the offering or secondary distribution, etc. of all of the foreign-issued company bonds for which the underwriting, etc. has been performed, as well as any other matters specified by Ordinance of the Ministry of Finance, to the competent district director having jurisdiction over the location of the head office or principal office of the person who issued the said foreign-issued company bonds (where the said person who issued the said foreign-issued company bonds is a foreign corporation, the location of the foreign corporation's principal office in Japan), via the said person who issued the bonds.

(34) With respect to the application of the provisions of Article 267, paragraph (2) of the Order for Enforcement of the Income Tax Act in the case where a resident who has, in a given year, interest income from interest (excluding interest subject to the provisions of Article 3-3, paragraph (1) of the Act) on general foreign-issued company bonds, submits a final return form prescribed in Article 267, paragraph (2) of the said Act, the term "written statement" in paragraph (2) of the said Article shall be deemed to be replaced with "written statement or any other document specified by Ordinance of the Ministry of Finance."

(35) A person who pays interest on specified foreign-issued company bonds may request a person in charge of handling payment in Japan to give a notice thereto of the part of the amount of interest on the relevant foreign-issued company bonds delivered by the said person in charge of handling payment in the course of intermediary services, etc. for the receipt of such interest, which is subject to the provisions of Article 3-3, paragraph (3) or paragraph (6) of the Act.

(36) The provisions of paragraph (12) to the preceding paragraph shall apply mutatis mutandis where the provisions of Article 6, paragraphs (1) to (12) of the Act as applied mutatis mutandis pursuant to paragraph (13) of the said Article shall apply with respect to interest on foreign currency denominated bonds prescribed in the said paragraph.

(Exclusion from Taxation of Interest on Deposits, etc. Settled in the Special International Financial Transactions Account)

Article 3-2-2 (1) The bond transaction with a repurchase or resale agreement specified by Cabinet Order as prescribed in Article 7 of the Act shall be a bond transaction with a repurchase/resale agreement (referred to as a "bond transaction with a repurchase/resale agreement" in the following paragraph) prescribed in Article 283, paragraph (4) of the Order for Enforcement of the Income Tax Act.

(2) The margin specified by Cabinet Order as prescribed in Article 7 of the Act shall be a margin equivalent to the amount calculated, in the case where in a bond transaction with a repurchase/resale agreement that a financial institution prescribed in the said Article conducts with a foreign corporation prescribed in the said Article and that has been settled in the special international financial transaction account, the value for purchasing bonds upon the purchase is less than the value for reselling bonds of the same type and the same quantity upon resale, by deducting the value for the said purchase from the value for the said resale.

(Special Provisions for Taxation on Distribution of Profit from Foreign Special Purpose Trust or Distribution of Proceeds from Foreign Special Investment Trust)

Article 4-9 (1) Where a distribution of profit from a foreign special purpose trust prescribed in Article 9-5-2, paragraph (7), item (i) of the Act or a distribution of proceeds from a foreign special investment trust prescribed in item (ii) of the said paragraph is paid to a foreign corporation in Japan, with regard to the application of the provisions of Article 225, paragraph (1) of the Income Tax Act, the said distribution of profit from a foreign special purpose trust or distribution of proceeds from a foreign special investment trust shall be deemed to be a dividend of surplus to be received from a domestic corporation prescribed in Article 161, item (v), (a) of the said Act.

(2) With regard to the application of the provisions of Article 225, paragraph (1) of the Income Tax Act to a person who pays a distribution of profit from a special purpose trust prescribed in Article 9-5-2, paragraph (7), item (i) of the Act or a distribution of proceeds from a foreign special investment trust prescribed in item (ii) of the said paragraph to a nonresident or a foreign corporation in Japan, the phrase "a person who makes payment" in item (viii) in the said paragraph shall be deemed to be replaced with "a person who makes payment (including a person who pays a distribution of profit from a foreign special purpose trust prescribed in Article 9-5-2, paragraph (7), item (i) (Special Provisions for Taxation on Distribution of Profit from Foreign Special Purpose Trust or Distribution of Proceeds from Foreign Special Investment Trust) of the Act on Special Measures Concerning Taxation or a distribution of proceeds from a foreign special investment trust prescribed in item (ii) of the said paragraph to a nonresident or a foreign corporation in Japan)."

Section 8-2 Special Provisions, etc. for Taxation on Income from Transfer of Securities

(Special Provisions for Taxation on Domestic Source Income from Transfer of Shares, etc. of a Nonresident Having No Permanent Establishments)

Article 25-11 (1) The amount that is calculated pursuant to the method specified by Cabinet Order as the amount of domestic source income from transfer of shares, etc. prescribed in Article 37-12, paragraph (1) of the Act shall be the sum of the amounts that are treated as the amount of business income, the amount of capital gains, and the amount of miscellaneous income in the case where domestic source income from the transfer of shares, etc. prescribed in the said paragraph (hereinafter referred to as "domestic source income from the transfer of shares, etc." in this Article) is calculated in accordance with the provisions of Part II, Chapter II, Section 2 of the Income Tax Act. In this case, if there is any amount of loss generated when calculating these amounts in the relevant year, the said amount of loss shall be deducted from the amount of income prescribed in the following items for the category of loss listed in the said items:

(i) The amount of loss generated when calculating the amount that is treated as the amount of business income in the case where domestic source income from the transfer of shares, etc. is calculated in accordance with the provisions of Part II, Chapter II, Section 2 of the Income Tax Act: The amounts that are treated as the amount of capital gain and the amount of miscellaneous income in the case of calculating domestic source income from the transfer of shares, etc. in accordance with the provisions of the said Section

(ii) The amount of loss generated when calculating the amount that is treated as the amount of capital gains in the case where domestic source income from the transfer of shares, etc. is calculated in accordance with the provisions of Part II, Chapter II, Section 2 of the Income Tax Act: The amounts that are treated as the amount of business income and the amount of miscellaneous income in the case where domestic source income from the transfer of shares, etc. is calculated in accordance with the provisions of the said Section

(iii) The amount of loss generated when calculating the amount that is treated as the amount of miscellaneous income in the case where domestic source income from the transfer of shares, etc. is calculated in accordance with the provisions of Part II, Chapter II, Section 2 of the Income Tax Act: The amounts that are treated as the amount of business income and the amount of capital gains in the case where domestic source income from the transfer of shares, etc. is calculated in accordance with the provisions of the said Section.

(2) The provisions of Article 25-8, paragraph (6) shall apply mutatis mutandis where the provisions of Article 37-10, paragraph (3) of the Act as applied mutatis mutandis pursuant to Article 37-12, paragraph (4) of the Act apply.

(3) The provisions of Article 25-8, paragraph (7) shall apply mutatis mutandis pursuant to the calculation of the amount of business income prescribed in paragraph (1).

(4) Where a nonresident having no permanent establishments in Japan as prescribed in Article 37-12, paragraph (1) of the Act who has domestic source income from the transfer of shares, etc. in the relevant year files a final return form, he/she shall, pursuant to the provisions of Ordinance of the Ministry of Finance, attach a detailed statement concerning the calculation of the amount of domestic source income from the transfer of shares, etc. to the said final return form. In this case, with regard to the application of the provisions of Article 120, paragraph (4) of the Income Tax Act, the phrase "business income" in the said paragraph shall be deemed to be replaced with "business income (excluding domestic source income from the transfer of shares, etc. prescribed in Article 37-12, paragraph (1) (Special Provisions for Taxation on Domestic Source Income from Transfer of Shares, etc. of a Nonresident Having No Permanent Establishments) of the Act on Special Measures Concerning Taxation)."

(5) The provisions of Article 25-8, paragraphs (12) through (15) shall apply mutatis mutandis in the case where the provisions of Article 37-12, paragraph (1) of the Act apply. In this case, in the provisions of Article 25-8, paragraphs (12) through (15), the phrase "Article 37-10, paragraph (1)" shall be deemed to be replaced with "Article 37-12, paragraph (1)"; the phrase "(Special Provisions for Taxation on Capital Gains, etc. from Shares, etc.)" shall be deemed to be replaced with "(Special Provisions for Taxation on Domestic Source Income from Transfer of Shares, etc. of a Nonresident Having No Permanent Establishments)"; the phrase "with regard to the amount of taxable capital gains, etc. from shares, etc. (hereinafter referred to as the "amount of taxable capital gains, etc. from shares, etc.") and the estimated amount of taxable timber income, the provisions of Chapter III (Calculation of Tax Amount) and the said paragraph" shall be deemed to be replaced with "with regard to the amount of domestic source income from shares, etc. (in the case of applying the provisions of Article 72 (Deduction of Casualty Loss), Article 78 (Deduction of Donation), Article 86 (Basic Exemption), and Article 87 (Order of Exemption and Deduction from Income) that are applied pursuant to the provisions of Article 37-10, paragraph (6), item (v) (Special Provisions for Taxation on Capital Gains, etc. from Shares, etc.) of the said Act as applied mutatis mutandis pursuant to paragraph (4) of the said Article, the amount after the application; hereinafter referred to as the "amount of taxable domestic source income from the transfer of shares, etc.") and the estimated amount of taxable timber income, the provisions of Chapter III (Calculation of Tax Amount) and Article 37-12, paragraph (1) of the said Act"; the phrase "the amount of capital gains, etc. from shares, etc. (hereinafter referred to as the "amount of capital gains, etc. from shares, etc.")" shall be deemed to be replaced with "the amount of domestic source income from the transfer of shares, etc. (hereinafter referred to as the "amount of domestic source income from the transfer of shares, etc.")"; the phrase "the amount of capital gains, etc. from shares, etc." shall be deemed to be replaced with "the amount of domestic source income from the transfer of shares, etc."; the phrase "the amount of taxable capital gains, etc. from shares, etc." shall be deemed to be replaced with "the amount of taxable domestic source income from the transfer of shares, etc."; and the phrase "the amount of taxable capital gains, etc. from shares, etc. (hereinafter referred to as "the amount of taxable capital gains, etc. from shares, etc.")" shall be deemed to be replaced with "the amount of domestic source income from the transfer of shares, etc. (in the case of applying the provisions of Article 72 (Deduction of Casualty Loss), Article 78 (Deduction of Donation), Article 86 (Basic Exemption), and Article 87 (Order of Exemption and Deduction from Income) that are applied pursuant to the provisions of Article 37-10, paragraph (6), item (v) (Special Provisions for Taxation on Capital Gains, etc. from Shares, etc.) of the said Act as applied mutatis mutandis pursuant to paragraph (4) of the said Article, the amount after the application; hereinafter referred to as the "amount of taxable domestic source income from the transfer of shares, etc.")."

(Special Provisions for Taxation in Cases of Receiving Delivery of Foreign Parent Corporation's Shares as a result of Merger, etc.)

Article 25-14 (1) The shares specified by Cabinet Order as shares to be managed as assets pertaining to business conducted in Japan as prescribed in Article 37-14-2, paragraph (1) of the Act shall be shares (including capital contributions; hereinafter the same shall apply in this Article) which are managed as assets pertaining to the business conducted in Japan by a nonresident having permanent establishments in Japan and which are managed at permanent establishments in Japan (meaning the fixed place for conducting a business prescribed in Article 164, paragraph (1), item (i) of the Income Tax Act, the construction work, etc. prescribed in item (ii) of the said paragraph that is carried out for more than one year, or the agent, etc. prescribed in item (iii) of the said paragraph; the same shall apply in the following paragraph and paragraph (3)).

(2) The act specified by Cabinet Order as prescribed in Article 37-14-2, paragraph (4) of the Act shall be any of the following acts:

(i) An act of discontinuing the management of the shares as assets pertaining to the business conducted in Japan

(ii) An act of transferring the shares to the person's domicile, residence or office, place of business, or any other place equivalent thereto located outside Japan

(iii) Any other act of discontinuing the management of the shares at permanent establishments in Japan.

(3) Where a nonresident having permanent establishments in Japan does not manage all or part of the parent corporation's shares managed in a domestic business prescribed in Article 37-14-2, paragraph (4) of the Act (hereinafter referred to as the "parent corporation's shares managed in a domestic business" through to paragraph (5), and paragraph (9) and paragraph (10)) as assets pertaining to the business conducted in Japan at the time of receiving the delivery thereof or where he/she does not manage such shares at permanent establishments in Japan, with regard to the part of the said parent corporation's shares managed in a domestic business that is not managed, the provisions of paragraph (4) of the said Article shall apply by deeming that the nonresident has performed any of the acts listed in the items of the preceding paragraph immediately after he/she has managed the said part as assets pertaining to the business conducted in Japan at the time of the delivery thereof and managed the same at permanent establishments in Japan.

(4) Where any of the acts listed in the items of paragraph (2) is performed with regard to the parent corporation's shares managed in a domestic business, the said act shall not be included in the scope of acts listed in Article 279, paragraph (3), item (ii) of the Order for Enforcement of the Income Tax Act.

(5) Where the shares of the same issue held by a nonresident having permanent establishments in Japan contain the parent corporation's shares managed in a domestic business and shares other than those parent corporation's shares managed in a domestic business, when any of the acts listed in the items of paragraph (2) is performed with respect to these shares, the provisions of Article 37-14-2, paragraph (4) of the Act shall apply by deeming that the said act has been performed first with respect to the said parent corporation's shares managed in a domestic business among those shares of the same issue involved in the said act.

(6) The relationship specified by Cabinet Order as prescribed in Article 37-14-2, paragraph (5), item (ii) of the Act shall be the relationship with the merging corporation prescribed in the said item involved in a merger whereby the foreign corporation holds the whole of the issued shares of or capital contributions to the said merging corporation (excluding the shares of the said merging corporation held by itself; referred to as the "issued shares, etc." in the following paragraph and paragraph (8)), if such relationship exists immediately before the said merger.

(7) The relationship specified by Cabinet Order as prescribed in Article 37-14-2, paragraph (5), item (iv) of the Act shall be the relationship with a succeeding corporation in a company split prescribed in item (iv) of the said paragraph involved in a split-off-type company split prescribed in Article 2, item (xii)-9 of the Corporation Tax Act whereby the foreign corporation holds the whole of the issued shares, etc. of the said succeeding corporation in a company split, if such relationship exists immediately before the said split-off-type company split.

(8) The relationship specified by Cabinet Order as prescribed in Article 37-14-2, paragraph (5), item (vi) of the Act shall be the relationship with the wholly owning parent corporation in a share exchange prescribed in the said item pertaining to a share exchange whereby the foreign corporation holds the whole of the issued shares, etc. of the said wholly owning parent corporation in a share exchange, if such relationship exists immediately before the said share exchange.

(9) A nonresident having permanent establishments in Japan who receives the delivery of the parent corporation's shares managed in a domestic business in the relevant year shall submit a document stating the issue name and number of the parent corporation's shares managed in a domestic business that he/she holds as of December 31 of the year containing the day on which he/she receives the delivery thereof, as well as other matters specified by Ordinance of the Ministry of Finance, to the competent district director of the tax office having jurisdiction over the person's place for tax payment, no later than March 15 of the year following the relevant year.

(10) With regard to the application of the provisions of Article 25-8, paragraph (11) in the case where a nonresident having permanent establishments in Japan, who is subject to the provisions of Article 37-14-2, paragraph (4) of the Act with regard to the parent corporation's shares managed in a domestic business, files a final return form in the relevant year, the term "detailed statement concerning..." in Article 25-8, paragraph (11) shall be deemed to be replaced with "document stating the details of..., and other matters specified by Ordinance of the Ministry of Finance."

(11) Where a nonresident, with regard to the shares he/she holds, receives the delivery of a foreign merging parent corporation's shares prescribed in Article 37-14-2, paragraph (1) as a result of the specified merger prescribed in paragraph (5), item (i) of the said Article of a domestic corporation that issued those shares held by him/her, with regard to the calculation of the fair value of the said foreign merging parent corporation's shares, the provisions of Article 112, paragraph (1) of the Order for Enforcement of the Income Tax Act in the case of making a calculation in accordance with the provisions of the said paragraph pursuant to the provisions of Article 165 of the Income Tax Act shall not apply.

(12) Where a nonresident, with regard to the shares he/she holds, receives the delivery of shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-2, paragraph (2) as a result of a specified split-off-type company split prescribed in paragraph (5), item (iii) of the said Article which is effected by a domestic corporation that issued those shares held by him/her, with regard to the calculation of the fair value of the said shares of the foreign succeeding parent corporation in a company split, the provisions of Article 113, paragraph (1) of the Order for Enforcement of the Income Tax Act in the case of making a calculation in accordance with the provisions of the said paragraph pursuant to the provisions of Article 165 of the Income Tax Act shall not apply.

(13) Where a nonresident, with regard to the shares he/she holds, has transferred the said shares to the wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-4 of the Corporation Tax Act as a result of a specified share exchange prescribed in Article 37-14-2, paragraph (5), item (v) of the Act which is effected by a domestic corporation that issued those shares held by him/her, and received the delivery of shares of a fully controlling foreign parent corporation in a share exchange prescribed in article 37-14-2, paragraph (3) of the Act, with regard to the calculation of the amount of business income, the amount of capital gains, or the amount of miscellaneous income pertaining to the said fully controlling foreign parent corporation in a share exchange, the provisions of Article 167-7, paragraph (3) of the Order for Enforcement of the Income Tax Act in the case of making a calculation in accordance with the provisions of the said paragraph pursuant to the provisions of Article 165 of the Income Tax Act shall not apply.

(14) With regard to the application of the provisions of Article 280 and Article 291 of the Order for Enforcement of the Income Tax Act in the cases prescribed in paragraph (11) and paragraph (12): the phrase "or paragraph (4) ("in Article 280, paragraph (2) of the said Order shall be deemed to be replaced with "or paragraph (4) ("; the phrase "or the items of paragraph (4)" in the said paragraph shall be deemed to be replaced with "or the items of paragraph (4)"; the phrase "or extinguishment of rights..." in the said paragraph shall be deemed to be replaced with "or extinguishment of rights..., or transfer or extinguishment of rights corresponding to the value of the shares of the foreign merging parent corporation prescribed in Article 37-14-2, paragraph (1) (Special Provisions for Taxation in Cases of Receiving Delivery of Foreign Parent Corporation's Shares as a result of Merger, etc.) of the Act on Special Measures Concerning Taxation or shares of the foreign succeeding parent corporation in a company split prescribed in paragraph (2) of the said Article, with regard to the shares held as prescribed in paragraph (1) or (2) of the said Article based on the specified merger prescribed in paragraph (1) of the said Article or the specified split-off-type company split prescribed in paragraph (2) of the said Article, which has been the cause of the delivery of the said shares of the foreign merging parent corporation or the said shares of the foreign succeeding parent corporation in a company split, in the case where the amount equivalent to the said value shall be deemed to be revenue from capital gains, etc. from shares, etc. prescribed in Article 37-10, paragraph (1) of the said Act pursuant to the provisions of Article 37-14-2, paragraph (1) or paragraph (2) of the said Act"; the phrase "Article 280, paragraph (2)" in Article 291, paragraph (1), item (iii) of the said Order shall be deemed to be replaced with "Article 280, paragraph (2) whose terms and phrases are replaced pursuant to Article 25-14, paragraph (14) (Special Provisions for Taxation in Cases of Receiving Delivery of Foreign Parent Corporation's Shares as a result of Merger, etc.) of the Order for Enforcement of the Act on Special Measures Concerning Taxation"; the phrase "split-off-type company split ("in paragraph (7), item (i) of the said Article shall be deemed to be replaced with "split-off-type company split (limited to a specified split-off-type company split prescribed in Article 37-14-2, paragraph (5), item (iii) (Special Provisions for Taxation in Cases of Receiving Foreign Parent Corporation's Shares as a result of Merger, etc.) of the Act on Special Measures Concerning Taxation."; the phrase "through a split-off-type merger..., which falls under any of the following cases of company splits, the delivery of shares of a succeeding corporation in a company split prescribed in Article 2, item (xii)-3 of the said Act (hereinafter referred to as a "succeeding corporation in a company split" in this item), shares of a succeeding parent corporation in a company split prescribed in Article 113, paragraph (1) (Acquisition Cost for Shares, etc. Acquired through Split-Off-Type Company Split) (hereinafter referred to as a "succeeding parent corporation in a company split" in this item) or other assets" in the said item shall be deemed to be replaced with "through a split-off-type merger, the delivery of shares of a foreign succeeding parent corporation in a company split prescribed in paragraph (2) of the said Article"; and the phrase "paragraph (2) of the said Article" in the said item shall be deemed to be replaced with "Article 113, paragraph (2) (Acquisition Cost of Shares, etc. Acquired Through Split-Off-Type Company Split)."

(15) Where the provisions of Article 37-14-2, paragraphs (1) through (3) apply, the following provisions shall apply:

(i) With regard to the application of the provisions of Article 19-3, paragraph (9), the phrase "shares of a merging parent corporation" in the said paragraph shall be deemed to be replaced with "shares of a merging parent corporation (excluding shares of a foreign merging parent corporation prescribed in Article 37-14-2, paragraph (1) of the Act pertaining to the specified merger prescribed in paragraph (5), item (i) of the said Article)"; the phrase "shares of a succeeding parent corporation in a company split" in the said paragraph shall be deemed to be replaced with "shares of a succeeding parent corporation in a company split (excluding shares of a foreign succeeding parent corporation in a company split prescribed in article 37-14-2, paragraph (2) of the Act pertaining to the specified split-off-type company split prescribed in paragraph (5), item (iii) of the said Article)"; and the phrase "shares of a corporation... paragraph (2) of the said Article" in the said paragraph shall be deemed to be replaced with "shares of a corporation (excluding shares of a fully controlling foreign parent corporation in a share exchange prescribed in Article 37-14-2, paragraph (3) of the Act that are delivered from the wholly owning parent corporation in a share exchange as a result of a specified share exchange prescribed in paragraph (5), item (v) of the said Article) ... Article 57-4, paragraph (2) of the Income Tax Act".

(ii) With regard to the application of the provisions of Article 25-8-2, paragraph (3), the phrase "or paragraph (4)" in the said paragraph shall be deemed to be replaced with "or paragraph (4)"; the phrase "or the items of paragraph (4)" in the said paragraph shall be deemed to be replaced with "or the items of paragraph (4)"; and the phrase "or extinguishment of rights..." in the said paragraph shall be deemed to be replaced with "or extinguishment of rights..., or transfer or extinguishment of rights corresponding to the value of the shares of the foreign merging parent corporation prescribed in Article 37-14-2, paragraph (1) of the Act or shares of the foreign succeeding parent corporation in a company split prescribed in paragraph (2) of the said Article, with regard to the shares held as prescribed in paragraph (1) or (2) of the said Article based on the specified merger prescribed in paragraph (1) of the said Article or the specified split-off-type company split prescribed in paragraph (2) of the said Article, which has been the cause of the delivery of the said shares of the foreign merging parent corporation or the said shares of the foreign succeeding parent corporation in a company split, in the case where the amount equivalent to the said value shall be deemed to be revenue from capital gains, etc. from shares, etc. prescribed in Article 37-10, paragraph (1) of the said Act pursuant to the provisions of Article 37-14-2, paragraph (1) or paragraph (2) of the said Act."

(iii) With regard to the application of the provisions of Article 25-10, the phrase "acquisition" in paragraph (4) of the said Article shall be deemed to be replaced with "acquisition (excluding the acquisition of shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-2, paragraph (2) of the Act as a result of a specified split-off-type company split prescribed in paragraph (5), item (iii) of the said Article)"; the phrase "share exchange" in paragraph (5), item (i) of the said Article shall be deemed to be replaced with "share exchange (excluding the specified share exchange prescribed in Article 37-14-2, paragraph (2), item (v) of the Act in the case of acquiring shares of a fully controlling foreign parent corporation in a share exchange prescribed in paragraph (3) of the said Article as a result of the said specified share exchange)"; the phrase "Article 37-11-2, paragraph (2), item (ii) of the Act" in paragraph (6), item (i) of the said Article shall be deemed to be replaced with "Article 37-11-2, paragraph (2), item (ii) of the Act whose terms and phrase are replaced pursuant to the provisions of Article 37-14-2, paragraph (6), item (i) of the Act"; the phrase "paragraph (4)" in item (ii) of the said paragraph shall be deemed to be replaced with "paragraph (4) whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (iii)"; and the phrase "items of the preceding paragraph" in item (iii) of the said paragraph shall be deemed to be replaced with "items of the preceding paragraph whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (iii)."

(iv) With regard to the application of the provisions of Article 25-10-2, the phrase "item (x) of the following paragraph" in paragraph (14) of the said Article shall be deemed to be replaced with "item (x) of the following paragraph whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (iv)"; the phrase "shares of a merging parent corporation" in paragraph (15), item (vii) of the said Article shall be deemed to be replaced with "shares of a merging parent corporation (excluding shares of a foreign merging parent corporation prescribed in Article 37-14-2, paragraph (1) of the Act to be acquired as a result of a specified merger prescribed in paragraph (5), item (i) of the said Article; the same shall apply in this item)"; the phrase "shares of a succeeding parent corporation in a company split" in item (ix) of the said paragraph shall be deemed to be replaced with "shares of a succeeding parent corporation in a company split (excluding shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-2, paragraph (2) of the Act to be acquired as a result of a specified split-off-type company split prescribed in paragraph (5), item (iii) of the said Article; the same shall apply in this item)"; the phrase "shares... or ...in paragraph (2) of the said Article" in item (x) of the said paragraph shall be deemed to be replaced with "shares (excluding shares of a fully controlling foreign parent corporation in a share exchange prescribed in Article 37-14-2, paragraph (3) of the Act to be acquired as a result of a specified share exchange prescribed in paragraph (5), item (v) of the Act) ... or ... Article 57-4, paragraph (2) of the Income Tax Act"; and the phrase "paragraph (15), item (v)" in paragraph (20) of the said Article shall be deemed to be replaced with "paragraph (15), item (v) whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (iv)."

(v) With regard to the application of the provisions of Article 25-10-5, paragraph (3), the phrase "Article 25-10-2, paragraph (15), item (vii)" in item (iii) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (vii) whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15) item (iv)"; the phrase "Article 25-10-2, paragraph (15), item (ix)" in item (v) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (ix) whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (iv)"; and the phrase "Article 25-10-2, paragraph (15), item (x)" in item (vi) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (x) whose terms and phrases are replaced with the provisions of Article 25-14, paragraph (15), item (iv)";

(vi) With regard to the application of the provisions of Article 25-11-2, the phrase "Article 37-12-2, paragraph (2) of the Act" in paragraph (1), item (i) of the said Article shall be deemed to be replaced with "Article 37-12-2, paragraph (2) of the Act whose terms and phrases are replaced pursuant to the provisions of Article 37-14-2, paragraph (6), item (ii) of the Act"; and the phrase "items of paragraph (1)" in paragraph (9) of the said Article shall be deemed to be replaced with "items of paragraph (1) whose terms and phrases are replaced pursuant to the provisions of Article 25-14, paragraph (15), item (vi)."

(vii) With regard to the application of the provisions of Article 25-12-2, paragraph (9), the phrase "Article 37-12-2, paragraph (2) of the Act" in the said paragraph shall be deemed to be replaced with "Article 37-12-2, paragraph (2) of the Act whose terms and phrase are replaced pursuant to the provisions of Article 37-14-2, paragraph (6), item (ii) of the Act."

(16) With regard to the application of the provisions of Article 345 of the Order for Enforcement of the Income Tax Act in the case where a nonresident receives the delivery of shares of a foreign merging parent corporation or shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-2, paragraph (5), item (ii) or item (iv) as a result of a specified merger or specified split-off-type company split prescribed item (i) or item (iii) of the said paragraph, the phrase "other than shares of or capital contributions to" in paragraph (1), item (i) of the said Article shall be deemed to be replaced with "other than shares of or capital contributions to (excluding shares of a foreign merging parent corporation prescribed in Article 37-14-2, paragraph (5), item (ii) (Special Provisions for Taxation in Cases of Delivery of Receiving Foreign Parent Corporation's Shares as a result of Merger, etc.) of the Act on Special Measures Concerning Taxation)"; and the phrase "other than shares of or capital contributions to" in item (ii) of the said paragraph shall be deemed to be replaced with "other than shares of or capital contributions to (excluding shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-2, paragraph (5), item (iv) of the Act on Special Measures Concerning taxation)."

(Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.)

Article 25-14-2 (1) Where an individual, with regard to the shares he/she holds (including capital contributions; hereinafter the same shall apply through to paragraph (3)), receives the delivery of shares of a foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) of the Act as a result of the specified non-qualified merger, as prescribed in the said paragraph, of a domestic corporation that issued those shares held by him/her, when the said shares of the foreign merging parent corporation fall under the category of shares of a specified foreign corporation with less tax burden (meaning the foreign corporation with less tax burden prescribed in Article 68-2-3, paragraph (5), item (i) of the Act; the same shall apply in the following paragraph and paragraph (3)), with regard to the calculation of the fair value of the said shares of the foreign merging parent corporation, the provisions of Article 112, paragraph (1) of the Order for Enforcement of the Income Tax Act (including the case of making such calculation in accordance with the provisions of Article 165 of the Income Tax Act) shall not apply.

(2) Where an individual, with regard to the shares he/she holds, receives the delivery of shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the Act as a result of a specified non-qualified split-off-type company split prescribed in the said paragraph which is effected by a domestic corporation that issued those shares held by him/her, when the said shares of the foreign succeeding parent corporation in a company split fall under the category of shares of a specified foreign corporation with less tax burden, with regard to the calculation of the fair value of the said shares of the foreign succeeding parent corporation, the provisions of Article 113, paragraph (1) of the Order for Enforcement of the Income Tax Act (including the case of making such calculation in accordance with the provisions of Article 165 of the Income Tax Act) shall not apply.

(3) Where an individual, with regard to the shares he/she holds, has transferred the said shares to a wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-4 of the Corporation Tax Act as a result of a specified non-qualified share exchange prescribed in Article 37-14-3, paragraph (3) of the Act which is effected by a domestic corporation that issued the said shares, and received the delivery of shares of a fully controlling foreign parent corporation in a share exchange prescribed in the said paragraph, when the said shares of the fully controlling foreign parent corporation in a share exchange fall under the category of shares of a specified foreign corporation with less tax burden, with regard to the calculation of the amount of business income, the amount of capital gains, or the amount of miscellaneous income pertaining to the said shares of the fully controlling foreign parent corporation, the provisions of Article 167-7, paragraph (3) of the Order for Enforcement of the Income Tax Act (including the case of making such calculation in accordance with the provisions of Article 165 of the Income Tax Act) shall not apply.

(4) With regard to the application of the provisions of Article 280 and Article 291 of the Order for Enforcement of the Income Tax Act in the cases prescribed in paragraph (11) and paragraph (12): the phrase "or paragraph (4) ("in Article 280, paragraph (2) of the said Order shall be deemed to be replaced with "or paragraph (4) ("; the phrase "or the items of paragraph (4)" in the said paragraph shall be deemed to be replaced with "or the items of paragraph (4)"; the phrase "or extinguishment of rights..." in the said paragraph shall be deemed to be replaced with "or extinguishment of rights..., or transfer or extinguishment of rights corresponding to the value of the shares of the foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) (Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.) of the Act on Special Measures Concerning Taxation or shares of the foreign succeeding parent corporation in a company split prescribed in paragraph (2) of the said Article, with regard to the shares held as prescribed in paragraph (1) or (2) of the said Article based on the specified non-qualified merger prescribed in paragraph (1) of the said Article or the specified non-qualified split-off-type company split prescribed in paragraph (2) of the said Article, which has been the cause of the delivery of the said shares of the foreign merging parent corporation or the said shares of the foreign succeeding parent corporation in a company split, in the case where the amount equivalent to the said value shall be deemed to be revenue from capital gains, etc. from shares, etc. prescribed in Article 37-10, paragraph (1) of the said Act pursuant to the provisions of Article 37-14-3, paragraph (1) or paragraph (2) of the said Act"; the phrase "Article 280, paragraph (2)" in Article 291, paragraph (1), item (iii) of the said Order shall be deemed to be replaced with "Article 280, paragraph (2) whose terms and phrases are replaced pursuant to Article 25-14-2, paragraph (14) (Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.) of the Order for Enforcement of the Act on Special Measures Concerning Taxation"; the phrase "split-off-type company split ("in paragraph (7), item (i) of the said Article shall be deemed to be replaced with "split-off-type company split (limited to a specified non-qualified split-off-type company split prescribed in Article 37-14-3, paragraph (2), item (iii) (Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.) of the Act on Special Measures Concerning Taxation."; the phrase "through a split-off-type merger..., which falls under any of the following cases of company splits, the delivery of shares of a succeeding corporation in a company split prescribed in Article 2, item (xii)-3 of the said Act (hereinafter referred to as a "succeeding corporation in a company split" in this item), shares of a succeeding parent corporation in a company split prescribed in Article 113, paragraph (1) (Acquisition Cost for Shares, etc. Acquired through Split-Off-Type Company Split) (hereinafter referred to as a "succeeding parent corporation in a company split" in this item) or other assets" in the said item shall be deemed to be replaced with "through a split-off-type merger, the delivery of shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the said Act which fall under the category of shares of a foreign corporation with less tax burden prescribed in Article 68-2-3, paragraph (5), item (i) (Special Provisions Concerning the Scope of Qualified Merger, etc.) of the said Act"; and the phrase "paragraph (2) of the said Article" in the said item shall be deemed to be replaced with "Article 113, paragraph (2) (Acquisition Cost of Shares, etc. Acquired Through Split-Off-Type Company Split)."

(5) Where the provisions of Article 37-14-3, paragraphs (1) through (3) apply, the following provisions shall apply:

(i) With regard to the application of the provisions of Article 19-3, paragraph (9), the phrase "shares of a merging parent corporation" in the said paragraph shall be deemed to be replaced with "shares of a merging parent corporation (excluding share of a foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) of the Act which fall under the category of shares of a specified foreign corporation with less tax burden (meaning a specified foreign corporation with less tax burden prescribed in article 68-2-3, paragraph (5), item (i) of the Act; hereinafter the same shall apply through to Article 25-10-2) pertaining to a specified non-qualified merger prescribed in Article 37-14-3, paragraph (1) of the Act)";the phrase "shares of a succeeding parent corporation in a company split" in the said paragraph shall be deemed to be replaced with "shares of a succeeding parent corporation in a company split (excluding shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the Act which fall under the category of shares of a specified foreign corporation with less tax burden pertaining to a specified non-qualified split-off-type company split prescribed in the said paragraph)"; and the phrase "shares of a corporation... paragraph (2) of the said Article" in the said paragraph shall be deemed to be replaced with "shares of a corporation (excluding shares of a fully controlling foreign parent corporation in a share exchange prescribed in Article 37-14-3, paragraph (3) of the Act which fall under the category of shares of a specified foreign corporation with less tax burden, which are delivered from a wholly owning parent corporation in a share exchange as a result of a specified share exchange prescribed in the said paragraph), ... Article 57-4, paragraph (2) of the Income Tax Act";

(ii) With regard to the application of the provisions of Article 25-8-2, paragraph (3), the phrase "or paragraph (4)" in the said paragraph shall be deemed to be replaced with "or paragraph (4)"; the phrase "or the items of paragraph (4)" in the said paragraph shall be deemed to be replaced with "or the items of paragraph (4)"; and the phrase "or extinguishment of rights..." in the said paragraph shall be deemed to be replaced with "or extinguishment of rights..., or transfer or extinguishment of rights corresponding to the value of the shares of the foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) of the Act or shares of the foreign succeeding parent corporation in a company split prescribed in paragraph (2) of the said Article, with regard to the shares held as prescribed in paragraph (1) or (2) of the said Article based on the specified non-qualified merger prescribed in paragraph (1) of the said Article or the specified non-qualified split-off-type company split prescribed in paragraph (2) of the said Article, which has been the cause of the delivery of the said shares of the foreign merging parent corporation or the said shares of the foreign succeeding parent corporation in a company split, in the case where the amount equivalent to the said value shall be deemed to be revenue from capital gains, etc. from shares, etc. prescribed in Article 37-10, paragraph (1) of the said Act pursuant to the provisions of Article 37-14-3, paragraph (1) or paragraph (2) of the said Act."

(iii) With regard to the application of the provisions of Article 25-10, the phrase "acquisition" in paragraph (4) of the said Article shall be deemed to be replaced with "acquisition (excluding the acquisition of shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the Act, which fall under the category of shares of a specified foreign corporation with less tax burden, as a result of a specified non-qualified split-off-type company split prescribed in the said paragraph)"; the phrase "share exchange" in paragraph (5), item (i) of the said Article shall be deemed to be replaced with "share exchange (excluding the specified share exchange prescribed in Article 37-14-3, paragraph (2), item (v) of the Act in the case of acquiring shares of a fully controlling foreign parent corporation in a share exchange prescribed in the said paragraph, which fall under the category of shares of a specified foreign corporation with less tax burden, as a result of the said specified share exchange)"; the phrase "Article 37-11-2, paragraph (2), item (ii) of the Act" in paragraph (6), item (i) of the said Article shall be deemed to be replaced with "Article 37-11-2, paragraph (2), item (ii) of the Act whose terms and phrase are replaced pursuant to the provisions of Article 37-14-3, paragraph (4), item (i) of the Act"; the phrase "paragraph (4)" in item (ii) of the said paragraph shall be deemed to be replaced with "paragraph (4) whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iii)"; and the phrase "items of the preceding paragraph" in item (iii) of the said paragraph shall be deemed to be replaced with "items of the preceding paragraph whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iii)."

(iv) With regard to the application of the provisions of Article 25-10-2, the phrase "item (x) of the following paragraph" in paragraph (14) of the said Article shall be deemed to be replaced with "item (x) of the following paragraph whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iv)"; the phrase "shares of a merging parent corporation" in paragraph (15), item (vii) of the said Article shall be deemed to be replaced with "shares of a merging parent corporation (excluding shares of a foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) of the Act, which fall under the category of shares of a specified foreign corporation with less tax burden, to be acquired as a result of a specified non-qualified merger prescribed in the said paragraph; the same shall apply in this item)"; the phrase "shares of a succeeding parent corporation in a company split" in item (ix) of the said paragraph shall be deemed to be replaced with "shares of a succeeding parent corporation in a company split (excluding shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the Act, which fall under the category of shares of a specified foreign corporation with less tax, to be acquired as a result of a specified non-qualified split-off-type company split prescribed in the said paragraph; the same shall apply in this item)"; the phrase "shares... or ...in paragraph (2) of the said Article" in item (x) of the said paragraph shall be deemed to be replaced with "shares (excluding shares of a fully controlling foreign parent corporation in a share exchange prescribed in Article 37-14-3, paragraph (3) of the Act, which fall under the category of shares of a specified foreign corporation with less tax, to be acquired as a result of a specified non-qualified share exchange prescribed in the said paragraph) ... or ... Article 57-4, paragraph (2) of the Income Tax Act"; and the phrase "paragraph (15), item (v)" in paragraph (20) of the said Article shall be deemed to be replaced with "paragraph (15), item (v) whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iv)."

(v) With regard to the application of the provisions of Article 25-10-5, paragraph (3), the phrase "Article 25-10-2, paragraph (15), item (vii)" in item (iii) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (vii) whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iv)"; the phrase "Article 25-10-2, paragraph (15), item (ix)" in item (v) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (ix) whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (iv)"; and the phrase "Article 25-10-2, paragraph (15), item (x)" in item (vi) of the said paragraph shall be deemed to be replaced with "Article 25-10-2, paragraph (15), item (x) whose terms and phrases are replaced with the provisions of Article 25-14-2, paragraph (5), item (iv)."

(vi) With regard to the application of the provisions of Article 25-11-2, the phrase "Article 37-12-2, paragraph (2) of the Act" in paragraph (1), item (i) of the said Article shall be deemed to be replaced with "Article 37-12-2, paragraph (2) of the Act whose terms and phrases are replaced pursuant to the provisions of Article 37-14-3, paragraph (4), item (ii) of the Act"; and the phrase "items of paragraph (1)" in paragraph (9) of the said Article shall be deemed to be replaced with "items of paragraph (1) whose terms and phrases are replaced pursuant to the provisions of Article 25-14-2, paragraph (5), item (vi)."

(vii) With regard to the application of the provisions of Article 25-12-2, paragraph (9), the phrase "Article 37-12-2, paragraph (2) of the Act" in the said paragraph shall be deemed to be replaced with "Article 37-12-2, paragraph (2) of the Act whose terms and phrases are replaced pursuant to the provisions of Article 37-14-3, paragraph (4), item (ii) of the Act."

(6) With regard to the application of the provisions of Article 345 of the Order for Enforcement of the Income Tax Act in the case where the provisions of Article 37-14-3, paragraph (1) or (2) apply, the phrase "other than shares of or capital contributions to" in paragraph (1), item (i) of the said Article shall be deemed to be replaced with "other than shares or capital contributions to (excluding shares of a foreign merging parent corporation prescribed in Article 37-14-3, paragraph (1) (Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.) of the Act on Special Measures Concerning Taxation)"; and the phrase "other than shares of or capital contributions to" in item (ii) of the said paragraph shall be deemed to be replaced with "other than shares of or capital contributions to (excluding shares of a foreign succeeding parent corporation in a company split prescribed in Article 37-14-3, paragraph (2) of the Act on Special Measures Concerning taxation)."

Section 8-4 Special Provisions for Taxation on Income of Specified Foreign Subsidiary Companies, etc. Related to Residents

Article 25-19 (1) The affiliated foreign company specified by Cabinet Order prescribed in Article 40-4, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign company that has its head office or principal office in a state or territory where there are no taxes imposed on corporate income (meaning an affiliated foreign company prescribed in Article 40-4, paragraph (2), item (i) of the Act; hereinafter the same shall apply in this Article)

(ii) An affiliated foreign company whose tax imposed on its income for the relevant business year (meaning a business year prescribed in Article 2, paragraph (2), item (xix) of the Act; hereinafter the same shall apply in this Section) is 25 percent or less of the said income.

(2) Whether or not an affiliated foreign company falls under the category of an affiliated foreign company set forth in item (ii) of the preceding paragraph shall be determined as specified as follows:

(i) The amount of income set forth in item (ii) of the preceding paragraph shall be the amount obtained by adding the amount of income calculated pursuant to the provisions of the laws and regulations concerning foreign corporation taxes (meaning foreign corporation taxes prescribed in Article 69, paragraph (1) of the Corporation Tax Act; hereinafter the same shall apply in this paragraph) of the state or territory where the said affiliated foreign company's head office or principal office is located (hereinafter referred to as the "state of the head office" in this Section) (where there are two or more laws and regulations concerning the said foreign corporation taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph) with regard to the said affiliated foreign company's income in its settlement of accounts for the relevant business year and the sum of the amounts listed in (a) to (e) pertaining to the said calculated amount of income and then deducting therefrom the amount listed in (f) pertaining to the said calculated amount of income:

(a) The amount of income which shall not be included in the foreign corporation tax base under the laws and regulations of the state of the head office (excluding the amounts listed as follows):

1. The amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act to be received from a corporation located in the state of the head office (including the amount of profit reserve prescribed in Article 2, paragraph (18) of the said Act to be reduced by reason of the delivery of money or any other assets on any of the grounds listed in the items of Article 24, paragraph (1) of the said Act; hereinafter referred to as the "amount of a dividend, etc." in this item and the following Article)

2. The amount of a dividend, etc. to be received from a corporation located in a state or territory other than the state of the head office, which shall not be included in the foreign corporation tax base on condition that the ratio of the shares, etc. (meaning shares or capital contributions; hereinafter the same shall apply in this Section) held by the affiliated foreign company out of the total number or total amount of the said corporation's issued shares or capital contributions (excluding its own shares held by the said corporation) (hereinafter referred to as the "issued shares, etc." in this Section) is not less than the ratio specified by the laws and regulations of the said state of the head office

(b) The amount of a dividend, etc. that the affiliated foreign company shall pay and which is included in deductible expenses

(c) The amount of foreign corporation tax that the affiliated foreign company shall pay and which is included in deductible expenses

(d) The amount equivalent to the amount of reserve belonging to the reserve for casualty set forth in Article 57-5, paragraph (1) or Article 57-6, paragraph (1) of the Act (referred to as the "insurance reserve" in (e)) that the affiliated foreign company has saved and which is included in deductible expenses, which shall not be included in deductible expenses when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied

(e) Where the amount of the insurance reserve that has been saved by the affiliated foreign company and has been included in gross profits (limited to the insurance reserve that shall be saved when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied) does not reach the amount to be included in gross profits when these provisions shall be applied, the amount of the said shortfall

(f) The amount of foreign corporation tax that shall be refunded to the affiliated foreign company and which is included in gross profits

(ii) The amount of tax set forth in item (ii) of the preceding paragraph shall be the sum of the amounts listed as follows:

(a) The amount of foreign corporation tax to be imposed on the amount of the affiliated foreign company's income in its settlement of accounts for the relevant business year in the state of the head office or in a state or territory other than the state of the head office (including the amount to be deducted from the foreign corporation tax in the state of the head office by deeming that the said affiliated foreign company has paid the said amount under the laws and regulations of the state of the head office and excluding the amount of foreign corporation tax to be imposed on the amount listed in (a), 2. of the preceding item)

(b) The amount of foreign corporation tax that has been reduced or exempted for the affiliated foreign company for the relevant business year in the state of the head office and which is deemed to have been paid by the said affiliated foreign company pursuant to the provisions of the tax convention prescribed in Article 1-3, paragraph (1), item (ii)

(iii) Where foreign corporation tax rates in the state of the head office increase in accordance with the amount of income, the amount of foreign corporation tax set forth in (a) of the preceding item shall be the amount calculated based on the highest rates out of such tax rates

(iv) Where the amount of income set forth in item (ii) of the preceding paragraph proves to be a loss, the amount of foreign corporation tax shall be determined based on the foreign corporation tax rate to be applied in the state of the head office to any income that arises from revenue pertaining to the affiliated foreign company's principal business (in the case where the said revenue falls under the category of the amount listed in 1. or 2. of item (i), (a), revenue other than the said revenue).

(3) A nonresident who has a special relationship specified by Cabinet Order with a resident or domestic corporation prescribed in Article 40-4, paragraph (2), (i) of the Act shall be a nonresident listed as follows:

(i) A relative of the resident

(ii) A person in a relationship with the resident where a marital relationship is de facto, though a marriage has not been registered

(iii) An employee of the resident

(iv) A person other than those listed in the preceding three items who maintains his/her living by receiving money or any other assets from the resident

(v) A relative of any of the persons listed in the preceding three items who depends on such person for his/her livelihood

(vi) An officer of the domestic corporation (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this item and Article 25-21, paragraph (8) and paragraph (10)) and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer.

(Calculation of Eligible Income of Specified Foreign Subsidiary Companies, etc.)

Article 25-20 (1) The amount of undistributed income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the amount listed in Article 39-15, paragraph (1), item (iii) pertaining to the income of a specified foreign subsidiary company, etc. prescribed in Article 40-4, paragraph (1) of the Act (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article and paragraph (1) and paragraph (3) of the following Article) in its settlement of accounts for the relevant business year from the sum of the amount listed in Article 39-15, paragraph (1), item (i) and item (ii) and the amount listed in item (ii) of the said paragraph pertaining to the said income (where the amount listed in item (i) of the said paragraph pertaining to the said income is a loss, the said amount of undistributed income shall be the amount that remains after deducting the sum of the said amount of loss and the amount listed in item (iii) of the said paragraph pertaining to the said income from the amount listed in item (ii) of the said paragraph pertaining to the said income).

(2) Notwithstanding the provisions of the preceding paragraph, a resident listed in the items of Article 40-4, paragraph (1) of the Act may deem that the amount obtained by adding the amount of income calculated pursuant to the provisions of the laws and regulations concerning corporate income taxes in the state of the head office of a specified foreign subsidiary company, etc. (meaning taxes to be imposed based on the amount of the company's income in the state of the head office or in a state or territory other than the state of the head office or by local entities in such state or territory including the state of the head office (including taxes listed in the items of Article 141, paragraph (2) of the Order for Enforcement of the Corporation Tax Act to be imposed in such state or territory or by local entities of such state or territory) and taxes equivalent to incidental taxes to be imposed incidentally as prescribed in Article 2, item (xlv) of the Corporation Tax Act (excluding interest tax) and other taxes similar to the tax equivalent to the said incidental taxes; hereinafter the same shall apply in this Article) (where there are two or more laws and regulations concerning the said corporate income taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph), with regard to the income of the said specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year (where the provisions of Article 66-4, paragraph (1) or Article 68-88, paragraph (1) of the Act are applied to a transaction between the said specified foreign subsidiary company, etc. and a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act that relates to the said specified foreign subsidiary company, etc., the amount of income calculated pursuant to the provisions of the laws and regulations of the state of the head office by deeming that the transaction was carried out at the arm's length price prescribed in those provisions), and the sum of the amounts listed in Article 39-15, paragraph (2), items (i) to (xiii) pertaining to the said calculated amount of income and then deducting therefrom the sum of the amounts listed in items (xiv) to (xvi) of the said paragraph pertaining to the said calculated amount of income (where the amount calculated pursuant to the provisions of the laws and regulations of the state of the head office proves to be a loss, the said amount shall be the amount that remains after deducting the sum of the said amount of loss and the amounts listed in items (xiv) to (xvi) of the said paragraph pertaining to the said calculated amount from the sum of the amounts listed in items (i) to (xiii) of the said paragraph pertaining to the said calculated amount) shall be the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 40-4, paragraph (2), (ii) of the Act.

(3) Where there is any amount of a deductible dividend, etc. (meaning the amount equivalent to the amount specified respectively in the following items for the category of cases listed in the relevant items; hereinafter the same shall apply in this paragraph) for the relevant business year of a specified foreign subsidiary company, etc. related to a resident listed in the items of Article 40-4, paragraph (1) of the Act, the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the said amount of a deductible dividend, etc. from the amount calculated pursuant to these provisions, notwithstanding the provisions of paragraph (1) or the preceding paragraph:

(i) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said resident (hereinafter referred to as the "other specified foreign subsidiary company, etc." in this item) in the relevant business year does not exceed the amount of a dividend payable corresponding to the capital contributions by the said specified foreign subsidiary company, etc. out of the total amount of dividends payable by the said other specified foreign subsidiary company, etc. in the business year containing the base date for paying the said dividend, etc. (hereinafter referred to as the "base business year" in this paragraph) and the said base business year is the business year during which the taxable income prescribed in Article 40-4, paragraph (1) of the Act (hereinafter referred to as the "taxable income" in this Section) arises: The amount of the said dividend, etc.

(ii) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said resident in the relevant business year exceeds the amount of a dividend payable corresponding to the capital contributions for the base business year pertaining to the said amount of a dividend, etc.: Where the amount of a dividend payable corresponding to the capital contributions for the relevant business year preceding the base business year of the said other specified foreign subsidiary company, etc. shall be appropriated to the said amount of a dividend, etc. in reverse chronological order and the said amount of a dividend, etc. has been categorized for the relevant business year in accordance with the said amount of a dividend payable corresponding to the capital contributions for the relevant business year, the sum of the amount of a dividend, etc. to be appropriated with the amount of a dividend payable corresponding to the capital contributions for the business year during which the taxable income arises.

(4) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) Amount of dividend payable: The amount that remains after deducting the sum of the amounts listed in (d) and (e) pertaining to eligible income (meaning eligible income prescribed in Article 40-4, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this Section) of a specialized foreign subsidiary company, etc. for the relevant business year, from the amount calculated by adding the said eligible income to the sum of the amounts listed in (a) to (c)

(a) The amount of a deductible dividend, etc. prescribed in the preceding paragraph to be deducted pursuant to the provisions of the said paragraph

(b) In the case where the provisions of Article 66-4, paragraph (1) or Article 68-88, paragraph (1) of the Act are applied to a transaction with a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act pertaining to the said specified foreign subsidiary company, etc., and the amount of income to be reduced pursuant to the provisions of paragraph (1) or paragraph (2) contains any amount that shall not be paid to the said domestic corporation, such amount that shall not be paid

(c) The amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (ii) to be deducted pursuant to the provisions of the said item in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article

(d) The amount payable due to the appropriation of surplus for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.)

(e) The amount paid as the expenses for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.) which was included in the amount of eligible income for the relevant business year, because the said amount was not included in deductible expenses for calculating the amount of income pursuant to the provisions of paragraph (1) or paragraph (2) or was included in the amount of income pursuant to the provisions of the said paragraph

(ii) The amount of a dividend payable corresponding to the capital contributions: The amount obtained by multiplying the amount of a dividend payable by a specified foreign subsidiary company, etc. by the ratio of the number or the amount of the shares, etc. of the said specified foreign subsidiary company, etc. that any other specified foreign subsidiary company, etc. (hereinafter referred to as the "other specified foreign subsidiary company, etc." in this item) holds out of the total issued shares, etc. of the said specified foreign subsidiary company, etc. (where the said specified foreign subsidiary company, etc. has issued the shares, etc. in which claims prescribed in Article 40-4, paragraph (1) of the Act (hereinafter referred to as "claims" through to Article 25-23) with different contents are vested or the shares, etc. in which claims with different contents are deemed to be substantially vested (referred to as the "shares, etc. in which different claims are vested" in paragraph (2) of the following Article and Article 25-23, paragraph (1)), the ratio of the amount of a dividend, etc. that the said other specified foreign subsidiary company, etc. can receive based on the said claims out of the total amount of a dividend of surplus, etc.).

(5) The amount obtained as a result of an adjustment for the amount of loss and the base income amount prescribed in Article 40-4, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting, from the base income amount, prescribed in the said item, of a specified foreign subsidiary company, etc. for the relevant business year (referred to as the "base income amount" in paragraph (7)), the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (ii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in the business years that started within seven years prior to the first day of the relevant business year of the specified foreign subsidiary company, etc. (excluding the business years that started before April 1, 1978 and the business years during which the company did not fall under the category of specified foreign subsidiary companies, etc. (including specified foreign subsidiary companies, etc. prescribed in Article 60-6, paragraph (1) or Article 68-90, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph)

(ii) The amount of corporate income tax that the specified foreign subsidiary company, etc. is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(6) The loss prescribed in item (i) of the preceding paragraph shall be the loss calculated where the provisions of paragraph (1), paragraph (2) or paragraph (3) are applied to the amount of income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year.

(7) When calculating the amount listed in Article 39-15, paragraph (1), item (i) with regard to the income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year pursuant to the provisions of paragraph (1), if there is any amount to be included in deductible expenses in the relevant business year, pursuant to the provisions of Article 33 and Articles 42 to 53 of the Corporation Tax Act and the provisions of Article 43, Article 45-2, Article 52-2, Article 57-5, Article 57-6, Article 57-8, Articles 65-7 to 65-9 (limited to the part pertaining to item (xix) of the table in Article 65-7, paragraph (1) of the Act), Article 67-12, paragraph (2) and Article 67-13, paragraph (2) of the Act, whose provisions shall be applicable under the provisions of the said item, the said amount shall be included in deductible expenses for calculating the base income amount for the relevant business year, only when detailed statements concerning the inclusion of the said amount in deductible expenses are attached to a final return form; provided, however, that when a final return form has not been submitted or a final return form has been submitted without detailed statements concerning the inclusion of the said amount in deductible expenses, the district director shall, when he/she finds that there was any compelling reason therefor, apply the provisions of the main clause of this paragraph, only when the said detailed statements have been submitted.

(8) Where a resident, who was subject to the provisions of paragraph (1) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (2) for calculating the amount of income of the said specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in years following the one to which the provisions of paragraph (1) have been applied, or where a resident, who was subject to the provisions of paragraph (2) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (1) for calculating the amount of income of the said specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in years following the one to which the provisions of paragraph (2) have been applied, he/she shall receive approval from the competent district director having jurisdiction over his/her place for tax payment, in advance.

(Calculation, etc. of the Amount of Taxable Income of Specified Foreign Subsidiary Companies, etc. Related to Residents)

Article 25-21 (1) The amount calculated as specified by Cabinet Order prescribed in Article 40-4, paragraph (1) of the Act shall be the amount obtained by deducting the sum of the amounts listed in paragraph (4), item (i), (d) and (e) of the preceding Article for the relevant business year from the amount of eligible income for the relevant business year of a specified foreign subsidiary company, etc. related to a resident listed in the items of the said paragraph and then multiplying the said amount that remains after deduction by the ratio of the shares, etc. for considering the claims held by the said person out of the total issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc.

(2) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) The shares, etc. for considering the claims held: The number or the amount adding together the number or the amount of the shares, etc. of a foreign corporation directly held by a resident (where the said foreign corporation has issued the shares, etc. in which different claims are vested, the number or the amount obtained by multiplying the issued shares, etc. of the said foreign corporation by the ratio of the amount of a dividend of surplus, dividend of profit or distribution of surplus prescribed in Article 24, paragraph (1) of the Income Tax Act (hereinafter referred to as the "dividend of surplus, etc." in this Section) that the said resident can receive based on the said claims out of the total amount) and the shares, etc. for considering the claims indirectly held

(ii) The shares, etc. for considering the claims indirectly held: The number or the amount of the shares, etc. obtained by multiplying the issued shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(a) Where a resident holds the whole or a part of the issued shares, etc. of other foreign corporations which are shareholders, etc. (meaning shareholders, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this Article) of the said foreign corporation (hereinafter such other foreign corporations shall be simply referred to as "other foreign corporations" in (a)): The ratio obtained by multiplying the said resident's ratio of shareholding (meaning the ratio of the number or the amount of the shares, etc. held by the shareholders, etc. out of the total issued shares, etc. of the corporation issuing the said shares, etc. (where the said issuing corporation has issued the shares, etc. in which different claims are vested, the ratio of the amount of a dividend of surplus, etc. that the said shareholder, etc. can receive based on the said claims out of the total amount); hereinafter the same shall apply in this item) pertaining to the said other foreign corporations by the said other foreign corporations' ratio of shareholding pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(b) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation the whole or a part of whose issued shares, etc. are held by a resident; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said resident, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the said resident's ratio of shareholding pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of shareholding pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(3) The amount that shall be included in the necessary expenses for calculating the amount of miscellaneous income pertaining to the taxable income of a specified foreign subsidiary company to be included in the gross revenue pursuant to the provisions of Article 40-4, paragraph (1) of the Act shall be the sum of the amounts listed as follows (where the said sum exceeds the amount deemed to be revenue pertaining to the said miscellaneous income under the provisions of the said paragraph, such amount shall be that equivalent to the sum of the amounts deemed to be the said revenue):

(i) The sum of the interest on liabilities incurred by a resident in acquiring the shares, etc. of a specified foreign subsidiary company, etc. (including the shares, etc. of a foreign corporation pertaining to the shares, etc. held indirectly by the said resident in the case where he/she holds indirectly the shares, etc. pertaining to the said specified foreign subsidiary company, etc. (such shares, etc. held indirectly shall mean the number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as those held indirectly as prescribed in Article 40-4, paragraph (2), item (iii) of the Act) (such shares, etc. of a specified foreign subsidiary corporation shall be limited to those held by the said resident and exclude those falling under the category of the shares, etc. of a specified foreign subsidiary company, etc. related to the said resident); hereinafter the same shall apply in this item) which shall be paid for a period of the year during which the said resident held the said shares, etc. of the specified foreign subsidiary company, etc.

(ii) The amount of foreign income tax prescribed in Article 222-2, paragraph (4), item (iii) of the Order for Enforcement of the Income Tax Act to be imposed based on the amount of a dividend of surplus, etc. prescribed in the said item to be received from the specified foreign subsidiary company, etc. which shall be paid for the relevant year

(4) The sum of the amounts listed in the items of the preceding paragraph which shall be included in the necessary expenses for calculating the amount of miscellaneous income pertaining to the taxable income pursuant to the provisions of the said paragraph shall not be included in the amount to be included in the necessary expenses for calculating the amount of business income or miscellaneous income and the amount of interest on liabilities prescribed in Article 24, paragraph (2) of the Income Tax Act which shall be deducted for calculating the amount of dividend income pursuant to the provisions of the said paragraph.

(5) The number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as those held indirectly as prescribed in Article 40-4, paragraph (2), item (iii) of the Act shall be the number or the amount of the shares, etc. obtained by multiplying the issued shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the issued shares, etc. of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of shareholding (meaning the ratio of the number or the amount of the shares, etc. held by the shareholders, etc. out of the total issued shares, etc. of the corporation issuing the said shares, etc.; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of shareholding pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation the whole or a part of whose issued shares, etc. are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the ratio of shareholding of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of shareholding pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(6) The number of voting rights of a foreign corporation specified by Cabinet Order as being held indirectly as prescribed in Article 40-4, paragraph (2), item (iv) of the Act shall be the number of voting rights obtained by multiplying the total number of voting rights (meaning the voting rights prescribed in Article 40-4, paragraph (1), item (i), (a) of the Act; hereinafter the same shall apply in this paragraph) by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the voting rights of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of voting rights (meaning the ratio of the number of voting rights held by the shareholders, etc. out of the total number; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of voting rights pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation the whole or a part of whose voting rights are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the voting rights: The ratio obtained by multiplying the ratio of voting rights of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of voting rights pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of voting rights pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of voting rights pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(7) The amount of a dividend of surplus, etc. specified by Cabinet Order as being receivable based on the claims vested in the shares, etc. of a foreign corporation held indirectly as prescribed in Article 40-4, paragraph (2), item (v) of the Act shall be the amount of a dividend of surplus, etc. obtained by multiplying the total amount of a dividend of surplus, etc. receivable based on the claims vested in the shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the claims vested in the shares, etc. of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of claims (meaning the ratio of the amount of a dividend of surplus, etc. receivable based on the claims vested in the shares, etc. held by the shareholders, etc. out of the total amount; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of claims pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation the whole or a part of whose claims vested in the shares, etc. are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the claims vested in the shares, etc.: The ratio obtained by multiplying the ratio of claims of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of claims pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of claims pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of claims pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(8) A person who has a special relationship specified by Cabinet Order with a resident or a domestic corporation prescribed in Article 40-4, paragraph (2), item (vi) of the Act shall be an individual or corporation listed as follows:

(i) An individual listed as follows:

(a) A relative of the resident

(b) A person in a relationship with the resident where a marital relationship is de facto, though a marriage has not been registered

(c) An employee of the resident

(d) A person other than those listed in (a) to (c) who maintains his/her living by receiving money or any other assets from the resident

(e) A relative of any of the persons listed in (b) to (d) who depends on such person for his/her livelihood

(f) An officer of the domestic corporation and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer

(ii) A corporation listed as follows:

(a) Where a resident or a domestic corporation (including an individual who has a special relationship prescribed in the preceding item with the said resident or domestic corporation; hereinafter referred to as a "resident, etc." in this paragraph) controls any other corporation, the said other corporation

(b) Where a resident, etc. or a corporation which has a special relationship prescribed in (a) with the said resident, etc. controls any other corporation, the said other corporation

(c) Where a resident, etc. or a corporation which has a special relationship prescribed in (a) and (b) with the said resident, etc. controls any other corporation, the said other corporation

(d) Where any of the two or more corporations which have a special relationship prescribed in (a) to (c) with the same person is a resident, etc., a corporation other than the one falling under the said resident, etc. out of those which have such special relationship with the same person

(9) The provisions of Article 4, paragraph (3) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where controlling any other corporation listed in (a) to (c) of item (ii) of the preceding paragraph.

(11) The amount of expenses specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (ii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the sum of personnel expenses for officers and employees of a specified foreign subsidiary company, etc. engaged in the business of the said specified foreign subsidiary company, etc. prescribed in paragraph (3) of the said Article (limited to the amount to be included in deductible expenses for calculating the amount of income or loss pursuant to the provisions of paragraph (1) or paragraph (2) of the preceding Article for the relevant business year of the said specified foreign subsidiary company, etc.).

(Determination, etc. of Business of Specified Foreign Subsidiary Companies, etc.)

Article 25-22 (1) The person specified by Cabinet Order prescribed in Article 40-4, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations (meaning consolidated corporations prescribed in Article 2, item (xii)-7-4 of the Corporation Tax Act) which have the consolidated full controlling interest prescribed in item (xii)-7-5 of the said Article with a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. prescribed in Article 40-4, paragraph (4) of the Act (hereinafter referred to as a "specified foreign subsidiary company, etc." in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph

(ii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding item who is related to the said specified foreign subsidiary company, etc.)

(iii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act (where the said consolidated corporation is a consolidated subsidiary corporation prescribed in Article 2, item (xii)-7-3 of the Corporation Tax Act, a consolidated parent corporation prescribed in item (xii)-7-2 of the said Article which pertains to the said consolidated corporation) which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding two items who is related to the said specified foreign subsidiary company, etc.)

(iv) Where a person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act holds the shares, etc. indirectly pertaining to the said specified foreign subsidiary company, etc. (such shares, etc. shall mean the number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as being held through indirect ownership as prescribed in Article 40-4, paragraph (2), item (iii) of the Act), the other foreign corporation prescribed in paragraph (5), item (i) of the preceding Article or the other foreign corporation and capital contribution-related foreign corporation(s) prescribed in item (ii) of the said paragraph which pertain to the said shares, etc. held indirectly

(v) A person who has a special relationship specified by Cabinet Order prescribed in Article 40-4, paragraph (2), item (vi) of the Act with any of the persons listed as follows (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act):

(a) A specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act

(b) A person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 40-4, paragraph (4), item (i) of the Act

(c) A person listed in the preceding items.

(2) The case specified by Cabinet Order prescribed in Article 40-4, paragraph (4), item (i) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Wholesale business: Where, out of the total revenue from selling inventory assets (meaning inventory assets prescribed in Article 2, item (xx) of the Corporation Tax Act; hereinafter the same shall apply in this item) for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling inventory assets for the relevant business year, such revenues shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of sales transactions" in this item), the ratio of the sum of the amount of sales transactions with a person other than affiliated persons (meaning those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who are related to the said specified foreign subsidiary company, etc.; hereinafter the same shall apply in this paragraph and the following paragraph) exceeds 50 percent, or out of the sum of the acquisition costs for acquiring inventory assets for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling inventory assets for the relevant business year, such acquisition costs shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of purchase transactions" in this item), the ratio of the sum of the amount of purchase transactions with a person other than affiliated persons exceeds 50 percent

(ii) Banking business: Where, out of the sum of the total interest received for the relevant business year, the ratio of the sum of the said interest to be received from a person other than affiliated persons exceeds 50 percent, or out of the sum of the total interest paid for the relevant business year, the ratio of the sum of the said interest to be paid to a person other than affiliated persons exceeds 50 percent

(iii) Trust business: Where, out of the sum of the total trust charge for the relevant business year, the ratio of the sum of the said trust charge to be received from a person other than affiliated persons exceeds 50 percent

(iv) Financial instruments business: Where, out of the sum of the total commissions received (including profits from the buying and selling securities) for the relevant business year, the ratio of the sum of the said commissions to be received from a person other than affiliated persons exceeds 50 percent

(v) Insurance business: Where, out of the sum of the total premium income for the relevant business year, the ratio of the sum of the said premium income to be received from a person other than affiliated persons (where the said premium income pertains to reinsurance, limited to premium income from insurance for assets held by a person other than affiliated persons or damages incurred by a person other than affiliated persons) exceeds 50 percent

(vi) Water transportation business or air transportation business: Where, out of the total revenue from the operation or rental of vessels or operation or rental of aircraft for the relevant business year, the ratio of the sum of the said revenues to be received from a person other than affiliated persons exceeds 50 percent.

(3) Where transactions prescribed in the preceding paragraph between a specified foreign subsidiary company, etc. and an affiliated person related to the said specified foreign subsidiary company, etc. are conducted indirectly via a person other than an affiliated person related to the said specified foreign subsidiary company, etc. (hereinafter referred to as a "non-affiliated person" in this paragraph), transactions between the said specified foreign subsidiary company, etc. and the said non-affiliated person shall be deemed to have been conducted directly between the said specified foreign subsidiary company, etc. and the said affiliated person and the provisions of the items of the preceding paragraph shall be applied, except in the case where there are reasonable grounds for having the said non-affiliated person intervene in such transactions.

(4) The water areas specified by Cabinet Order prescribed in Article 40-4, paragraph (4), item (ii) of the Act shall be inland water and territorial sea and exclusive economic zones or water areas equivalent to continental shelves related to a state or territory prescribed in the said item.

(5) The case specified by Cabinet Order prescribed in Article 40-4, paragraph (4), item (ii) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Real estate business: Where conducting a buying and selling or rental business of real estate (including acts to let others use the said real estate) (real estate shall include the rights thereon; hereinafter the same shall apply in this item) mainly located in the state of the head office, providing agent or intermediary services for the buying and selling or rental business of the said real estate, and managing the said real estate

(ii) Rental and leasing business: Where conducting a rental business for goods to be provided for use mainly in the state of the head office

(iii) Business other than those listed in paragraph (2) and the preceding two items: Where conducting a business mainly in the state of the head office.

(Deduction of Dividend of Surplus, etc. to be Received by Specified Foreign Subsidiary Company, etc.)

Article 25-23 (1) The amount specified by Cabinet Order prescribed in Article 40-5, paragraph (1), item (i) of the Act shall be the amount obtained by deducting the sum of the amounts listed in Article 25-20, paragraph (4), item (i), (d) and (e) for the business year pertaining to a specified foreign subsidiary company, etc. prescribed in Article 40-5, paragraph (1), item (i) of the Act (hereinafter referred to a "specified foreign subsidiary company, etc." in this Article and paragraph (2) of the following Article), from the amount of eligible income (limited to that which pertains to taxable income to be included in the amount of gross revenue in the calculation of the amount of miscellaneous income for the years, prescribed in the said item, of a resident; hereinafter the same shall apply in this paragraph) pertaining to the specified foreign subsidiary company, etc., and then multiplying the amount that remains after deduction by the ratio of the shares, etc. for considering the claims held directly by the said resident out of the total issued shares, etc. of the said specified foreign subsidiary company, etc. at the end of the relevant business year of the said specified foreign subsidiary company, etc. (meaning the number or the amount of the shares, etc. of a foreign corporation held by a resident (where the said foreign corporation has issued the shares, etc. in which different claims are vested, the number or the amount obtained by multiplying the issued shares, etc. of the said foreign corporation by the ratio of the amount of a dividend of surplus, etc. that the said resident can receive based on the said claims out of the total amount); the same shall apply in the following paragraph)

(2) The amount specified by Cabinet Order prescribed in Article 40-5, paragraph (1), item (ii) of the Act shall be the amount obtained by deducting the sum of the amounts listed in Article 25-20, paragraph (4), item (i), (d) and (e) for the relevant business year from the amount of eligible income (limited to that which pertains to taxable income included in the amount of gross revenue in the calculation of the amount of miscellaneous income for the years in the three years preceding the previous year prescribed in Article 40-5, paragraph (1), item (ii) of the Act of a resident) for the relevant business year of a specified foreign subsidiary company, etc., and then multiplying the amount that remains after deduction by the ratio of the shares, etc. for considering the claims held directly by the said resident out of the total issued shares, etc. of the said specified foreign subsidiary company, etc. at the end of the relevant business year of the said specified foreign subsidiary company, etc.

(Determination, etc. of Affiliated Foreign Companies)

Article 25-24 (1) In the case referred to in Article 40-4, paragraph (1) of the Act, whether or not a foreign company falls under the category of an affiliated foreign company prescribed in paragraph (2), item (i) of the said Article (hereinafter referred to as an "affiliated foreign company" in this paragraph) shall be determined according to its status at the end of the relevant business year of the said foreign corporation and whether or not the person falls under the category of a resident listed in the items of paragraph (1) of the said Article shall be determined according to its status at the end of the relevant business year of an affiliated foreign company related to such resident.

(2) With respect to the application of the provisions of Article 222 of the Order for Enforcement of the Income Tax Act when calculating the limitation on a creditable amount prescribed in Article 95, paragraph (1) of the Income Tax Act for a resident subject to the provisions of Article 40-4, paragraph (1) of the Act or Article 40-5, paragraph (1) or paragraph (2) of the Act, the amount of miscellaneous income pertaining to the taxable income to be included in the gross revenue pursuant to the provisions of Article 40-4, paragraph (1) of the Act shall be included in the domestic source income prescribed in Article 222, paragraph (3) of the said Order, and the amount of dividend income from a dividend, etc. prescribed in Article 40-5, paragraph (1) to be received from a specified foreign subsidiary company, etc. or an affiliated foreign company subject to the provisions of Article 40-5, paragraph (1) or paragraph (2) of the Act shall be the amount of the said dividend income calculated without applying these provisions.

(3) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 40-4, paragraph (7) of the Act shall apply under the provisions of Article 40-4 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 40-6 of the Act and Articles 25-19 to 25-21 (excluding paragraph (10)), the preceding Article and this Article.

(4) With regard to a trust corporation or a beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 40-4 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 40-6 of the Act, or Articles 25-19 to 25-21 (excluding paragraph (10)), the preceding Article or this Article shall be specified by Ordinance of the Ministry of Finance.

Section 8-5 Special Provisions for Taxation on Income of Specified Foreign Corporations Related to Residents who are Specially-related Shareholders, etc.

(Scope, etc. of Specially-related Shareholders, etc.)

Article 25-25 (1) An individual who has a special relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be any of the following:

(i) An individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with an individual falling under the category of a specified shareholder, etc. (meaning a specified shareholder, etc. prescribed in Article 40-7, paragraph (2), item (i) of the Act; hereinafter the same shall apply in the following item and item (i) of the following paragraph)

(ii) An officer (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this paragraph and Article 25-27, paragraph (4)) of a corporation falling under the category of a specified shareholder, etc. and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer (referred to as a "specially-related person" in the following item)

(iii) An officer of a specially-related domestic corporation (meaning a specially-related domestic corporation prescribed in Article 40-7, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this Section) and a specially-related person who is related to the said officer

(2) A corporation which has a special relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be any of the following:

(i) Where a specified shareholder, etc. (including an individual who has a special relationship with the said specified shareholder, etc. as prescribed in item (i) or item (ii) of the preceding paragraph) or an individual who has a special relationship with a specially-related domestic corporation as prescribed in item (iii) of the said paragraph (hereinafter referred to as a "determined shareholder, etc." in this paragraph) controls any other corporation, the said other corporation

(ii) Where a determined shareholder, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding item control any other corporation, the said other corporation

(iii) Where a determined shareholder, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding two items control any other corporation, the said other corporation.

(3) The provisions of Article 4, paragraph (3) and paragraph (4) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply.

(4) A relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be the relevant relationship in the case where a specially-related shareholder, etc. prescribed in the said paragraph (hereinafter referred to as a "specially-related shareholder, etc." in this Section) and a specially-related domestic corporation have a relationship where the ratio of the shares, etc. indirectly held by the specially-related shareholder, etc. pertaining to the specially-related domestic corporation (meaning the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)) is 80 percent or more:

(i) Where out of the total number or total amount of shares or capital contributions issued by a foreign corporation (excluding that falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this item) which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, paragraph (1), item (viii)-2 of the Income Tax Act; hereinafter the same shall apply in this Article) of a specially-related domestic corporation (such issued shares or capital contributions shall exclude those held on their own by the said foreign corporation and the total number or total amount of such issued shares or capital contributions shall be referred to as the "issued shares, etc." in this Section), a specially-related shareholder, etc. holds 80 percent or more of the number or the amount of such shares, etc. (meaning shares or capital contributions; hereinafter the same shall apply in this Section): The ratio of the number or the amount of the shares, etc. of the specially-related domestic corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of a specially-related domestic corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item and a corporation falling under the category of a specially-related shareholder, etc.) and a specially-related shareholder, etc. and has(have) a linkage with them through holding the shares, etc. (where the said corporation which is a shareholder, etc. is a domestic corporation and the said intervening corporation(s) is a (are all) domestic corporation(s), excluding the said domestic corporation(s) and a corporation falling under the category of a specially-related shareholder, etc.; hereinafter referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where 80 percent or more of the number or the amount of the issued shares, etc. of each of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held by a specially-related shareholder, etc. or a capital contribution-related corporation(s) (such specially-related shareholder, etc. or capital contribution-related foreign corporation(s) shall be limited to those 80 percent or more of the number or the amount of whose issued shares, etc. are held by a specially-related shareholder, etc. or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of the specially-related domestic corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(5) A foreign corporation specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be any of the following:

(i) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (i) of the preceding paragraph, where the ratio of the shares, etc. held indirectly as prescribed in the said paragraph is 80 percent or more

(ii) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (ii) of the preceding paragraph where the ratio of the shares, etc. held indirectly as prescribed in the preceding paragraph is 80 percent or more and a foreign corporation falling under the category of a capital contribution-related corporation prescribed in the said item

(iii) A foreign corporation, over 50 percent of the number or the amount of whose issued shares, etc. are held directly or indirectly by a foreign corporation listed in the preceding two items (excluding a foreign corporation falling under the category of a foreign corporation listed in the preceding two items and a foreign corporation falling under the category of a specially-related shareholder, etc.).

(6) In item (iii) of the preceding paragraph, whether or not a foreign corporation directly or indirectly holds over 50 percent of the issued shares, etc. shall be determined based on the sum of the ratio of the shares, etc. held directly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to any other foreign corporation (excluding a foreign corporation falling under the category of a foreign corporation listed in item (i) or item (ii) of the said paragraph and a foreign corporation falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this paragraph) (such ratio of the shares, etc. held directly shall mean the ratio of the number or the amount of the shares, etc. of any other foreign corporation held by a foreign corporation listed in item (i) and item (ii) of the preceding paragraph out of the total issued shares, etc. of the said other foreign corporation) and the ratio of the shares, etc. held indirectly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to the said other foreign corporation (such ratio of the shares, etc. held indirectly shall mean the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where a foreign corporation listed in item (i) and item (ii) of the preceding paragraph holds over 50 percent of the number or the amount of the issued shares, etc. of a foreign corporation which is a shareholder, etc. of the said other foreign corporation: The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between a foreign corporation which is a shareholder, etc. of the said other foreign corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item) and a foreign corporation listed in item (i) and item (ii) of the preceding paragraph and has(have) a linkage with them through holding the shares, etc. (hereinafter referred to as a "capital contribution-related foreign corporation(s)" in this item) (limited to the case where over 50 percent of the number or the amount of the issued shares, etc. of each of a capital contribution-related foreign corporation(s) and the said foreign corporation which is a shareholder, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or a capital contribution-related foreign corporation(s) (such foreign corporation or capital contribution-related foreign corporation(s) shall be limited to those over 50 percent of the number or the amount of whose issued shares, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(7) An affiliated foreign corporation specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign corporation (meaning an affiliated foreign corporation prescribed in Article 40-7, paragraph (1) of the Act; hereinafter the same shall apply in this Section) which has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) An affiliated foreign corporation where the tax imposed on its income for the relevant business year (meaning a business year prescribed in Article 2, paragraph (2), item (xix) of the Act; hereinafter the same shall apply in this Section) is 25 percent or less of the said income.

(8) The provisions of Article 25-19, paragraph (2) shall apply mutatis mutandis to the determination as to whether or not an affiliated foreign corporation falls under the category of an affiliated foreign corporation set forth in item (ii) of the preceding paragraph.

(9) An individual who has the special relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (2), item (i) of the Act shall be an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with a shareholder, etc. of a domestic corporation.

(10) A corporation which has a special relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (2), item (i) of the Act shall be any of the following:

(i) Where one of the shareholders, etc. of a domestic corporation (where the said domestic corporation holds its own shares, etc., excluding the said domestic corporation; hereinafter referred to as a "determined shareholder, etc." in this paragraph) (regarding a determined shareholder, etc. who is an individual, the said determined shareholder, etc. and an individual who has a special relationship with him/her as prescribed in the preceding paragraph; hereinafter the same shall apply in this paragraph) controls any other corporation, the said other corporation

(ii) Where one of the determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding item control any other corporation, the said other corporation

(iii) Where one of the determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding two items control any other corporation, the said other corporation.

(11) The provisions of Article 4, paragraph (3) and paragraph (4) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply.

(12) A domestic corporation specified by Cabinet Order prescribed in Article 40-7, paragraph (2), item (ii) of the Act shall be a domestic corporation which has received the transfer of almost all the assets and liabilities of a specified domestic corporation prescribed in the said item immediately prior to a merger, split, transfer of business or for other reasons (hereinafter referred to as "specified reasons" in this paragraph) due to the said specified reasons.

(Calculation of Eligible Income of Specified Foreign Corporations)

Article 25-26 (1) The amount of undistributed income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 40-7, paragraph (2), item (iii) of the Act shall be the amount calculated, pursuant to the provisions of Article 25-20, paragraph (1) or paragraph (2), or paragraph (3) of the said Article, with regard to the income of a specified foreign corporation prescribed in Article 40-10, paragraph (1) of the Act (hereinafter referred to as a "specified foreign corporation" in this Article and paragraph (1) of the following Article) in its settlement of accounts for the relevant business year.

(2) The amount obtained as a result of an adjustment for the amount of loss and base income prescribed in Article 40-7, paragraph (2), item (iii) of the Act shall be the amount that remains after deducting, from the base income amount prescribed in the said item for the relevant business year of a specified foreign corporation, the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 40-7, paragraph (2), item (iii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in the business years that started within seven years prior to the first day of the relevant business year of the specified foreign corporation (excluding the business years that started before October 1, 2007 and the business years during which the corporation did not fall under the category of specified foreign corporations (including specified foreign corporations prescribed in Article 66-9-2, paragraph (1) or Article 68-93-2, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph)

(ii) The amount of corporate income tax prescribed in Article 25-20, paragraph (2) (hereinafter referred to as "corporate income tax" in this item) that the specified foreign corporation is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(3) A loss prescribed in item (i) of the preceding paragraph shall be a loss calculated with regard to the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year, where the calculation has been made pursuant to the provisions of paragraph (1).

(4) The provisions of Article 25-20, paragraph (7) and paragraph (8) shall apply mutatis mutandis where the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year is calculated pursuant to the provisions of paragraph (1) or paragraph (2) of the said Article.

(Calculation, etc. of the Amount of Taxable Income of Specified Foreign Corporations)

Article 25-27 (1) The amount calculated as specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act shall be the amount calculated with regard to the eligible income (meaning the eligible income prescribed in the said paragraph; hereinafter the same shall apply in this Section) for the relevant business year of a specified foreign corporation related to a resident who is a specially-related shareholder, etc., pursuant to the provisions of Article 25-21, paragraph (1) and paragraph (2).

(2) The provisions of Article 25-21, paragraph (3) and paragraph (4) shall apply mutatis mutandis to the case of calculating the amount to be included in the necessary expenses for calculating the amount of miscellaneous income pertaining to taxable income prescribed in Article 40-7, paragraph (1) of the Act which shall be included in the gross revenue pursuant to the provisions of the said paragraph. In this case, the term "Article 40-4, paragraph (2), item (iii)" in Article 25-21, paragraph (3), item (i) shall be deemed to be replaced with "Article 40-7, paragraph (2), item (i)," and the term "Article 222-2, paragraph (4), item (iii)" in item (ii) of the said paragraph shall be deemed to be replaced with "Article 222-2, paragraph (4), item (iv)."

(3) The provisions of Article 25-21, paragraph (5) shall apply mutatis mutandis to the number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as being held indirectly as prescribed in Article 40-7, paragraph (2), item (iv) of the Act. In this case, the term "an individual" in Article 25-21, paragraph (5) shall be deemed to be replaced with "a resident."

(4) The amount of expenses specified by Cabinet Order set forth in Article 40-7, paragraph (2), item (iii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the amount calculated with regard to the sum of personnel expenses for officers and employees of a specified foreign corporation engaged in the business of the said specified foreign corporation prescribed in paragraph (3) of the said Article, pursuant to the provisions of Article 25-21, paragraph (10).

(Determination, etc. of Business of Specified Foreign Corporations)

Article 25-28 (1) The person specified by Cabinet Order prescribed in Article 40-7, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations (meaning consolidated corporations prescribed in Article 2, item (xii)-7-4 of the Corporation Tax Act; hereinafter the same shall apply in this item and item (iii)) which have the consolidated full controlling interest prescribed in Article 2, item (xii)-7-5 of the Corporation Tax Act with a consolidated corporation falling under the category of a specially-related shareholder, etc. which pertains to a specified foreign corporation prescribed in Article 40-7, paragraph (4) of the Act (hereinafter referred to as a "specified foreign corporation" in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph (hereinafter such specified foreign corporation shall be referred to as a "specified foreign corporation" in this paragraph) (such other consolidated corporations shall exclude those falling under the category of specially-related shareholders, etc. pertaining to the said specified foreign corporation)

(ii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding item)

(iii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a consolidated corporation falling under the category of a specially-related shareholder, etc. (where the said consolidated corporation is a consolidated subsidiary corporation prescribed in Article 2, item (xii)-7-3 of the Corporation Tax Act, a consolidated parent corporation prescribed in item (xii)-7-2 of the said Article related to the said consolidated corporation) which pertains to a specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding two items)

(iv) An affiliated foreign corporation related to a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act

(v) A corporation which is a shareholder, etc. prescribed in Article 25-25, paragraph (4), item (ii) or a capital contribution-related corporation(s) which intervene(s) between a specially-related domestic corporation and a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act (excluding a person falling under the category of persons listed in item (i) or the preceding item)

(vi) A person who has a special relationship specified by Cabinet Order prescribed in Article 40-7, paragraph (1) of the Act with those listed as follows (excluding a person falling under the category of a specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-10, paragraph (4), item (i) of the Act, a person falling under the category of a specially-related shareholder, etc. and a person falling under the category of persons listed in the preceding items):

(a) A specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act

(b) A specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-7 paragraph (4), item (i) of the Act

(c) An individual or corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 40-7, paragraph (4), item (i) of the Act

(d) Those listed in the preceding items.

(2) The provisions of Article 25-22, paragraph (2) and paragraph (3) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 40-7, paragraph (4), item (i) of the Act. In this case, the term "those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items" in Article 25-22, paragraph (2), item (i) shall be deemed to be replaced with "a specially-related domestic corporation prescribed in Article 40-7, paragraph (2), item (ii) of the Act, specially-related shareholder, etc. prescribed in paragraph (1) of the said Article and those listed in the items of Article 25-28, paragraph (1)."

(3) The provisions of Article 25-22, paragraph (5) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 40-7, paragraph (4), item (ii) of the Act.

(Deduction for the Amount of Dividends, etc. of Surplus from Specified Foreign Corporation)

Article 25-29 (1) The amount specified by Cabinet Order as prescribed in Article 40-8, paragraph (1), item (i) of the Act shall be the amount calculated in accordance with the provisions of Article 25-23, paragraph (1), with regard to the amount of eligible income (limited to that which pertains to taxable income prescribed in the said item that is included in the amount of gross revenue in the calculation of the amount of miscellaneous income, for the years prescribed in the said item, of a resident who is a specially-related shareholder, etc.) pertaining to a specified foreign corporation prescribed in the said item (referred to as a "specified foreign corporation" in the following paragraph).

(2) The amount specified by Cabinet Order as prescribed in Article 40-8, paragraph (1), item (ii) of the Act shall be the amount calculated in accordance with the provisions of Article 25-23, paragraph (2), with regard to the amount of eligible income (limited to that which pertains to taxable income prescribed in the said item that is included in the amount of gross revenue in the calculation of the amount of miscellaneous income for each of the three years preceding or including the previous year, prescribed in the said item, of a resident who is a specially-related shareholder, etc.) for each business year of a specified foreign corporation.

(Determination, etc. of Specified Relationship)

Article 25-30 (1) Where the provisions of Article 40-7, paragraph (1) of the Act shall apply, whether or not a domestic corporation falls under the category of a specified domestic corporation prescribed in Article 40-7, paragraph (2), item (i) of the Act shall be determined according to its status immediately before an event causing a specified relationship prescribed in paragraph (1) of the said Article occurred, and whether or not the said specified relationship actually exists afterwards between a specially-related shareholder, etc. and a specially-related domestic corporation and whether or not a foreign corporation falls under the category of an affiliated foreign corporation shall be determined according to its status at the end of the relevant business year of the said specially-related domestic corporation.

(2) Where a foreign corporation has been determined as falling under the category of an affiliated foreign corporation at the end of the relevant business year of a specially-related domestic corporation, pursuant to the provisions of preceding paragraph, the provisions of Article 40-7 of the Act shall apply to the eligible income for the relevant business year containing the day on which the said affiliated foreign corporation (limited to that falling under the category of a specified foreign corporation prescribed in Article 40-7, paragraph (1) of the Act) was determined as falling under such category.

(3) The provisions of Article 25-24, paragraph (2) shall apply mutatis mutandis to the application of the provisions of Article 222 of the Order for Enforcement of the Income Tax Act in the case of calculating the limitation on a creditable amount prescribed in Article 95, paragraph (1) of the Income Tax Act for a resident subject to the provisions of Article 40-7, paragraph (1) or Article 40-8, paragraph (1) of the Act.

(4) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 40-7, paragraph (8) of the Act shall apply under the provisions of Article 40-7 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 40-9 of the Act, Articles 25-25 to 25-27 (excluding paragraph (5)), the preceding Article and this Article.

(5) With regard to a trust corporation or the beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 40-7 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 40-9 of the Act, Articles 25-25 to 25-27 (excluding paragraph (5)), the preceding Article or this Article shall be specified by Ordinance of the Ministry of Finance.

Section 10 Other Special Provisions

(Amount, etc. of Profit from Redemption)

Article 26-9-2 (1) The amount specified by Cabinet Order as prescribed in Article 41-12, paragraph (1) of the Act shall be the following amount:

(i) The amount calculated by multiplying the amount of profit from redemption prescribed in article 41-12, paragraph (7) of the Act (hereinafter referred to as "profit from redemption" in this Article through to Article 26-15-2) to be paid with respect to discount bonds prescribed in the said paragraph (hereinafter referred to as "discount bonds" in this Article through to Article 26-13) issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act, by the ratio of the amount listed in (b) to the amount listed in (a):

(a) The amount of the shortfall of the said discount bonds as prescribed in Article 136-2, paragraph (1) of the Order for Enforcement of the Corporation Tax Act (hereinafter referred to as "discount on company bonds premium" in this Article through to Article 26-15-3)

(b) The part of the amount listed in (a) that is attributed to a business conducted by the said foreign corporation in Japan through a fixed place for conducting a business prescribed in Article 141, item (i) of the Corporation Tax Act

(ii) The amount calculated by multiplying the amount of profit from redemption to be paid with respect to discount bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act, by the ratio of the amount listed in (b) to the amount listed in (a):

(a) Discount on company bonds premium of the said discount bonds

(b) The part of the amount listed in (a) that is attributed to businesses prescribed in Article 141, item (ii) or item (iii) of the Corporation Tax Act conducted by those foreign corporations.

(2) The amount specified by Cabinet Order as prescribed in Article 41-12, paragraph (3) of the Act shall be the following amount:

(i) The amount calculated by deducting the issue price from the face value of the discount bonds issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act and then multiplying the amount that remains after deduction by the ratio of the amount listed in (b) to the amount listed in (a):

(a) Discount on company bonds premium of the said discount bonds

(b) The part of the amount listed in (a) that is attributed to a business conducted by the said foreign corporation in Japan through a fixed place for conducting a business prescribed in Article 141, item (i) of the Corporation Tax Act

(ii) The amount calculated by deducting the issue price from the face value of discount bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act and then multiplying the amount that remains after deduction by the ratio of the amount listed in (b) to the amount listed in (a):

(a) Discount on company bonds premium of the said discount bonds

(b) The part of the amount listed in (a) that is attributed to the businesses prescribed in Article 141, item (ii) or item (iii) of the Corporation Tax Act pertaining to these foreign corporations.

(Payment, etc. of Income Tax on Profit from Redemption)

Article 26-10 (1) The issuer of discount bonds shall, when he/she pays income tax collected pursuant to the provisions of Article 41-12, paragraph (3) of the Act, attach a financial statement specified by Ordinance of the Ministry of Finance to a payment statement prescribed in Article 34, paragraph (1) of the Act on General Rules for National Taxes at the time of the payment.

(2) The place for paying income tax to be collected and paid pursuant to the provisions of Article 41-12, paragraph (3) of the Act shall be at the location of the head office or principal office of an issuer of discount bonds (where the said discount bonds are national government bonds (excluding those listed in Article 41-12, paragraph (7), item (i) of the Act), at the location of the head office of the Bank of Japan, and where the said discount bonds are issued by a foreign corporation, at the location of the said foreign corporation's principal office in Japan).

(3) The amount deemed to be income tax to be collected when receiving the redemption prescribed in Article 41-12, paragraph (4) of the Act pursuant to the provisions of the said paragraph shall be the amount of income tax that shall be collected from a person who receives the said redemption, with regard to discount bonds that he/she holds at the time of the said redemption, at the time of issuance of the discount bonds pursuant to the provisions of paragraph (3) of the said Article.

(Credit of the Amount of Income Tax on Profit from Redemption against Corporation Tax)

Article 26-11 (1) The amount of income tax to be credited against corporation tax out of the amount deemed to be income tax to be collected when receiving the redemption prescribed in Article 41-12, paragraph (4) of the Act pursuant to the provisions of the said paragraph shall be the amount calculated, pursuant to the provisions of Article 140-2 of the Order for Enforcement of the Corporation Tax Act, with regard to the amount of the said income tax (where the amount of the said income tax is not clear, with regard to the amount obtained by deducting the issue price for the discount bonds (where the said discount bonds are national government bonds listed in Article 41-12, paragraph (9), items (i) to (viii) of the Act which are those falling under the category of short-term government or company bonds prescribed in the said paragraph or other national government bonds specified by Ordinance of the Ministry of Finance (hereinafter referred to as "short-term national government bonds, etc." in this paragraph) and are discount bonds other than those whose issue price is not clear, such issue price shall be the issue price on the final issue date for the said discount bonds, and where the said discount bonds are the said short-term national government bonds, etc., such issue price shall be the price specified by Ordinance of the Ministry of Finance as equivalent to the said issue price for the said discount bonds; such issue price shall be referred to as the "issue price, etc. on the final issue date" in Article 26-13, paragraph (1), item (i) and paragraph (5), item (ii)) from the face value of the said discount bonds and then multiplying the amount that remains after deduction (where the said discount bonds are issued outside Japan by a foreign corporation, the amount specified by Cabinet Order, prescribed in Article 41-12, paragraph (3) of the Act) by the rate of income tax on profit from redemption for the said discount bonds collected at the time of issuance pursuant to the provisions of paragraph (3) of the said Article, and where the discount bonds have been redeemed by bringing the redemption date forward or retired by purchase prior to the redemption date, with regard to the amount that remains after deducting the amount to be refunded that was calculated pursuant to the provisions of paragraph (1) of the following Article from the amount of the income tax). In this case, the term "interest" in Article 140-2, paragraph (1), item (i) of the Order for Enforcement of the Corporation Tax Act shall be deemed to be replaced with "profit from redemption (meaning profit from redemption as prescribed in Article 41-12, paragraph (7) (Separate Taxation, etc. for Profit from Redemption, etc.) of the Act on Special Measures Concerning Taxation; the same shall apply in the following paragraph and paragraph (3))"; the term "out of the number of months" in paragraph (2) of the said Article shall be deemed to be replaced with "out of the number of months (the number of days, where the said dividend of interest, etc. is profit from redemption for short-term government or company bonds (meaning short-term government or company bonds prescribed in Article 41-12, paragraph (9) of the Act on Special Measures Concerning Taxation; the same shall apply in the following paragraph); hereinafter the same shall apply in this paragraph);" and the term "the amount of income prescribed in paragraph (1), item (i)" in paragraph (3) of the said Article shall be deemed to be replaced with "the amount of income (excluding the amount of income tax on profit from redemption of short-term government or company bonds) prescribed in paragraph (1), item (i)."

(2) The amount of income tax collected pursuant to the provisions of Article 41-12, paragraph (3) of the Act, where a corporation acquired discount bonds at the time of issue, shall be included in the acquisition costs of the said discount bonds; the amount deemed to be income tax to be collected when receiving the redemption pursuant to the provisions of paragraph (4) of the said Article shall not be included in deductible expenses for calculating the amount of income for a business year containing the time of receiving the redemption (where the business year is a consolidated business year prescribed in Article 15-2 of the Corporation Tax Act, for calculating the amount of consolidated income prescribed in Article 2, item (xviii)-4 of the said Act for the said consolidated business year; hereinafter the same shall apply in this paragraph); and the amount of income tax to be credited against corporation tax pursuant to the provisions of Article 68 (including the cases where it is applied mutatis mutandis pursuant to Article 144 of the said Act) or Article 81-14 of the said Act shall be included in gross profits for calculating the amount of income that is to be credited for that business year.

(Refund of Income Tax in the Case of Advanced Redemption, etc.)

Article 26-12 (1) The amount of income tax to be refunded pursuant to the provisions of Article 41-12, paragraph (5) of the Act shall be the amount obtained by deducting the redemption price (where retirement by purchase is performed, the purchase price; hereinafter the same shall apply in this paragraph) from the face value of the discount bonds and then multiplying the amount that remains after deduction (where the said discount bonds are issued outside Japan by a foreign corporation, the amount listed as follows) by the rate of income tax on profit from redemption for the said discount bonds collected at the time of issue, pursuant to the provisions of paragraph (3) of the said Article.

(i) The amount obtained by deducting the redemption price from the face value of the discount bonds issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act and then multiplying the amount that remains after deduction by the rate of the amount listed in (b) out of the amount listed in (a):

(a) Discount on company bonds premium for the said discount bonds

(b) The part of the amount listed in (a) that is attributed to a business conducted by the said foreign corporation in Japan through a fixed place for conducting a business as prescribed in Article 141, item (i) of the Corporation Tax Act.

(ii) The amount obtained by deducting the redemption price from the face value of the discount bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act and then multiplying the amount that remains after deduction by the rate of the amount listed in (b) out of the amount listed in (a):

(a) Discount on company bonds premium for the said discount bonds

(b) The part of the amount listed in (a) that is attributed to businesses conducted by these foreign corporations as prescribed in Article 141, item (ii) or item (iii) of the Corporation Tax Act.

(2) A refund under the provisions of Article 41-12, paragraph (5) of the Act shall be made at the time of redemption prescribed in the said paragraph. In this case, the said amount to be refunded shall be deducted from the amount payable pursuant to the provisions of paragraph (3) of the said Article or Article 181 or Article 212 of the Income Tax Act.

(Refund of Income Tax for Non-taxable Corporations, etc.)

Article 26-13 (1) The amount of income tax to be refunded pursuant to the provisions of Article 41-12, paragraph (6) of the Act with regard to discount bonds set forth in the said paragraph shall be the amount specified respectively in the following items for the category of cases listed in the relevant items:

(i) Where redemption is made after the redemption date: Out of the income tax collected on the said discount bonds pursuant to the provisions of Article 41-12, paragraph (3) of the Act (where the amount of the said income tax is not clear, the amount obtained by deducting the issue price, etc. on the final issue date for the said discount bonds from the face value of the said discount bonds and then multiplying the amount that remains after deduction (where the said discount bonds are issued outside Japan by a foreign corporation, the amount listed as follows) by the rate of income tax on profit from redemption for the said discount bonds collected at the time of issuance pursuant to the provisions of the said paragraph; hereinafter the same shall apply in this Article), the amount corresponding to the period during which a domestic corporation or trustee prescribed in Article 41-12, paragraph (6) of the Act (hereinafter referred to as a "non-taxable corporation, etc." in this Article) held the said discount bonds

(ii) Where redemption is made by bringing the redemption date forward or retirement by purchase is performed prior to the redemption date: Out of the amount that remains after deducting the amount to be refunded pursuant to the provisions of Article 41-12, paragraph (5) of the Act from the income tax collected on the said discount bonds pursuant to the provisions of paragraph (3) of the said Article, the amount corresponding to the period during which a non-taxable corporation, etc. held the said discount bonds.

(2) The amount corresponding to the period during which a non-taxable corporation, etc. held the said discount bonds as prescribed in items of the preceding paragraph shall be the amount obtained by multiplying the amount of income tax or remaining amount prescribed in the said items by the ratio of the number of months (where the said discount bonds are short-term government or company bonds prescribed in Article 41-12, paragraph (9) of the Act, the number of days; hereinafter the same shall apply in this paragraph and paragraph (5), item (iii)) up to the redemption date during which the said non-taxable corporation, etc. held the said discount bonds out of the number of months from the issue date (where the date is not clear, the final issue date for the said discount bonds) to the redemption date (including a date for retirement by purchase; hereinafter the same shall apply in this Article) of the said discount bonds.

(3) The number of months set forth in the preceding paragraph shall be calculated by calendar month, and when there are any fractions less than one month, those fractions shall be deemed to be one month for counting the period during which a non-taxable corporation, etc. held the said discount bonds and shall be rounded off for calculating the period from the issue date to the redemption date of the said discount bonds, and when the ratio set forth in the said paragraph exceeds one, the ratio shall be deemed to be one.

(4) A refund pursuant to the provisions of Article 41-12, paragraph (6) shall be made at the time of paying the profit from redemption as prescribed in the said paragraph upon request from a non-taxable corporation, etc. In this case, the provisions of the second sentence of Article 26-12, paragraph (2) shall apply mutatis mutandis.

(5) A non-taxable corporation, etc. intending to receive a refund pursuant to the provisions of Article 41-12, paragraph (6) of the Act shall submit a written request for a refund containing the following matters, along with a document certifying the date of acquisition of the discount bonds, to the issuer of the said discount bonds by the day on which he/she receives the payment of the profit from redemption as prescribed in the said paragraph for the said discount bonds set forth in the said paragraph:

(i) The name of the requester and the location of the requester's head office or principal office

(ii) The sum of the face value and the sum of the issue price of the discount bonds for which the requester intends to receive redemption (where the said issue price is not clear, the issue price, etc. on the final issue date for the said discount bonds) and the amount of income tax on the said discount bonds collected pursuant to the provisions of Article 41-12, paragraph (3) of the Act

(iii) The date of acquisition of the discount bonds for which the requester intends to receive redemption and the number of months up to the redemption date out of the period during which the requester held the said discount bonds

(iv) The amount by which the requester intends to be refunded pursuant to the provisions of Article 41-12, paragraph (6) of the Act out of the amount of income tax listed in item (ii)

(v) Other matters for reference.

(Treatment where an Issuer of Discount Bonds Could not Deduct the Amount to Refund from the Amount Payable)

Article 26-14 (1) Where the provisions of Article 26-12, paragraph (2) or paragraph (4) of the preceding Article shall apply, when there is any amount that an issuer prescribed in Article 41-12, paragraph (5) or paragraph (6) of the Act (hereinafter referred to as an "issuer" in this Article) cannot deduct as prescribed in the second sentence of Article 26-12, paragraph (2) (including the cases where it is applied mutatis mutandis pursuant to paragraph (4) of the preceding Article) in the month following the month including the day on which he/she shall make a refund pursuant to the provisions of Article 41-12, paragraph (5) or paragraph (6) of the Act, the competent district director having jurisdiction over the place for tax payment prescribed in Article 26-10, paragraph (2) for income tax pertaining to the profit from redemption for discount bonds prescribed in Article 41-12, paragraph (5) or paragraph (6) of the Act shall refund the said amount that cannot be deducted to the said issuer.

(2) An issuer who seeks the application of the provisions of the preceding paragraph shall submit a document containing that fact to the competent district director set forth in the preceding paragraph, along with a detailed statement containing the amount that he/she shall refund pursuant to the provisions of Article 41-12, paragraph (5) or paragraph (6) of the Act, the amount that he/she cannot deduct as prescribed in the preceding paragraph out of the said amount, which of the provisions of paragraph (5) or paragraph (6) of the said Article the said refund is based on, and other necessary matters.

(3) Where the interest on a refund prescribed in Article 58, paragraph (1) of the Act on General Rules for National Taxes is to be calculated with regard to a refund under the provisions of paragraph (1), the period set forth in Article 58, paragraph (1) of the said Act to be used as the basis for the calculation shall be the period from the day on which one month has elapsed from the next day of submitting the documents set forth in the preceding paragraph up to the day on which the payment for the refund is determined or the day on which an appropriation is made for the refund (where there has been any day suitable for an appropriation before such day, up to the day which proved to be suitable).

(Scope of Discount Bonds Pertaining to Separate Taxation, etc. on Profit from Redemption)

Article 26-15 (1) The government or company bonds specified by Cabinet Order prescribed in Article 41-12, paragraph (7) of the Act shall be the government or company bonds listed as follows which are issued by means of a discount:

(i) National government bonds and local government bonds

(ii) Company bonds issued by a domestic corporation (including bonds issued by a domestic corporation other than a company under special acts)

(iii) Bonds issued by a foreign corporation (for bonds issued outside Japan, limited to those listed as follows):

(a) Where the whole or a part of discount on company bonds premium for the company bonds issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act is attributed to a business conducted by the said foreign corporation in Japan through a fixed place of business prescribed in the said item, the said company bonds

(b) Where the whole or a part of discount on company bonds premium for the company bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act is attributed to a business conducted by the said foreign corporation as prescribed in these items, the said company bonds

(2) The bonds specified by Cabinet Order prescribed in Article 41-12, paragraph (7), item (ii) of the Act shall be the bonds issued by the Japan Housing Finance Agency, the Okinawa Development Finance Corporation, or the Urban Renaissance Agency pursuant to the provisions of Article 8 of the Supplementary Provisions of the Japan Housing Finance Agency Act, Article 27, paragraph (4) of the Okinawa Development Finance Corporation Act (Act No. 31 of 1972) or Article 15, paragraph (1) of the Supplementary Provisions of the Urban Renaissance Agency Act.

(Application of the Income Tax Act, etc. to Profit from Redemption to be Received by Nonresident)

Article 26-15-2 Profit from redemption of government or company bonds listed in paragraph (1), item (iii) of the preceding Article (excluding specified short-term government or company bonds prescribed in Article 41-12, paragraph (9) of the Act) that is to be received by a nonresident shall be deemed to be income arising from the utilization or holding of assets located in Japan prescribed in Article 161, item (i) of the Income Tax Act, and the provisions of the said Act and other income tax-related laws and regulations (excluding provisions concerning withholding income tax prescribed in Article 2, paragraph (1), item (xlv) of the Income Tax Act) shall apply.

(Income, etc. from Transfer of Discount Bonds Deemed to Be Non-Taxable)

Article 26-15-3 The provisions of Article 37-16, paragraph (1) of the Act shall not apply to income arising from the transfer of the following government or company bonds, issued by means of a discount, that was carried out by a resident or a nonresident who maintains a permanent establishment in Japan:

(i) Where the whole of the discount on company bonds premium for the company bonds issued outside Japan by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act is attributed to a business that is conducted by the said foreign corporation in Japan through a fixed place of business as prescribed in the said item, the said company bonds

(ii) Where the whole of the discount on company bonds premium for the company bonds issued outside Japan by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act is attributed to a business that is conducted by the said foreign corporation as prescribed in these items, the said company bonds.

(Scope of Specified Entries or Records under the Book-entry Transfer System)

Article 26-16 The entries or records under the book-entry transfer system specified by Cabinet Order prescribed in Article 41-12, paragraph (9) of the Act shall be the entries or records under the book-entry transfer system specified respectively in the following items for the category of short-term government or company bonds listed in the relevant items:

(i) Short-term government or company bonds (meaning short-term government or company bonds prescribed in Article 41-12, paragraph (9) of the Act; the same shall apply in the following item) listed in items (i) to (viii) of the said paragraph: Entries or records under the book-entry transfer system (meaning entries or records under the book-entry transfer system prescribed in Article 41-12, paragraph (9) of the Act; hereinafter the same shall apply through to Article 26-20) where entries or records under the book-entry transfer system are not made in an account established by a foreign intermediary (meaning a foreign intermediary prescribed in Article 41-12, paragraph (12) of the Act; hereinafter the same shall apply through to Article 26-20) other than a qualified foreign intermediary prescribed in Article 5-2, paragraph (5), item (iv) of the Act

(ii) Short-term government or company bonds other than short-term government or company bonds listed in the preceding item: Entries or records under the book-entry transfer system where entries or records under the book-entry transfer system are not made in an account established by a foreign intermediary.

(Income from Transfer of Specified Short-term Government or Company Bonds Not Excluded from Taxation)

Article 26-17 The income specified by Cabinet Order prescribed in Article 41-12, paragraph (10) of the Act shall be the income from a transfer of specified short-term government or company bonds prescribed in the said paragraph that was carried out by a resident or a nonresident who maintains a permanent establishment in Japan.

(Submission, etc. of a Written Notice by a Person Who Makes Entries or Records under the Book-entry Transfer System for Specified Book-entry Transfer National Government Bonds, etc.)

Article 26-18 (1) The person specified by Cabinet Order prescribed in Article 41-12, paragraph (12) of the Act shall be the national government or any of the following:

(i) A corporation listed in appended table 1 of the Corporation Tax Act

(ii) A corporation established under special acts (limited to a corporation whose name was determined under the said special acts and where it is determined thereunder that letters used in the said name shall not be used for any other persons' names)

(iii) A specified book-entry transfer institution, etc. prescribed in Article 41-12, paragraph (12) of the Act (hereinafter referred to as a "specified book-entry transfer institution, etc." in this Article and Article 26-20, paragraph (2)) and a foreign intermediary

(iv) A foreign government, foreign local public entity, foreign central bank, and an international organization that Japan has joined.

(2) The documents specified by Cabinet Order prescribed in Article 41-12, paragraph (12) of the Act shall be the documents listed respectively in the following items for the category of persons listed in the relevant items:

(i) An individual: A copy of the certificate of residence, certificate of items entered in the certificate of residence, health insurance card, driver's license and certificate of alien registration of the said individual and other documents specified by Ordinance of the Ministry of Finance

(ii) A corporation (including an association or foundation without juridical personality prescribed in Article 2, item (viii) of the Corporation Tax Act; hereinafter the same shall apply in this item): A certificate of registered matters concerning registration for establishment, receipt of national or local tax and certificate of tax payment of the said corporation and other documents specified by Ordinance of the Ministry of Finance.

(3) The identification documents prescribed in Article 41-12, paragraph (12) of the Act (hereinafter referred to as the "identification documents" through to Article 26-20) shall be presented pursuant to the provisions of Article 41-12, paragraph (12) of the Act when submitting a written notice set forth in the said paragraph.

(4) When a person who had submitted a written notice set forth in Article 41-12, paragraph (12) of the Act has changed the person's name or address (or any other place specified by Ordinance of the Ministry of Finance in the case where the person does not have an address in Japan; hereinafter the same shall apply through to Article 26-20), the person shall promptly submit a document containing the person's name and address after the change to the head of the business office, etc. (meaning a business office, etc. prescribed in Article 41-12, paragraph (12) of the Act; hereinafter the same shall apply in this Article) of the specified book-entry transfer institution, etc. to which the person had submitted the written notice (where the person had submitted the said written notice, pursuant to the provisions of the said paragraph, via a foreign intermediary to the head of the business office, etc. of the specified book-entry transfer institution, etc. where he/she makes entries or records under the book-entry transfer system for the specified book-entry transfer national government bonds, etc. (meaning specified book-entry transfer national government bonds, etc. prescribed in the said paragraph; hereinafter the same shall apply through to Article 26-20), the person shall promptly submit such document via the said foreign intermediary to the head of the business office, etc. of the said specified book-entry transfer institution, etc., according to the provisions of the first sentence of Article 41-12, paragraph (12) of the Act). The same shall apply where the person has changed the name or address again after submitting the said document.

(5) A person who submits the document prescribed in the preceding paragraph shall, when submitting the said document, present the identification documents to the head of the business office, etc. of the specified book-entry transfer institution, etc. to which he/she submits the said document (excluding the case where he/she submits the said document via a foreign intermediary; the same shall apply in the following paragraph) or to the head of the overseas business office, etc. (meaning the overseas business office, etc. prescribed in Article 41-12, paragraph (12) of the Act) of the foreign intermediary set forth in the said paragraph via which he/she had submitted a written notice prescribed in the preceding paragraph as prescribed in Article 41-12, paragraph (12) of the Act (referred to as the "head of the overseas business office, etc. of the foreign intermediary" in the following paragraph and paragraph (8)).

(6) The head of the business office, etc. of the specified book-entry transfer institution, etc. or the head of the overseas business office, etc. of the foreign intermediary shall, when a written notice prescribed in Article 41-12, paragraph (12) of the Act or the document prescribed in paragraph (4) has been submitted, confirm whether or not the name and address entered in the said written notice or the document are consistent with the name and address entered in the identification documents which were presented pursuant to the provisions of Article 41-12, paragraph (12) of the Act or the preceding paragraph at the time of the submission of the said written notice or the document.

(7) The foreign intermediary set forth in the preceding paragraph that has provided a confirmation pursuant to the provisions of the said paragraph shall submit the documents prescribed in Article 41-12, paragraph (14) of the Act for each person who makes entries or records under the book-entry transfer system set forth in paragraph (12) of the said Article to the head of the business office, etc. of the specified book-entry transfer institution, etc. where the foreign intermediary makes entries or records under the book-entry transfer system for specified book-entry transfer national government bonds, etc. pertaining to the said confirmation (where the said foreign intermediary is a foreign further indirect account management institution (meaning a foreign further indirect account management institution prescribed in the said paragraph), to the head of the business office, etc. of the specified book-entry transfer institution, etc. where the foreign further indirect account management institution prescribed in paragraph (14) of the said Article pertaining to the said specified book-entry transfer national government bonds, etc. makes entries or records under the book-entry transfer system for the said specified book-entry transfer national government bonds, etc. via the said foreign further indirect account management institution).

(8) The head of the business office, etc. of the specified book-entry transfer institution, etc. or the head of the overseas business office, etc. of the foreign intermediary shall, when having provided a confirmation pursuant to the provisions of paragraph (6), clearly record that he/she has provided the said confirmation in the books concerning the said confirmation (including the books or documents equivalent thereto), pursuant to the provisions of Ordinance of the Ministry of Finance, and preserve the said books; and the head of the business office, etc. of the specified book-entry transfer institution, etc. who has received the submission of a written notice prescribed in Article 41-12, paragraph (12) of the Act, the document prescribed in paragraph (4) or the documents prescribed in the preceding paragraph shall preserve such written notice and documents, pursuant to the provisions of Ordinance of the Ministry of Finance.

(9) Where a nonresident or foreign corporation (excluding those listed in paragraph (1), item (i), item (iii), or item (iv); hereinafter the same shall apply in this paragraph) makes entries or records under the book-entry transfer system for short-term national government bonds, etc. (meaning national government bonds listed in Article 41-12, paragraph (9), items (i) to (viii) of the Act which fall under the category of specified short-term government or company bonds and principal-only book-entry transfer national government bonds and coupon-only book-entry transfer national government bonds prescribed in paragraph (12) of the said Article) for the first time on or after April 1, 1999 in the account pertaining to entries or records under the book-entry transfer system that has gone through the confirmation pursuant to the provisions of Article 5-2, paragraph (9) of the Act (including the cases where it is applied mutatis mutandis pursuant to paragraph (12) of the said Article; hereinafter the same shall apply in this paragraph) (hereinafter such confirmation shall be referred to as a "confirmation pertaining to book-entry transfer national government bonds, etc." in this paragraph), with regard to the said entries or records under the book-entry transfer system, it shall be deemed that the submission of a written notice set forth in Article 41-12, paragraph (12) of the Act under the provisions of the said paragraph (including the submission of the document set forth in paragraph (4) under the provisions of the said paragraph) has been made by the submission of a written application for tax exemption of book-entry transfer national government bonds set forth in Article 5-2, paragraph (1), item (i), (a) of the Act under the provisions of (a) of the said item (including the submission of a written application set forth in paragraph (10) of the said Article under the provisions of the said paragraph) or the submission of a written application for tax exemption of book-entry transfer local government bonds set forth in Article 5, paragraph (1), item (ii), (a) of the Act under the provisions of (a) of the said item (including the submission of a written application set forth in paragraph (11) of the said Article under the provisions of the said paragraph) for the said confirmation pertaining to book-entry transfer national government bonds, etc., that the presentation of the identification documents under the provisions of Article 41-12, paragraph (12) of the Act (including the provisions of paragraph (5)) has been made by the presentation of the documents specified by Cabinet Order set forth in Article 5-2, paragraph (9) of the Act under the provisions of the said paragraph for the said confirmation pertaining to book-entry transfer national government bonds, etc., and that the confirmation under the provisions of paragraph (6) (including the submission of the documents set forth in paragraph (7) under the provisions of the said paragraph) has been provided by the said confirmation pertaining to book-entry transfer national government bonds, etc.; provided, however, that this shall not apply when the name and address to be entered in a written notice set forth in Article 41-12, paragraph (12) of the Act or the document set forth in paragraph (4) are inconsistent with the name and address of the said nonresident or foreign corporation for which the said confirmation pertaining to book-entry transfer national government bonds, etc. has been provided.

(10) The form of a written notice set forth in Article 41-12, paragraph (12) of the Act shall be specified by Ordinance of the Ministry of Finance.

(11) The documents specified by Cabinet Order prescribed in Article 41-12, paragraph (14) of the Act shall be a document certifying that the confirmation prescribed in the said paragraph has been provided, the identification documents and a copy of the said identification documents.

(Entries or Records in the Books by a Foreign Intermediary)

Article 26-18-2 (1) When persons intending to make entries or records under the book-entry transfer system prescribed in Article 41-12, paragraph (15) of the Act (hereinafter referred to as "customers" in this Article) have made entries or records under the book-entry transfer system for specified book-entry transfer national government bonds, etc. via a foreign intermediary, the said foreign intermediary shall enter or record the matters prescribed in the said paragraph in the books prescribed in the said paragraph, for each of the said customers each time, and preserve the said books pursuant to the provisions of Ordinance of the Ministry of Finance.

(2) When customers have made entries or records under the book-entry transfer system for specified book-entry transfer national government bonds, etc. via a foreign intermediary, the said foreign intermediary shall provide information about the matters prescribed in Article 41-12, paragraph (16) of the Act for each of the said customers to the specified book-entry transfer institution, etc. prescribed in the said paragraph of the said foreign intermediary pertaining to the said specified book-entry transfer national government bonds, etc. by way of a document or any other means prescribed in the following paragraph.

(3) The means specified by Cabinet Order prescribed in Article 41-12, paragraph (16) of the Act shall be a means of using an electronic data processing system or another means of using information and communications technology that is specified by Ordinance of the Ministry of Finance.

(4) The specified book-entry transfer institution, etc. prescribed in paragraph (2) shall, when having received a notification set forth in the said paragraph, enter or record the said matters notified, for each of the customers each time, in the books prescribed in Article 41-12, paragraph (16) of the Act and preserve the said books pursuant to the provisions of Ordinance of the Ministry of Finance.

(Notification, etc. of a Recipient of a Consideration for the Transfer of Specified Book-entry Transfer National Government Bonds, etc.)

Article 26-19 (1) Those specified by Cabinet Order prescribed in Article 41-12, paragraph (17) of the Act shall be the national government and those listed in Article 26-18, paragraph (1)item (i), item (ii) and item (iv) (referred to as "public corporations, etc." in paragraph (1) of the following Article).

(2) A notification under the provisions of Article 41-12, paragraph (17) of the Act shall be made each time, on receipt of the payment of a consideration for the transfer of specified book-entry transfer national government bonds, etc. prescribed in the said paragraph.

(3) The identification documents shall be presented pursuant to the provisions of Article 41-12, paragraph (17) of the Act when making a notification set forth in the same paragraph.

(4) Necessary matters concerning the scope of the identification documents that a person intending to make a notification under the provisions of Article 41-12, paragraph (17) of the Act shall present pursuant to the provisions of the said paragraph shall be specified by Ordinance of the Ministry of Finance.

(5) A payer prescribed in Article 41-12, paragraph (17) of the Act (referred to as a "payer" in the following paragraph) shall, when having received a notification under the provisions of paragraph (17) of the said Article, confirm whether or not the name and address notified are consistent with the name and address entered in the identification documents that were presented to him/her at the time of the said notification pursuant to the provisions of the said paragraph.

(6) A payer shall, when having provided a confirmation under the provisions of the preceding paragraph, clearly record that he/she has provided the said confirmation in the books concerning the said confirmation (including the books or documents equivalent thereto), pursuant to the provisions of Ordinance of the Ministry of Finance, and preserve the said books.

(Submission, etc. of a Written Notice by a Recipient of Redemption Money, etc. of Specified Book-entry Transfer National Government Bonds, etc.)

Article 26-20 (1) Those specified by Cabinet Order prescribed in Article 41-12, paragraph (18) of the Act shall be public corporations, etc.

(2) Where a specified book-entry transfer institution, etc. and a foreign intermediary receive redemption money (meaning redemption money prescribed in Article 41-12, paragraph (18) of the Act; hereinafter the same shall apply in this Article) or payment of interest (meaning interest prescribed in Article 41-12, paragraph (18) of the Act; hereinafter the same shall apply in this Article) pertaining to specified book-entry transfer national government bonds, etc., due to the redemption (meaning the redemption prescribed in Article 41-12, paragraph (18) of the Act; the same shall apply in paragraph (7)) or payment of interest, a written notice set forth in Article 41-12, paragraph (18) of the Act under the provisions of the said paragraph shall not be required to be submitted for the receipt of the said redemption or payment of interest.

(3) The identification documents shall be presented pursuant to the provisions of Article 41-12, paragraph (18) of the Act when submitting a written notice set forth in the said paragraph.

(4) Necessary matters concerning the scope of the identification documents that a person intending to submit a written notice under the provisions of Article 41-12, paragraph (18) of the Act shall present pursuant to the provisions of the said paragraph shall be specified by Ordinance of the Ministry of Finance.

(5) A person in charge of handling payment of redemption money or interest pertaining to specified book-entry transfer national government bonds, etc. shall, when a written notice prescribed in Article 41-12, paragraph (18) of the Act has been submitted, confirm whether or not the name and address entered in the said written notice are consistent with the name and address entered in the identification documents that were presented to him/her at the time of the submission of the said written notice pursuant to the provisions of the said paragraph.

(6) A person in charge of handling payment of redemption money or interest pertaining to specified book-entry transfer national government bonds, etc. shall, when having provided a confirmation under the provisions of the preceding paragraph, clearly record that he/she has provided the said confirmation in the books concerning the said confirmation (including the books or documents equivalent thereto), pursuant to the provisions of Ordinance of the Ministry of Finance, and preserve the said books and the written notice prescribed in Article 41-12, paragraph (18) of the Act.

(7) Where a person who receives a payment prescribed in Article 41-12, paragraph (18) of the Act receives redemption money or payment of interest pertaining to specified book-entry transfer national government bonds, etc., due to the redemption or payment of interest, pertaining to a confirmation provided pursuant to the provisions of Article 26-18, paragraph (6) (hereinafter referred to as a "confirmation pertaining to entries or records under the book-entry transfer system" in this paragraph), with regard to the receipt of the said redemption money or payment of interest, it shall be deemed that the submission of a written notice set forth in Article 41-12, paragraph (18) of the Act under the provisions of the said paragraph has been made by the submission of a written notice set forth in Article 41-12, paragraph (12) of the Act under the provisions of the said paragraph (including the submission of the document set forth in Article 26-18, paragraph (4) under the provisions of the said paragraph) for the said confirmation pertaining to entries or records under the book-entry transfer system, that the presentation of the identification documents under the provisions of Article 41-12, paragraph (18) of the Act has been made by the presentation of the identification documents under the provisions of Article 41-12, paragraph (12) of the Act (including the provisions of Article 26-18, paragraph (5)) for the said confirmation pertaining to entries or records under the book-entry transfer system, and that the confirmation under the provisions of Article 41-12, paragraph (18) of the Act (including the submission of the documents set forth in paragraph (14) of the said Article under the provisions of the said paragraph which is applied mutatis mutandis pursuant to paragraph (19) of the said Article) has been provided by the said confirmation pertaining to entries or records under the book-entry transfer system; provided, however, that this shall not apply when the name and address to be entered in a written notice set forth in Article 41-12, paragraph (18) of the Act are inconsistent with the name and address of the person for which the said confirmation pertaining to entries or records under the book-entry transfer system has been provided.

(8) The form of a written notice set forth in Article 41-12, paragraph (18) of the Act shall be specified by Ordinance of the Ministry of Finance.

(Submission of Report of Payment of a Consideration for the Transfer or Redemption Money of Specified Book-entry Transfer National Government Bonds, etc.)

Article 26-21 (1) Those specified by Cabinet Order prescribed in Article 41-12, paragraph (21) of the Act shall be the national government and those listed in the items of Article 26-18, paragraph (1).

(2) A payer prescribed in Article 41-12, paragraph (21) of the Act who intends to obtain the approval set forth in the said paragraph shall submit a written application containing his/her name and location, intention to obtain the said approval, and any other matters specified by Ordinance of the Ministry of Finance to the competent district director prescribed in the said paragraph.

(3) Where a written application set forth in the preceding paragraph has been submitted, when the competent district director set forth in the said paragraph has granted approval or has decided not to grant approval, he/she shall notify to that effect to the applicant in writing.

(4) A person in charge of handling payment of redemption money or interest pertaining to specified book-entry transfer national government bonds, etc. prescribed in Article 41-12, paragraph (22) of the Act who intends to obtain the approval set forth in the said paragraph shall submit a written application containing his/her name and location, intention to obtain the said approval, and any other matters specified by Ordinance of the Ministry of Finance to the competent district director prescribed in the said paragraph.

(5) Where a written application set forth in the preceding paragraph has been submitted, when the competent district director set forth in the said paragraph has granted approval or has decided not to grant approval, he/she shall notify to that effect to the applicant in writing.

(6) A person who pays a consideration for the transfer of specified book-entry transfer national government bonds, etc. or who is in charge of handling payment of redemption money or interest pertaining to specified book-entry transfer national government bonds, etc. prescribed in Article 41-12, paragraph (23) of the Act, who intends to obtain the approval set forth in the said paragraph, shall submit a written application containing his/her name and location, the type of optical disk prescribed in the said paragraph which he/she intends to submit, and any other matters specified by Ordinance of the Ministry of Finance to the competent district director having jurisdiction over the said location.

(7) Where a written application set forth in the preceding paragraph has been submitted, when the competent district director set forth in the said paragraph has granted approval or has decided not to grant approval, he/she shall notify to that effect to the applicant in writing.

(8) The form of a report of payment of a consideration for the transfer of specified book-entry transfer national government bonds, etc. prescribed in Article 41-12, paragraph (21) of the Act or a report of payment of redemption money, etc. of specified book-entry transfer national government bonds, etc. prescribed in paragraph (22) of the said Article shall be specified by Ordinance of the Ministry of Finance.

(Discount on Bonds Regarding Foreign-issued Company Bonds to Which Special Provisions for Tax Exemption are not Applied)

Article 26-22 The discount on bonds specified by Cabinet Order prescribed in Article 41-13 of the Act shall be the discount on bonds listed as follows:

(i) The discount on bonds to be received by a nonresident listed in Article 164, paragraph (1), item (i) of the Income Tax Act which is attributed to a business conducted by the said nonresident in Japan at any fixed place prescribed in the said item

(ii) The discount on bonds to be received by a nonresident listed in Article 164, paragraph (1), item (ii) or item (iii) of the Income Tax Act which is attributed to a business conducted by the said nonresident prescribed in these items.

(Special Provisions for Taxation on Foreign Partners)

Article 26-30 (1) The act specified by Cabinet Order as the execution of operations, as prescribed in Article 41-21, paragraph (1), item (ii) of the Act, shall be the following acts:

(i) Execution of operations pertaining to the business conducted under an investment partnership contract (meaning an investment partnership contract prescribed in Article 41-21, paragraph (2), item (i) of the Act; hereinafter the same shall apply in this Article and the following Article) (such business shall hereinafter be referred to as an "investment partnership business" in this paragraph and the following paragraph; such execution shall hereinafter be referred to as the "execution of operations" in this paragraph)

(ii) Determination of the execution of operations pertaining to the investment partnership business

(iii) Giving approval or consent for the execution of operations pertaining to the investment partnership business or on the determination thereof, or any other acts similar thereto.

(2) In the case of applying the provisions of Article 41-21, paragraph (1), item (ii) of the Act, when a person who has an equity interest in the partnership property (referred to as "investment partnership property" in paragraph (4) and paragraph (5)) pertaining to an investment partnership contract subject to special provisions (meaning an investment partnership contract subject to the provisions of Article 41-21, paragraph (1), item (ii) of the Act, which is concluded by a nonresident or foreign corporation who is subject to the provisions of the said paragraph; hereinafter the same shall apply in this Article and the following Article), as partnership property pertaining to any of the partnership contracts listed in the following items (excluding the said investment partnership contract subject to special provisions; hereinafter the same shall apply in this paragraph), which is concluded by one of the partners who has concluded the said investment partnership contract subject to special provisions (the said person shall a person other than the said partner), performs the acts listed in the items of the preceding paragraph pertaining to the investment partnership business under the said investment partnership contract subject to special provisions as the execution of operations of the business conducted based on the partnership contract listed in the said items, it shall be deemed that the said partner performs such acts pertaining to the said investment partnership business:

(i) A partnership contract that the said partner has concluded directly

(ii) A partnership contract that a partnership established under the partnership contract listed in the preceding item (including partnerships similar thereto; hereinafter the same shall apply in this paragraph) has concluded directly

(iii) A partnership contract that a partnership established under the partnership contract listed in the preceding item or the following item has concluded directly

(iv) A partnership contract that a partnership established under the partnership contract listed in the preceding item has concluded directly.

(3) The partnership contract prescribed in the preceding paragraph shall mean a contract listed in the following items, and the partnership property prescribed in the said paragraph shall mean property specified in the said items for the category of contracts listed in the said items:

(i) Partnership contract prescribed in Article 667, paragraph (1) of the Civil Code (Act No. 89 of 1896): Partnership property prescribed in Article 668 of the said Code

(ii) Investment limited partnership contract prescribed in Article 3, paragraph (1) of the Limited Partnership Act for Investment (Act No. 90 of 1998): Partnership property prescribed in Article 668 of the Civil Code as applied mutatis mutandis pursuant to Article 16 of the said Act

(iii) Limited liability business partnership contract prescribed in Article 3, paragraph (1) of the Limited Liability Partnership Act: Partnership property prescribed in Article 668 of the Civil Code as applied mutatis mutandis pursuant to Article 56 of the said Act

(iv) A contract in a foreign state similar to the contracts listed in the preceding three items (hereinafter referred to as a "foreign partnership contract" in this item): Property similar to partnership property prescribed in the preceding three items pertaining to the said foreign partnership contract.

(4) The ratio calculated pursuant to the provisions of Cabinet Order as the ratio of equity interest as prescribed in Article 41-21, paragraph (1), item (iii) of the Act shall be either of the following ratios, which is higher:

(i) The total of the ratios of equity interest of each specially-related partner pertaining to the nonresident or foreign corporation set forth in Article 41-21, paragraph (1) of the Act in the investment partnership property (in the case where said specially-related partner is a person listed in item (iii) of the following paragraph, limited to the ratio pertaining to the partnership property prescribed in the said item)

(ii) The total of the profit and loss distribution ratios of each specially-related partner set forth in the preceding item pertaining to an investment partnership contract subject to special provisions (the term "profit and loss distribution ratio" means the ratio of the distribution of profits and losses under the provisions of Article 674 of the Civil Code as applied mutatis mutandis pursuant to Article 16 of the Limited Partnership Act for Investment or the ratio similar thereto under a foreign partnership contract prescribed in Article 41-21, paragraph (2), item (vi) of the Act; in the case where the said specially-related partner is a person listed in item (iii) of the following paragraph, limited to the ratio pertaining to the partnership contract prescribed in the said item).

(5) The specially-related partner prescribed in the preceding paragraph shall be one of the following persons:

(i) A nonresident or foreign corporation who is a partner who has concluded an investment partnership contract subject to special provisions

(ii) A person who has a special relationship with the said nonresident or foreign corporation

(iii) A person (excluding the persons listed in the preceding two items) who has equity interest in the investment partnership property as partnership property prescribed in paragraph (2) pertaining to the partnership contract (excluding an investment partnership contract subject to special provisions) listed in the items of the said paragraph that the said single nonresident or foreign corporation has concluded.

(6) The person who has a special relationship with a nonresident or foreign corporation as prescribed in item (ii) of the preceding paragraph shall be one of the following persons:

(i) One of the following individuals:

(a) A relative of the said nonresident

(b) A person in a relationship with the said nonresident where a marital relationship is de facto, though a marriage has not been registered

(c) An employee of the said nonresident

(d) A person other than one of those listed in (a) through (c), who maintains his/her living by receiving money or other assets received from the said nonresident

(e) A relative of any of the persons listed in (b) through (d) who depends on such person for his/her livelihood

(f) An officer of the said foreign corporation (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this item) and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act pertaining to the said officer

(ii) In the case where there is a relationship between the said one nonresident or foreign corporation (referred to as a "nonresident, etc." in the following item) and another person whereby either one of them (if the said other person is an individual, including an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with him/her) controls the other (limited to a corporation): the said other person directly or indirectly

(iv) In the case where there is a relationship between the said nonresident, etc. and another person (limited to a corporation) whereby the same person (if the said other person is an individual, including an individual who has a special relationship as prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with him/her) controls the said one nonresident, etc. directly or indirectly and the said other person: the said other person.

(7) The relationship of direct or indirect control prescribed in item (ii) or item (iii) of the preceding paragraph shall mean any relationships between one person and another person whereby the said other person falls under the category of corporation listed in the following:

(i) In the case where the said person controls a corporation: the said corporation

(ii) In the case where the corporation or the said person listed in the preceding item or the following item and the corporation listed in the preceding item or the following item control another corporation: the said other corporation

(iii) In the case where the corporation or the said person listed in the preceding item and the corporation listed in the said corporation control another corporation: the said other corporation.

(8) The provisions of Article 4, paragraph (3) and paragraph (6) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis pursuant to the case of controlling the corporation prescribed in item (i) of the preceding paragraph and the case of controlling another corporation prescribed in item (ii) or item (iii) of the said paragraph.

(9) The person who has a special relationship specified by Cabinet Order with an unlimited liability partner as prescribed in Article 41-21, paragraph (1), item (iv) of the Act shall be a nonresident or foreign corporation in the relationship whereby the said unlimited liability partner falls under any of the categories of persons listed in the items of paragraph (6).

(10) The grounds specified by Cabinet Order as prescribed in Article 41-21, paragraph (4) of the Act shall be the following grounds:

(i) Dissolution of the investment partnership prescribed in Article 41-21, paragraph (2), item (ii) of the Act (referred to as an "investment partnership" in the following item and the following Article) pertaining to the written application for special provisions set forth in paragraph (4) of the said Article

(ii) The fact that the person who has submitted the written application for special provisions set forth in the preceding item is no longer a partner of an investment partnership pertaining to the said written application for special provisions due to a withdrawal from the said investment partnership or on other grounds.

(11) Where the person in charge of handling distribution prescribed in Article 41-21, paragraph (3) of the Act (referred to as a "person in charge of handling distribution" in the following paragraph) has received a written application for special provisions prescribed in paragraph (3) of the said Article or a written statement of change prescribed in paragraph (7) of the said Article (hereinafter referred to as a "written application for special provisions, etc." in this paragraph and the following paragraph), he/she shall submit the said written application for special provisions, etc. to the district director of the tax office prescribed in paragraph (3) of the said Article no later than the tenth of the month following the month including the day of the receipt, and prepare and preserve a copy of the said written application for special provisions, etc. (including those equivalent thereto) pursuant to the provisions of Ordinance of the Ministry of Finance.

(12) The person in charge of handling distribution who has received a written application for special provisions, etc. shall, for each person who has submitted the said written application for special provisions, etc., enter or record in his/her book the day on which the person who has submitted the said written application for special provisions, etc. concluded the investment partnership contract pertaining to the said written application for special provisions, etc. and other matters specified by the Ordinance of the Ministry of Finance, and shall preserve the said book pursuant to the provisions of the Ordinance of the Ministry of Finance.

(13) The nonresident prescribed in Article 41-21, paragraph (9) of the Act shall submit the document prescribed in the said paragraph to the competent district director of the tax office having jurisdiction over the place for tax payment, no later than March 15 of the year following the year containing the day on which he/she has obtained any amount of income categorized as domestic source income prescribed in the said paragraph.

(14) Where a nonresident or foreign corporation who is a partner having concluded an investment partnership contract and who has not satisfied the requirements listed in Article 41-21, paragraph (1), item (v) of the Act (hereinafter referred to as the "Item (v) requirement" in this paragraph and the following paragraph) by the time of the conclusion of the said investment partnership contract, comes to satisfy the Item (v) requirement in respect of the said investment partnership contract, with regard to the application of the provisions of paragraph (3) of the said Article to the said investment partnership contract in the case where the nonresident or foreign corporation satisfies the requirements listed in paragraph (1), items (i) through (iv) of the said Article in respect of the said investment partnership contract continuously during the period from the date of conclusion until the day on which the nonresident or foreign corporation comes to satisfy the Item (v) requirement, the phrase "date of conclusion of " in paragraph (3) of the said Article shall be deemed to be replaced with "the day on which the nonresident or foreign corporation comes to satisfy the requirements listed in paragraph (1), item (v) in respect of"; and the phrase "items of paragraph (1)" in the said paragraph shall be deemed to be replaced with "items of the said paragraph."

(15) Where a nonresident or foreign corporation who is a partner having concluded two or more investment partnership contracts and who has not satisfied the Item (v) requirement at the time of the conclusion of each investment partnership contract, would come to satisfy the Item (v) requirement in respect of one of the said two or more investment partnership contracts provided that the nonresident or foreign corporation does not conduct a business in Japan under an investment partnership contract(s) other than the said one of the two or more investment partnership contracts (hereinafter referred to as the "other investment partnership contract(s)" in this paragraph), with regard to the application of the provisions of Article 41-21, paragraph (3) of the Act to the said one investment partnership contract in the case where the nonresident or foreign corporation satisfies the requirements listed in paragraph (1), items (i) through (iv) of the said Article in respect of the said investment partnership contract continuously during the period from the date of the conclusion of each investment partnership contract until the day on which the nonresident or foreign corporation comes to satisfy the Item (v) requirement, the phrase "the date of conclusion of" in paragraph (3) of the said Article shall be deemed to be replaced with "the day on which the nonresident or foreign corporation comes to satisfy the requirements listed in paragraph (1), item (v) in respect of"; the phrase "items of paragraph (1)" in the said paragraph shall be deemed to be replaced with "items of the said paragraph"; and the phrase "on the date of the submission and thereafter" in the said paragraph shall be deemed to be replaced with "on the day on which the said nonresident or foreign corporation has submitted written applications for special provisions in respect of all of the investment partnership contracts concluded thereby, and thereafter."

(16) Where a foreign corporation who seeks the application of the provisions of Article 41-21, paragraph (1) of the Act has submitted a written application for special provisions prescribed in paragraph (3) of the said Article pursuant to the provisions of the said paragraph as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act or where such foreign corporation has submitted a written statement of change prescribed in Article 41-21, paragraph (7) of the Act pursuant to the provisions of the said paragraph as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act, it shall be deemed that the foreign corporation has submitted a written application for special provisions prescribed in Article 41-21, paragraph (3) of the Act pursuant to the provisions of the said paragraph or a written statement of change prescribed in paragraph (7) of the said Article pursuant to the provisions of the said paragraph, respectively.

(Special Provisions for Taxable Income of Foreign Partner Having No Permanent Establishments)

Article 26-31 (1) Where a nonresident listed in Article 164, paragraph (1), item (iv) of the Income Tax Act (hereinafter referred to as a "nonresident having no permanent establishments in Japan" in this Article) has concluded an investment partnership contract subject to special provisions, etc. (meaning an investment partnership contract subject to special provisions and an investment partnership contract (limited to the investment partnership contract in the case where the said nonresident having no permanent establishments in Japan satisfies the requirements listed in item (i) and item (ii) in respect of an investment partnership contract other than an investment partnership contract subject to special provisions; hereinafter the same shall apply in this paragraph and paragraph (5)); hereinafter the same shall apply in this Article), when the said nonresident has transferred (meaning a transfer as prescribed in Article 291, paragraph (1), item (iii) of the Order for Enforcement of the Income Tax Act; hereinafter the same shall apply in this Article) shares of or capital contributions to a domestic corporation that satisfy the requirements listed in the items of paragraph (6) of the said Article (including the case where the domestic corporation is deemed, pursuant to the provisions of Article 291, paragraph (7) of the said Order, to have conducted the transfer of shares or capital contributions as prescribed in paragraph (6), item (ii) of the said Article that satisfies the requirements listed in the said item, and limited to the case where the nonresident satisfies the requirements listed in item (iii) in respect of the said shares or capital contributions of a domestic corporation), with regard to the said transfer of shares of or capital contributions to the domestic corporation, the provisions of Article 291 of the said Order shall apply by deeming that the person listed in paragraph (4), item (iii) of the said Article pertaining to the said investment partnership contract subject to special provisions, etc. is not included in the scope of specially-related shareholders, etc. prescribed in paragraph (6) and paragraph (7) of the said Article:

(i) For the period within the three years preceding or including the year containing the date of transfer (hereinafter referred to as the "year containing the date of transfer" in this paragraph and paragraph (5)), during which the nonresident has been under an investment partnership contract, he/she has been a limited liability partner prescribed in Article 41-21, paragraph (2), item (iii) of the Act of an investment partnership that is established by the said investment partnership contract.

(ii) For the period within the three years preceding or including the year containing the date of transfer, during which the nonresident has been under an investment partnership contract, he/she has not performed any act listed in the items of paragraph (1) of the preceding Article pertaining to the business conducted under the said investment partnership contract.

(iii) At any time within the three years preceding or including the year containing the date of transfer, the specially-related shareholder, etc. (excluding the person listed in Article 291, paragraph (4), item (iii) of the Order for Enforcement of Income Tax Act pertaining to an investment partnership contract subject to special provisions, etc.) of a domestic corporation set forth in paragraph (1), item (iii), (b) of the said Article which pertains to the said nonresident having no permanent establishments in Japan, has not held shares or capital contributions that account for 25 percent or more of the total number or total amount of issued shares of or capital contributions to the said domestic corporation (in the case where the said specially-related shareholder, etc. is a person listed in paragraph (4), item (iii) of the said Article pertaining to the partnership contract prescribed in the said item (excluding the said investment partnership contract subject to special provisions, etc.), limited to those that are partnership property set forth in the said item).

(2) The provisions of paragraph (2) of the preceding Article shall apply mutatis mutandis in the case of applying the provisions of item (ii) of the preceding paragraph. In this case, the phrase "investment partnership contract subject to special provisions (meaning an investment partnership contract subject to the provisions of Article 41-21, paragraph (1), item (ii) of the Act, which is concluded by a nonresident or foreign corporation who is subject to the provisions of the said paragraph; hereinafter the same shall apply in this Article and the following Article)" in paragraph (2) of the said Article shall be deemed to be replaced with "investment partnership contract (meaning an investment partnership contract prescribed in paragraph (1) of the following Article; hereinafter the same shall apply in this paragraph)"; and the phrase "the said investment partnership contract subject to special provisions" in the said paragraph shall be deemed to be replaced with "the said investment partnership contract."

(3) Where a nonresident having no permanent establishments in Japan has transferred the shares of or capital contributions to a domestic corporation which are partnership property prescribed in article 41-21, paragraph (2), item (iv) of the Act (hereinafter referred to as "investment partnership property" in this paragraph and the following paragraph) pertaining to the investment partnership contract subject to special provisions, etc. concluded by the said nonresident and which fall under the following, with regard to the said transfer of shares or capital contributions, the provisions of paragraph (1) shall not apply:

(i) As of the date of transfer, the nonresident has held continuously the shares or capital contributions of the domestic corporation, which are the said investment partnership property and have been transferred by him/her, for a period of only less than one year since the day following the date of the acquisition thereof as the said investment partnership property (excluding those listed in the following item).

(ii) The shares or capital contributions fall under the category of shares of a bank under special crisis management as prescribed in Article 111, paragraph (2) of the Deposit Insurance Act that the Deposit Insurance Corporation acquires pursuant to the provisions of Article 112, paragraph (1) of the said Act, which are shares of the said bank under special crisis management that the nonresident acquires from the Deposit Insurance Corporation in the case where the Deposit Insurance Corporation transfers the shares of the said bank under special crisis management pursuant to the provisions of Article 120, paragraph (1), item (iv) of the said Act.

(4) The determination as to whether or not the shares of or capital contributions to a domestic corporation which are investment partnership property and have been transferred by a nonresident having no permanent establishments in Japan (hereinafter referred to as the "transferred shares, etc." in this paragraph) fall under the category of shares or capital contributions listed in item (i) of the preceding paragraph shall be made as of the day of acquiring the same issue of shares of or capital contributions to a domestic corporation that are deemed to have been transferred in the case where the said same issue of shares of (excluding the shares listed in item (ii) of the said paragraph) or contributions to a domestic corporation as the said transferred shares, etc. that have been acquired as the said investment partnership property prior to the date of the said transfer are deemed to have been transferred successively, starting from those acquired as the said investment partnership property earlier.

(5) The provisions of paragraph (1) shall apply only where a nonresident having no permanent establishments in Japan has submitted a document stating to the effect that he/she seeks the application of the provisions of the said paragraph, his/her name and address (in the case of a nonresident having no permanent establishments in Japan who has a residence in Japan, his/her residence), and other matters specified by the Ordinance of the Ministry of Finance (in the case of seeking the application of the provisions of the said paragraph with regard to an investment partnership contract, limited to the said document with a document specified by the Ordinance of the Ministry of Finance as a document certifying that he/she satisfies the requirements listed in item (i) and item (ii) of the said paragraph pertaining to the said investment partnership contract) to the competent district director of the tax office having jurisdiction over the place for tax payment, no later than March 15 of the year following the year containing the date of transfer.

(Special Provisions for Withholding at Source of Remuneration, etc. Paid by Tax-Exempt Entertainment Corporations, etc. to Entertainers, etc. for Their Provision of Services)

Article 27 (1) With respect to the place for tax payment of income tax to be collected, pursuant to the provisions of Article 42, paragraph (1) of the Act, for the payment of the remuneration paid by a tax-exempt entertainment corporation, etc. prescribed in Article 42, paragraph (1) of the Act (referred to as a "tax-exempt entertainment corporation, etc." in paragraph (3)) to entertainers, etc. for their provision of services, the term "shall be the place prescribed in the said items" in Article 55 of the Order for Enforcement of the Income Tax Act shall be deemed to be replaced with "shall be the place prescribed in the said items (with respect to the remuneration paid by a tax-exempt entertainment corporation, etc. prescribed in Article 42, paragraph (1) (Special Provisions for Withholding at Source of Remuneration, etc. Paid by Tax-Exempt Entertainment Corporations, etc. to Entertainers, etc. for Their Provision of Services) of the Act on Special Measures Concerning Taxation (hereinafter referred to as a "tax-exempt entertainment corporation, etc." in this Article), outside Japan, to entertainers, etc. listed in the items of the said paragraph for their provision of services out of consideration for the provision of the services of entertainers, etc. prescribed in the said paragraph (hereinafter referred to as the "consideration for the provision of the services of entertainers, etc." in this Article), the location of an office, business office or any other place equivalent thereto located in Japan of a person who pays the consideration for the provision of the services of entertainers, etc. of the said entertainers, etc. to the said tax-exempt entertainment corporation, etc. (where such person falls under the category of a tax-exempt entertainment corporation, etc., a person who pays the consideration for the provision of the services of entertainers, etc. to the said person) (where there are two or more locations, the principal location))."

(2) With respect to the application of the provisions of Article 264 of the Order for Enforcement of the Income Tax Act where the provisions of Article 42, paragraph (1) of the Act are applied, the term "Article 212, paragraph (1) (Withholding Liability for Income of Nonresidents or Corporations) of the Act" in the said Article shall be deemed to be replaced with "Article 212, paragraph (1) (Withholding Liability for Income of Nonresidents or Corporations) of the Act or Article 42, paragraph (1) (Special Provisions for Withholding at Source of Remuneration, etc. Paid by Tax-Exempt Entertainment Corporations, etc. to Entertainers, etc. for Their Provision of Services) of the Act on Special Measures Concerning Taxation."

(3) Where a tax-exempt entertainment corporation, etc. seeks the application of the provisions of Article 179 and Article 213, paragraph (1) of the Income Tax Act in which the terms and phrases were replaced pursuant to the provisions of Article 42, paragraph (3) of the Act with respect to the consideration listed in Article 161, item (ii) of the Income Tax Act, which they shall receive for the provision of the services of entertainers, etc. prescribed in Article 42, paragraph (1) of the Act, the said tax-exempt entertainment corporation, etc. shall, when receiving payment of the said consideration, submit a document containing the matters specified by Ordinance of the Ministry of Finance, via a person who pays the said consideration, to the competent district director having jurisdiction over the place for tax payment of the income tax to be collected and paid for the said consideration by the said payer pursuant to the provisions of Article 212 of the Income Tax Act.

(Special Provisions for Taxation on Interest Received by Foreign Financial Institutions, etc. from Bond Transactions with Repurchase/Resale Agreements)

Article 27-2 (1) The requirements specified by Cabinet Order prescribed in Article 42-2, paragraph (1) of the Act shall be as follows (where a specified financial institution, etc. prescribed in the said paragraph (hereinafter referred to as a "specified financial institution, etc." in this Article) is the Bank of Japan, the requirements listed in item (i) and item (iii)):

(i) In the bond transaction with a repurchase/resale agreement prescribed in Article 283, paragraph (4) of the Order for Enforcement of the Income Tax Act (referred to as "bond transaction with a repurchase/resale agreement" in the following item and item (iii)), the period between the date of the transfer or purchase of the bonds and the date of the repurchase or resale of the said bonds shall not exceed six months

(ii) With respect to the bond transaction with a repurchase/resale agreement, an agreement has been made on collective clearing prescribed in Article 3 of the Act on Collective Clearing of Specified Financial Transactions Conducted by Financial Institutions, etc. (Act No. 108 of 1998)

(iii) The value of the bonds pertaining to the bond transaction with a repurchase/resale agreement on the day on which the agreement was made with regard to the said bond transaction with a repurchase/resale agreement shall be not less than the value agreed for the said bond transaction with a repurchase/resale agreement.

(2) The interest specified by Cabinet Order prescribed in Article 42-2, paragraph (1) of the Act shall be the interest to be received by a foreign financial institution, etc. prescribed in the said paragraph on which no income tax shall be imposed pursuant to the provisions of Article 7 of the Act.

(3) The bonds specified by Cabinet Order prescribed in Article 42-2, paragraph (1) of the Act shall be any of the bonds listed as follows:

(i) Bonds issued or guaranteed by a foreign corporation listed as follows:

(a) A foreign corporation 50 percent or more of whose capital contributions or obligations were made by a foreign government

(b) A foreign corporation established based on the provisions of the special laws and regulations in a foreign state whose business is conducted under the management of the government of the said foreign state

(ii) Bonds issued or guaranteed by an international organization established based on an international agreement between governments

(iii) Bonds issued by a corporation which was established based on the laws and regulations of a member state of the OECD other than Japan and which is engaged in a banking business in the said state based on the laws and regulations of the said state.

(4) Whether or not a foreign corporation listed in Article 42-2, paragraph (4), item (i), (a) of the Act out of foreign financial institutions, etc. (meaning foreign financial institutions, etc. prescribed in the said item; hereinafter the same shall apply in this Article) falls under the category of a foreign corporation listed in the items of Article 42-2, paragraph (2) of the Act shall be determined according to its status at the end of the business year immediately prior to the business year containing the day on which the said foreign financial institution, etc. intends to submit a written application for tax exemption (meaning a written application for tax exemption prescribed in Article 42-2, paragraph (5) of the Act; hereinafter the same shall apply in this Article) and the day preceding the day on which the said foreign financial institution, etc. is to receive payment of specified interest (meaning specified interest prescribed in Article 42-2, paragraph (1) of the Act; hereinafter the same shall apply in this Article) after submitting the said written application for tax exemption.

(5) A foreign financial institution, etc. which seeks the application of the provisions of Article 42-2, paragraph (1) of the Act shall, when it intends to receive payment of specified interest from a specified financial institution, etc. for the first time, submit a written application for tax exemption to the district director prescribed in Article 42-2, paragraph (5) of the Act, via an office, business office, or any other establishment equivalent thereto (hereinafter referred to as "offices, etc." in this paragraph and paragraph (9)) of the said specified financial institution, etc. in charge of handling payment of the said specified interest (where payment of the said specified interest is handled at two or more offices, etc. held by the said specified financial institution, etc., via respective offices at the time when payment is handled for the first time respectively) by the day preceding the day on which the said foreign financial institution, etc. is to receive the said specified interest.

(6) A foreign financial institution, etc. which seeks the application of the provisions of Article 42-2, paragraph (1) of the Act shall, when it has not been entered or recorded separately in the books prescribed in Article 42-2, paragraph (10) of the Act of a specified financial institution, etc. which pays specified interest to the said foreign financial institution, etc., submit a written application for tax exemption to the district director prescribed in Article 42-2, paragraph (5) of the Act pursuant to the provisions of the said paragraph.

(7) Where a foreign financial institution, etc. which had previously received the application of the provisions of Article 42-2, paragraph (1) of the Act has become unable to receive the application of the said provisions based on the provisions of paragraph (2) of the said Article and subsequently seeks the application of the provisions of Article 42-2, paragraph (1) of the Act again, the said foreign financial institution, etc. shall submit a written application for tax exemption to the district director prescribed in Article 42-2, paragraph (5) of the Act, by the day preceding the day on which it is to receive the specified interest, in respect of which it seeks the application of the provisions of the said paragraph.

(8) The documents specified by Cabinet Order prescribed in Article 42-2, paragraph (7) of the Act shall be any of the foreign corporation's certificate of registered matters of the corporation, receipt for national tax or local tax, certificate of tax payment or any other document specified by Ordinance of the Ministry of Finance.

(9) A specified financial institution, etc. shall, when it has received a written application for tax exemption or a written application prescribed in Article 42-2, paragraph (8) of the Act at its offices, etc., submit such written applications to the district director prescribed in Article 42-2, paragraph (5) of the Act, by the final day of the month following the month involving the date of the receipt, and create copies of such written applications (including those equivalent thereto) and preserve them pursuant to the provisions of Ordinance of the Ministry of Finance.

(10) In the case referred to in Article 42-2, paragraph (8) of the Act, when a written application prescribed in the said paragraph has been submitted to the district director prescribed in the said paragraph, it shall be deemed that the submission has been made at the time when the person who pays specified interest set forth in the said paragraph received the written application.

(11) A specified financial institution, etc. shall, when the contract for a bond transaction with a repurchase/resale agreement prescribed in Article 42-2, paragraph (1) of the Act has been concluded with a foreign financial institution, etc. which had submitted a written application for tax exemption, or when a written application prescribed in paragraph (8) of the said Article has been submitted by a person who had submitted the said written application for tax exemption, enter or record the matters prescribed in paragraph (10) of the said Article in the books for each person each time, and preserve the said books pursuant to the provisions of Ordinance of the Ministry of Finance.

Chapter III Special Provisions for the Corporation Tax Act

Section 8-2 Special Provisions, etc. for Taxation on Transactions with Foreign Affiliated Persons)

(Special Provisions for Taxation on Transactions with Foreign Affiliated Persons)

Article 39-12 (1) The special relationship specified by Cabinet Order as prescribed in Article 66-4, paragraph (1) of the Act shall be the following:

(i) The relationship whereby either one of two corporations holds, directly or indirectly, shares or capital contributions that account for 50 percent or more of the total number or total amount of issued shares of or capital contributions to the other corporation (excluding the shares of or capital contributions to the other corporation held by itself) (hereinafter referred to as the "issued shares, etc." through to paragraph (3))

(ii) In the case where shares or capital contributions that account for 50 percent or more of the issued shares, etc. of two corporations are held respectively directly or indirectly by the same person (in the case where the said person is an individual, the said individual and an individual who has a special relationship specified by Cabinet Order as prescribed in Article 2, item (x) of the Corporation Tax Act with the said individual; the same shall apply in item (v)), the relationship between the said two corporations (excluding the relationship falling under the category of relationship listed in the preceding item)

(iii) The relationship whereby the existence of any of the facts listed in the following or any other fact equivalent thereto (referred to as a "specified fact" in the following item and item (v)) enables either one of two corporations to determine substantially the whole or part of the other corporation's business policy (excluding the relationship falling under the category of relationship listed in the preceding two items):

(a) The fact that 50 percent or more of the officers of the said other corporation or any officers who have authority to represent the said other corporation are persons who concurrently serve as officers or employees of the said one of the two corporations or who used to serve as officers or employees of the said one of the two corporations

(b) The fact that the said other corporation depends on transactions with the said one of the two corporations for a considerable part of its business activities

(c) The fact that said other corporation procures a considerable part of funds necessary for its business activities by receiving loans from the said one of the two corporations or by obtaining guarantees from the said one of the two corporations

(iv) The relationship between one corporation and any of the following corporations (excluding the relationship falling under the categories of relationships listed in the preceding three items):

(a) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by the said one corporation or the whole or part of its business policy can be substantially determined by the said one corporation due to the existence of a specified fact

(b) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or the whole or part of its business policy can be determined substantially by a corporation listed in (a) or (c) due to the existence of a specified fact

(c) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by a corporation listed in (b) or the whole or part of its business policy can be substantially determined by a corporation listed in (b) due to the existence of a specified fact

(v) The relationship between two corporations whereby they fall respectively under any of the categories of corporations listed as follows (limited to the case where the person prescribed in (a) is the same person; excluding the relationship falling under the categories of relationships listed in the preceding items):

(a) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by one person listed in (a) or (c) or the whole or part of its business policy can be substantially determined by one person listed in (a) or (c) due to the existence of a specified fact

(b) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or the whole or part of its business policy can be substantially determined by a corporation listed in (a) or (c) due to the existence of a specified fact

(c) A corporation in a relationship whereby shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held directly or indirectly by a corporation listed in (b) or the whole or part of its business policy can be substantially determined by a corporation listed in (b) due to the existence of a specified fact.

(2) In the case referred to in item (i) of the preceding paragraph, the determination as to whether one of two corporations holds directly or indirectly shares or capital contributions that account for 50 percent or more of the issued shares, etc. of the other corporation shall be made according to the ratio obtained by adding the ownership ratio for the shares, etc. of the said other corporation held directly by the said one of the two corporations (meaning the ratio of the number of the amount of the said other corporation's shares or capital contributions held by the said one of the two corporations out of the total issued shares, etc. of the said other corporation) and the ownership ratio for the shares, etc. of the said other corporation held indirectly by the said one of the two corporations.

(3) The ownership ratio for the shares, etc. held indirectly as prescribed in the preceding paragraph shall mean a ratio specified in the following items for the category of cases listed in the respective items (in the case where the ratio falls under both of the following items, the sum of the ratios specified as follows):

(i) Where shares or capital contributions that account for 50 percent or more of the issued shares, etc. of a corporation which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; the same shall apply in the following item) of the other corporation set forth in the preceding paragraph are held by one of the two corporations set forth in the preceding paragraph: The ratio of the number or amount of shares of or capital contributions to the said other corporation held by the said corporation which is a shareholder, etc. out of the issued shares, etc. of the said other corporation (in the case where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where one corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of the other corporation set forth in the preceding paragraph (excluding a corporation which is a shareholder, etc. set forth in the preceding item that falls under the case listed in the said item) and the said one of the two corporations set forth in the preceding paragraph, and has (have) a linkage with them through holding the issued shares, etc. (hereinafter such intervening corporation(s) shall be referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where shares or capital contributions that account for 50 percent or more of the issued shares, etc. of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held respectively by the said one of the two corporations or a capital contribution-related corporation(s) (limited to one whose shares or capital contributions that account for 50 percent or more of its issued shares, etc. are held by the said one of the two corporations or other capital contribution-related corporation(s))): The ratio of the number of shares or amount of capital contributions to the said other corporation held by the corporation which is a shareholder, etc. out of the issued shares, etc. of the said other corporation (in the case where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(4) The provisions of paragraph (2) shall apply mutatis mutandis to the determination of the relationship whereby the shares, etc. are held directly or indirectly as set forth in paragraph (1), items (ii), (iv) and (v).

(5) The transaction specified by Cabinet Order as prescribed in Article 66-4, paragraph (1) of the Act shall be a transaction pertaining to the domestic source income listed in Article 141, items (i) through (iii) of the Corporation Tax Act (excluding income for which corporation tax is reduced or exempted pursuant to the provisions of the tax convention prescribed in Article 1-3, paragraph (1), item (ii)) of a foreign affiliated person prescribed in Article 66-4, paragraph (1) of the Act, in accordance with the category of foreign corporation listed in those items which is applicable to the said foreign affiliated person:

(6) The normal profit margin specified by Cabinet Order as prescribed in Article 66-4, paragraph (2), item (i), (b) of the Act shall be the ratio of the amount of gross profits gained by a person (hereinafter referred to as a "reseller" in this paragraph and paragraph (8), item (ii)) who purchased the same or similar inventory assets as those for a foreign affiliated transaction prescribed in paragraph (1) of the said Article (hereinafter referred to as a "foreign affiliated transaction" in this Article) from a person (hereinafter referred to as a "non-affiliated person" through to paragraph (8)) who is not in a special relationship (meaning a special relationship prescribed in Article 66-4, paragraph (1) of the Act) through a transaction to sell the said same or similar inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this paragraph) (such gross profits shall mean the amount obtained by deducting the sum of the costs of the said inventory assets for the said comparable transaction from the total revenue arising from the sale of the said inventory assets for the said comparable transaction), against the sum of the said revenue; provided, however, that in the case where functions performed by the selling side or any other matters differ between a comparable transaction and a transaction in which the purchasing side of the inventory assets for the said foreign affiliated transaction sold the said inventory assets to a non-affiliated person, such normal profit margin shall be the ratio after making a necessary adjustment for the differences in ratios caused by such disparity.

(7) The normal profit margin specified by Cabinet Order as prescribed in Article 66-4, paragraph (2), item (i), (c) of the Act shall be the ratio of the amount of gross profits gained by a person who acquired the same or similar inventory assets as those for a foreign affiliated transaction through the purchase (limited to a purchase from a non-affiliated person), manufacture, or any other acts (hereinafter such person shall be referred to as a "seller" in this paragraph and item (iii) of the following paragraph), through a transaction to sell the said same or similar inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this paragraph) (such gross profits shall mean the amount obtained by deducting the sum of the costs of the inventory assets for the said comparable transaction from the total revenue arising from the sale of the inventory assets for the said comparable transaction ), against the sum of the said costs; provided, however, that in the case where functions performed by the selling side and other matters differ between a comparable transaction and the said foreign affiliated transaction, such normal profit margin shall be the ratio after making a necessary adjustment, necessary for the differences in ratios caused by such disparity.

(8) The method specified by Cabinet Order as prescribed in Article 66-4, paragraph (2), item (i), (d) of the Act shall be the method listed as follows:

(i) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount calculated by deeming that the income, which arises from the purchase, manufacture, sale, or any other acts conducted with regard to inventory assets for the said foreign affiliated transaction by a corporation prescribed in Article 66-4, paragraph (1) of the Act or a foreign affiliated person prescribed in the said paragraph who is related to the said corporation, is to be attributed to the said corporation or the said foreign affiliated person, in accordance with the amount of expenses paid or the value of fixed assets used by those persons for performing those acts with regard to the said inventory, or other factors sufficient to estimate the degree of contribution of these persons to generate the said income

(ii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount that remains after deducting, from the amount of consideration gained by the buyer of inventory assets for a foreign affiliated transaction for having sold the said inventory assets to a non-affiliated person (hereinafter the amount of consideration shall be referred to as the "resale price" in this item), the amount obtained by multiplying the said resale price by the ratio of the amount listed in (a) against the amount listed in (b) (where functions performed by the selling side or any other matters differ between a transaction in which the reseller has sold the same or similar inventory assets as the said inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this item) and a transaction in which the purchasing side of the inventory assets for the said foreign affiliated transaction sold the said inventory assets to a non-affiliated person, by the ratio after making a necessary adjustment for the differences in ratios caused by such disparity) and then adding the selling expenses and general administrative expenses needed for the sale of the inventory assets for the said foreign affiliated transaction:

(a) The sum of the operating profits arising from the sale of the inventory assets for the said comparable transaction

(b) The total revenue arising from the sale of the inventory assets for the said comparable transaction

(iii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount obtained by adding [1] the amount of the costs spent by the selling side of the inventory assets for a foreign affiliated transaction for acquiring the inventory assets through the purchase, manufacture or any other acts (hereinafter referred to as the "amount of acquisition costs" in this item), [2] the amount obtained by multiplying the amount listed in (a) by the ratio of the amount listed in (b) against the amount listed in (c) (where functions performed by the selling side or any other matters differ between a transaction in which a seller sold the same or similar inventory assets as the said inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this item) and the said foreign affiliated transaction, by the ratio after making a necessary adjustment for the differences in ratios caused by such disparity), and [3] the sum of the amounts listed in (a)2.:

(a) The sum of the amounts listed as follows:

1. The said amount of the acquisition costs

2. The amount of the selling expenses and general administrative expenses needed for the sale of the inventory assets for the said foreign affiliated transaction

(b) The sum of the operating profits arising from the sale of the inventory assets for the said comparable transaction

(c) The amount obtained by deducting the amount listed in (b) from the total revenue arising from the sale of the inventory assets for the said comparable transaction

(iv) The method equivalent to the methods listed in the preceding two items.

(9) The case specified by Cabinet Order as prescribed in Article 66-4, paragraph (6) of the Act shall be the case where it has been determined in advance at the time of a transaction between a corporation set forth in the said paragraph and a non-affiliated person set forth in the said paragraph (hereinafter referred to as a "non-affiliated person" in this paragraph and the following paragraph), under a contract or the like, that the assets for the said transaction are to be sold, transferred, lent or provided to a foreign affiliated person related to the said corporation set forth in paragraph (6) of the said Article and where the amount of consideration for the said sale, transfer, lending or provision is deemed to have been substantially determined between the said corporation and the said foreign affiliated person, and the case where it has been determined in advance at the time of a transaction between a foreign affiliated person related to the said corporation set forth in the said paragraph and a non-affiliated person, under a contract or the like, that the assets for the said transaction are to be sold, transferred, lent or provided to a corporation set forth in the said paragraph and where the amount of consideration for the said sale, transfer, lending or provision is deemed to have been substantially determined between the said corporation and the said foreign affiliated person.

(10) Notwithstanding the provisions of Article 66-4, paragraph (2) of the Act, the arm's length price prescribed in paragraph (1) of the said Article for a transaction that was deemed to be a foreign affiliated transaction under the provisions of paragraph (6) of the said Article shall be the amount calculated by applying the provisions of paragraph (2) of the said Article by deeming that the said transaction has been conducted between a corporation set forth in the preceding paragraph and a foreign affiliated person related to the said corporation set forth in the said paragraph and by making a necessary adjustment with regard to the differences in the amount of consideration caused when a transaction between the said corporation and the said foreign affiliated person is conducted via a non-affiliated person.

(11) The gross profit margin prescribed in Article 66-4, paragraph (7), item (i) of the Act or any other ratio specified by Cabinet Order as a ratio equivalent thereto shall be the ratio of the amount of gross profits gained by a corporation which is engaged in the same type of business and whose size and other details are similar as prescribed in the said item through the said business for a business year containing the day on which a foreign affiliated transaction set forth in the said item was conducted or for any other period equivalent thereto (such amount of gross profits shall mean the amount obtained by deducting the sum of the costs of inventory assets for the relevant business year or any other period equivalent thereto (where the said business is other than that pertaining to the sale of inventory assets, the sum of equivalent costs or expenses; hereinafter referred to as the "amount of gross costs" in this paragraph) from the total revenue arising from the sale of the said inventory assets (where the said business is other than that pertaining to the sale of inventory assets, the total revenue pertaining to the said business; hereinafter referred to as the "amount of gross revenue" in this paragraph)) against the amount of gross revenue or gross costs.

(12) The method specified by Cabinet Order as the method similar to the method specified by Cabinet Order as prescribed in Article 66-4, paragraph (2), item (i), (d) of the Act or the method listed in paragraph (2), item (ii), (b) of the said Article (limited to the method equal to that specified by the said Cabinet Order) as prescribed in paragraph (7), item (ii) of the said Article shall be the method listed in items (i) to (iv), in the case where a foreign affiliated transaction is for the sale or purchase of inventory assets, and the method listed in item (i) or item (v), in the case where a foreign affiliated transaction is for other than the sale or purchase of inventory assets:

(i) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount calculated by deeming that the income, which arises from a business pertaining to a foreign affiliated transaction set forth in Article 68-88, paragraph (6) of the Act for the business year containing the date on which the said foreign affiliated transaction was conducted, based on financial statements containing the consolidated status of property and profits and losses of a corporate group which includes the said consolidated corporation and a foreign affiliated person (meaning a foreign affiliated person prescribed in paragraph (1) of the said Article) pertaining to the said foreign affiliated transaction conducted by the said consolidated corporation (where the income arising from the said business is not recorded separately from the income arising from other businesses in the said financial statements, the income arising from businesses including the said business; hereinafter the same shall apply in this item), or for any other period equivalent thereto, is to be attributed to such persons, in accordance with the amount of expenses paid or the value of fixed assets used by those persons for conducting the said foreign affiliated transaction (where the amount of expenses or the value of fixed assets spent or used for the said business is not recorded separately from the amount of expenses or the value of the fixed assets spent or used for other businesses in the said financial statements, the amount of expenses or the value of the fixed assets spent or used for businesses including the said business), or other factors sufficient to estimate the degree of the contribution of those persons to generate the said income

(ii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount that remains after deducting, from the amount of consideration gained by the purchasing side of inventory assets for a foreign affiliated transaction for having sold the said inventory assets to a non-affiliated person (meaning a person who is not in a special relationship therewith as prescribed in Article 66-4, paragraph (1) of the Act) (hereinafter such amount of consideration shall be referred to as the "resale price" in this item), from the amount obtained by multiplying the said resale price by the ratio of the amount listed in (a) against the amount listed in (b) and then adding the selling expenses and general administrative expenses needed for the sale of the inventory assets for the said foreign affiliated transaction:

(a) The sum of the operating profits gained by a corporation which is engaged in the same or a similar type of business as those pertaining to the said foreign affiliated transaction and whose size and other details are similar (hereinafter referred to as a "comparable business" in this item) through the sale of inventory assets for the said comparable business for a business year containing the day on which the said foreign affiliated transaction was conducted or for any other period equivalent thereto (hereinafter referred to as a "comparable business year" in this item)

(b) The total revenue arising from the sale of the said inventory assets for a comparable business for the said comparable business year

(iii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount obtained by adding the amount of the costs spent by the selling side of inventory assets for the foreign affiliated transaction for acquiring the inventory assets through the purchase, manufacture or any other acts (hereinafter referred to as the "amount of the acquisition costs" in this item), the amount obtained by multiplying the amount listed in (a) by the ratio of the amount listed in (b) against the amount listed in (c), and the sum of the amounts listed in (a), 2.:

(a) The sum of the amounts listed as follows:

1. The said amount of the acquisition costs

2. The amount of the selling expenses and general administrative expenses needed for the sale of the inventory assets for the said foreign affiliated transaction

(b) The sum of the operating profits gained by a corporation which is engaged in the same or a similar type of business as those pertaining to the said foreign affiliated transaction and whose size and other details are similar (hereinafter referred to as a "comparable business" in this item) through the sale of inventory assets for the said comparable business for a business year containing the day on which the said foreign affiliated transaction was conducted or for any other period equivalent thereto (hereinafter referred to as a "comparable business year" in this item)

(c) The amount obtained by deducting the amount listed in (b) from the total revenue arising from the sale of the said inventory assets for the comparable business for the said comparable business year

(iv) The method equivalent to those listed in the preceding two items

(v) The method equal to those listed in the preceding three items

(13) The requirements specified by Cabinet Order as prescribed in Article 66-4, paragraph (19) of the Act shall be the requirements listed as follows:

(i) With regard to the arm's length price prescribed in Article 66-4, paragraph (19) of the Act which pertains to a foreign affiliated transaction prescribed in the said paragraph, the Minister of Finance has reached an agreement, under a tax convention prescribed in the said paragraph, with the competent authority of a contracting state other than Japan of the said tax convention

(ii) The contracting state other than Japan as set forth in the preceding item reduces a tax for a foreign affiliated person prescribed in Article 66-4, paragraph (19) of the Act, based on the agreement set forth in the preceding item, and does not add to the amount to be refunded due to the said tax reduction, the part of the amount equivalent to the interest on a refund that corresponds to the base period for the calculation for which the Minister of Finance has reached an agreement with the competent authority of the said contracting state other than Japan.

(14) The delinquent tax imposed with regard to the corporation tax payable as prescribed in Article 66-4, paragraph (19) of the Act shall be the delinquent tax to be imposed on the amount obtained by deducting the amount equivalent to the corporation tax payable where the provisions of paragraph (1) of the said Article do not apply from the corporation tax payable where the provisions of the said paragraph apply.

(15) Where the provisions of Article 66-4, paragraph (1), paragraph (2), item (i), (a) or (b), or paragraph (6) of the Act or the provisions of paragraph (6) shall apply, the existence or not of any special relationship prescribed in these provisions shall be determined according to its status at the time when the respective transactions were conducted.

(Application Procedures, etc. for Grace of Tax Payment Pertaining to Special Provisions for Taxation on Transactions with Foreign Affiliated Persons)

Article 39-12-2 (1) The amount calculated as specified by Cabinet Order as the amount of corporation tax and additional tax for the said corporation tax prescribed in Article 66-4-2, paragraph (1) of the Act shall be the sum of the amounts listed as follows:

(i) The amount obtained by deducting the amount of corporation tax payable where the calculation has been made by deeming that the reassessment or determination for the objection prescribed in Article 66-4-2, paragraph (1) of the Act (meaning the reassessment or determination listed in Article 66-4, paragraph (16, item (i) of the Act; hereinafter the same shall apply in this item and paragraph (3), item (ii)) does not cover the part pertaining to the corporation tax prescribed in Article 66-4-2, paragraph (1) of the Act (referred to as the "amount of corporation tax not under grace" in the following item) from the amount of corporation tax payable based on the said reassessment or determination (referred to as the "amount of corporation tax based on the reassessment or determination" in the following item)

(ii) The amount obtained by deducting the amount of additional tax (meaning the additional tax prescribed in Article 69 of the Act on General Rules for National Taxes; hereinafter the same shall apply in this item) to be imposed based on the amount of corporation tax not under grace from the amount of additional tax to be imposed based on the amount of corporation tax based on the reassessment or determination.

(2) The case where there is no agreement prescribed in Article 66-4-2, paragraph (1) of the Act or any other case specified by Cabinet Order shall be the case listed respectively in the following items and the date specified by Cabinet Order prescribed in the said paragraph shall be the date on which the Commissioner of the National Tax Agency notified the fact that the case falls under any of those listed in the relevant items:

(i) Where the Commissioner of the National Tax Agency finds that an agreement set forth in Article 66-4-2, paragraph (1) of the Act (referred to an "agreement" in the following item and item (iii)) cannot be reached even if the consultation prescribed in the said paragraph (hereinafter referred to as a "mutual consultation" in this paragraph) is continued (excluding the case listed in the items of Article 66-4-2, paragraph (5) of the Act), when he/she has made a request for the termination of the said mutual consultation to the competent authority of the other contracting state pertaining to the said mutual consultation (meaning a contracting state other than Japan of a tax convention prescribed in Article 1-3, paragraph (1), item (ii); the same shall apply in the following item) and has obtained consent from the said competent authority

(ii) Where the competent authority of the other contracting state pertaining to a mutual consultation finds that an agreement cannot be reached even if the said mutual consultation were continued, when the Commissioner of the National Tax Agency has received a request for the termination of the said mutual consultation from the said competent authority and has given his/her consent

(iii) Where an agreement has been reached on the amount of corporation tax prescribed in Article 66-4-2, paragraph (1) of the Act, when the said agreement is not to change the said amount of corporation tax.

(3) A person intending to receive a grace of tax payment under the provisions of Article 66-4-2, paragraph (1) of the Act shall submit a written application containing the matters listed as follows along with a document certifying that he/she has filed an objection set forth in the said paragraph and other documents specified by Ordinance of the Ministry of Finance to the district director, etc. prescribed in Article 46, paragraph (1) of the Act on General Rules for National Taxes:

(i) The name and place for tax payment of a corporation intending to receive the said grace of tax payment (where the place for tax payment and the location of the head office or principal office are different, the corporation's name, place for tax payment and location of the head office or principal office)

(ii) The business year, due date and the amount of payable corporation tax based on the reassessment or determination

(iii) The amount for which the corporation intends to receive a grace of tax payment out of the amount set forth in the preceding item

(iv) Where the said amount for which the corporation intends to receive a grace of tax payment exceeds 500,000 yen, the type, amount, value and location of the security listed in the items of Article 50 of the Act on General Rules for National Taxes which it intends to provide at the time of filing the application (when the security is a guarantee by a guarantor, the guarantor's name and the location, address or domicile of his/her head office or principal office) and any other matters for reference concerning the security (where there is any special circumstance whereby the corporation cannot provide security, the said circumstance).

(4) With respect to the application of the provisions of Article 23, paragraph (1) of the Order for Enforcement of the Act on General Rules for National Taxes (Cabinet Order No. 135 of 1962), regarding the corporation tax for which a grace of tax payment has been received pursuant to the provisions of Article 66-4-2, paragraph (1) of the Act, the term "or national tax" in Article 23, paragraph (1) of the said Order shall be deemed to be replaced with "(including a grace of tax payment under the provisions of Article 66-4-2, paragraph (1) (Grace of Tax Payment under the Special Provisions for Taxation on Transactions with Foreign Affiliated Persons) of the Act on Special Measures Concerning Taxation) or national tax."

Section 8-3 Special Provisions for Taxation on Interest on Liabilities, etc. Payable to Foreign Controlling Shareholders, etc.

(Special Provisions for Taxation on Interest on Liabilities, etc. Payable to Foreign Controlling Shareholders, etc.)

Article 39-13 (1) The amount calculated as specified by Cabinet Order as the amount equivalent to the excess part prescribed in Article 66-5, paragraph (1) of the Act shall be the amount specified respectively in the following items for the category of cases listed in the relevant items:

(i) Where the amount that remains after deducting the amount listed in (b) from the amount listed in (a) is equivalent to or less than the amount listed in (c): The amount obtained by calculating the amount of expenses listed in the items of paragraph (15) which the said domestic corporation pays for the relevant business year to a foreign controlling shareholder, etc. (meaning a foreign controlling shareholder, etc. prescribed in Article 66-5, paragraph (4), item (i) of the Act; hereinafter the same shall apply in this Article) and a fund provider, etc. (meaning a fund provider, etc. prescribed in item (ii) of the said paragraph; hereinafter the same shall apply in this Article) related to the said domestic corporation (such expenses shall be limited to what is to be paid, in the case prescribed in item (ii) or item (iii) of paragraph (13), when the interest on liabilities pertaining to the funds set forth in those items is included in the taxable income (meaning the taxable income prescribed in Article 66-5, paragraph (4), item (ix) of the Act; the same shall apply in (b)) of the person who is to receive payment of the said interest; such amount of expenses shall be referred to as the "amount of guarantee charge, etc. for the taxable income" in the following item) and then multiplying the said amount of expenses by the ratio obtained by dividing the amount that remains after deducting the amount listed in (c) from the amount listed in (a) (such remaining amount shall be referred to as the "amount exceeding the average balance of liabilities" in the following item and the following paragraph) by the amount listed in (b):

(a) The average balance of liabilities (meaning the average balance of liabilities prescribed in Article 66-5, paragraph (4), item (v) of the Act; hereinafter the same shall apply in this Article) regarding the liabilities owed, for the relevant business year of the said domestic corporation, to the said foreign controlling shareholder, etc. and fund provider, etc. (meaning the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in item (iv) of the said paragraph; hereinafter the same shall apply in this Article)

(b) The average balance of liabilities regarding the liabilities specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (iv) of the Act owed to a fund provider, etc. (limited to the liabilities regarding those whose interest is included in the taxable income of a person who is to receive payment of the said interest)

(c) The amount obtained by multiplying the equity interest held by a foreign controlling shareholder, etc. for the relevant business year of the said domestic corporation (meaning the equity interest held by a foreign controlling shareholder, etc. prescribed in Article 66-5, paragraph (4), item (vi) of the Act; the same shall apply in paragraph (4) and paragraph (7)) by three (where the said domestic corporation receives the application of the provisions of paragraph (3) of the said Article, by the multiple number prescribed in the said paragraph)

(ii) Where the amount that remains after deducting the amount listed in (b) from the amount listed in (a) of the preceding item exceeds the amount listed in (c): The sum of the amounts listed as follows:

(a) The amount obtained by deducting the amount of guarantee charge, etc. for the taxable income from the amount of interest on liabilities, etc. (meaning the interest on liabilities, etc. prescribed in Article 66-5, paragraph (4), item (iii) of the Act; hereinafter the same shall apply in this Article) that the said domestic corporation pays for the relevant business year to the said foreign controlling shareholder, etc. and fund provider, etc. and then multiplying the amount that remains after deduction by the ratio obtained by dividing the amount that remains after deducting the amount listed in (b) of the preceding item from the amount exceeding the average balance of liabilities by the amount that remains after deducting the amount listed in (b) of the said item from the amount listed in (a) of the said item

(b) The amount of guarantee charge, etc. for the taxable income.

(2) With respect to the application of the provisions of the preceding paragraph where the amount that remains after deducting the amount obtained by multiplying the amount of equity capital (meaning the amount of equity capital prescribed in Article 66-5, paragraph (4), item (vii) of the Act; hereinafter the same shall apply in this Article) for the relevant business year of the said domestic corporation by three from the average balance of liabilities regarding the total liabilities prescribed in Article 66-5, paragraph (1) of the Act for the relevant business year of the said domestic corporation is less than the amount exceeding the average balance of liabilities for the relevant business year of the said domestic corporation, in item (i) of the preceding paragraph, the term "the amount that remains after deducting the amount listed in (b) from the amount listed in (a) is equivalent to or less than the amount listed in (c)" shall be deemed to be replaced with "the amount that remains after deducting the amount obtained by multiplying the amount of equity capital prescribed in Article 66-5, paragraph (4), item (vii) of the Act for the relevant business year of the said domestic corporation by three from the average balance of liabilities regarding the total liabilities prescribed in Article 66-5, paragraph (1) of the Act for the relevant business year of the said domestic corporation (hereinafter such remaining amount shall be referred to as "the amount exceeding the average balance of the total liabilities" in this paragraph) is equivalent to or less than the amount listed in (c);" the term "Article 66-5, paragraph (4), item (i) of the Act" shall be deemed to be replaced with "paragraph (4), item (i) of the said Article;" and the term "amount that remains after deducting the amount listed in (c) from the amount listed in (a) (such remaining amount shall be referred to as the "amount exceeding the average balance of liabilities" in the following item and the following paragraph)" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities;" and in item (ii) of the said paragraph, the term "the amount that remains after deducting the amount listed in (b) from the amount listed in (a) of the preceding item exceeds the amount listed in (c)" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities exceeds the amount listed in (c);" and the term "the amount exceeding the average balance of liabilities" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities."

(3) Where the provisions of Article 66-5, paragraph (1) of the Act shall apply, the amount of interest on liabilities, etc. to be paid to the said foreign controlling shareholder, etc. and fund provider, etc. for the relevant business year shall be based on the amount posted as an expense for the relevant business year.

(4) With respect to the application of the provisions of Article 66-5, paragraph (1) of the Act where there are two or more foreign controlling shareholders, etc. related to the said domestic corporation, the average balance of liabilities regarding the liabilities owed to foreign controlling shareholders, etc. and fund providers, etc., equity interest held by foreign controlling shareholders, etc. and the amount of interest on liabilities, etc. to be paid to foreign controlling shareholders, etc. and fund providers, etc. shall be based on the sum of the average balance of liabilities regarding the liabilities owed to foreign controlling shareholders, etc. and fund providers, etc., equity interest held by foreign controlling shareholders, etc. and the amount of interest on liabilities, etc. to be paid to foreign controlling shareholders, etc. and fund providers, etc., respectively.

(5) The average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in Article 66-5, paragraph (2) of the Act shall be the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said domestic corporation which pertain to a specified bond transaction with a repurchase/resale agreement, etc. (meaning a specified bond transaction with a repurchase/resale agreement, etc. prescribed in Article 66-5, paragraph (4), item (viii) of the Act; the same shall apply in the following paragraph and paragraph (8)) (where the said average balance of liabilities exceeds the average balance of assets regarding assets pertaining to a specified bond transaction with a repurchase/resale agreement, etc. (the average balance of assets shall mean the amount calculated by a reasonable method as the average balance of the said assets' book value for the relevant business year; the same shall apply in the following paragraph), such calculated average balance of liabilities shall be the said average balance of assets; such average balance of assets shall be referred to as the "average balance of liabilities after adjustment" in paragraph (8)).

(6) The average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the average balance of liabilities regarding the total liabilities for the relevant business year prescribed in Article 66-5, paragraph (2) of the Act shall be the average balance of liabilities regarding the total liabilities for the relevant business year (limited to those which are to be the cause of payment of interest on liabilities, etc.; the same shall apply in paragraph (10)) which pertain to a specified bond transaction with a repurchase/resale agreement, etc. (where the said average balance of liabilities exceeds the average balance of assets regarding assets pertaining to a specified bond transaction with a repurchase/resale agreement, etc., such calculated average balance of liabilities shall be the said average balance of assets).

(7) The multiple number applicable to the equity interest held by a foreign controlling shareholder, etc. which is calculated as specified by Cabinet Order prescribed in Article 66-5, paragraph (2) of the Act shall be the multiple number obtained by calculating the average balance of liabilities by deducting the average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. calculated as specified by Cabinet Order prescribed in the said paragraph from the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in the said paragraph and then dividing the calculated average balance of liabilities by the equity interest held by the foreign controlling shareholder, etc. related to the said domestic corporation; and the multiple number applicable to the amount of equity capital which is calculated as specified by Cabinet Order prescribed in the said paragraph shall be the multiple number obtained by calculating the average balance of liabilities by deducting the average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. calculated as specified by Cabinet Order prescribed in the said paragraph from the average balance of liabilities regarding the total liabilities for the relevant business year prescribed in the said paragraph and then dividing the calculated average balance of liabilities by the amount of equity capital of the said domestic corporation.

(8) The amount of interest on liabilities, etc. pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the amount of interest on liabilities, etc. to be paid to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in Article 66-5, paragraph (2) of the Act shall be the amount obtained by multiplying the amount of interest on liabilities, etc. to be paid to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said domestic corporation which pertain to a specified bond transaction with a repurchase/resale agreement, etc. by the ratio obtained by dividing the average balance of liabilities after adjustment by the average balance of liabilities regarding liabilities pertaining to the said specified bond transaction with a repurchase/resale agreement, etc.

(9) With respect to the application of the provisions of paragraphs (1) to (4) in the case where the provisions of Article 66-5, paragraph (2) of the Act is applied, the term "and then multiplying the said amount of expenses by the ratio" in paragraph (1), item (i) shall be deemed to be replaced with ", then deducting the amount obtained by multiplying the part of the said amount of expenses that pertains to a specified bond transaction with a repurchase/resale agreement, etc. (meaning a specified bond transaction with a repurchase/resale agreement, etc. prescribed in Article 66-5, paragraph (4), item (viii) of the Act; hereinafter the same shall apply in this item) by the ratio obtained by dividing the average balance of liabilities after adjustment (meaning the average balance of liabilities after adjustment prescribed in paragraph (5); hereinafter the same shall apply in this item) regarding the liabilities for the said amount by the average balance of liabilities (meaning the average balance of liabilities prescribed in paragraph (4), item (v) of the said Article; hereinafter the same shall apply in this Article) regarding the liabilities for the said amount which pertains to a specified bond transaction with a repurchase/resale agreement, etc., and then multiplying the amount that remains after deduction by the ratio;" the term "The average balance of liabilities (meaning the average balance of liabilities prescribed in Article 66-5, paragraph (4), item (v) of the Act; hereinafter the same shall apply in this Article)" in (a) of paragraph (1), item (i) shall be deemed to be replaced with "The amount that remains after deducting the average balance of liabilities after adjustment from the average balance of liabilities;" the term "The average balance of liabilities" in (b) of the said item shall be deemed to be replaced with "The amount that remains after deducting the average balance of liabilities after adjustment regarding the said liabilities from the average balance of liabilities;" the term "three" in (c) of the said item shall be deemed to be replaced with "two;" the term "The amount obtained by deducting the amount of guarantee charge, etc. for the taxable income" in (a) of paragraph (1), item (ii) shall be deemed to be replaced with "The amount obtained by deducting the sum of the amount of interest on liabilities, etc. pertaining to a specified bond transaction with a repurchase/resale agreement, etc. prescribed in paragraph (2) of the said Article and the amount of guarantee charge, etc. for the taxable income;" the term "where the amount that remains after deducting the amount" in paragraph (2) shall be deemed to be replaced with "where the amount that remains after deducting the sum of the average balance of liabilities regarding the average balance of liabilities which pertain to a specified bond transaction with a repurchase/resale agreement, etc. prescribed in paragraph (6) and the amount;" and the term "by three" in the said paragraph shall be deemed to be replaced with "by two."

(10) The percentage specified by Cabinet Order prescribed in Article 66-5, paragraph (3) of the Act shall be the percentage of the amount of the total liabilities of any other domestic corporation whose business size set forth in paragraph (3) of the said Article and other details are similar to those of a domestic corporation which seeks the application of the provisions of the said paragraph (hereinafter referred to as an "applicable corporation" in this paragraph) on the final day of any of the said other domestic corporation's relevant business years or consolidated business years that ended within three years until the final day of the applicable corporation's relevant business year (where the said applicable corporation receives the application of the provisions of paragraph (2) of the said Article, the percentage of the remaining amount of the total liabilities after deducting the amount specified by Ordinance of the Ministry of Finance) against the sum of the amounts of stated capital, statutory reserve, and surplus on the same day. In this case, where there are any fractions after two decimal places, they shall be rounded up.

(11) The special relationship specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (i) of the Act shall be a relationship listed as follows:

(i) A relationship whereby out of the total number or total amount of the issued shares or capital contributions of the said domestic corporation (excluding its own shares or capital contributions held by the said corporation) (hereinafter referred to as the "issued shares, etc." in this Article), 50 percent or more of the shares or capital contributions (hereinafter referred to as the "shares, etc." in this Article) are held directly or indirectly by a foreign controlling shareholder, etc.

(ii) Where 50 percent or more of the issued shares, etc. of the said domestic corporation and a foreign corporation are respectively held directly or indirectly by the same person (where the said person is an individual, including an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the relationship between the said domestic corporation and the said foreign corporation (excluding relationships falling under the category of relationships listed in the preceding item)

(iii) A relationship whereby the existence of the fact listed as follows or any other facts equivalent thereto between the said domestic corporation and a nonresident (meaning a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act; the same shall apply in paragraph (28)) or a foreign corporation (hereinafter such nonresident or foreign corporation shall be referred to as a "nonresident, etc." in this item) enables the said nonresident, etc. to determine substantially the whole or a part of the said domestic corporation's business policies (excluding relationships falling under the category of relationships listed in the preceding two items):

(a) The fact that the said domestic corporation depends on transactions with the said nonresident, etc. for a considerable part of its business activities

(b) The fact that the said domestic corporation procures a considerable part of the funds necessary for its business activities by receiving loans from the said nonresident, etc. or by obtaining guarantees from the said nonresident, etc.

(c) The fact that 50 percent or more of the officers of the said domestic corporation or any officers who have authority to represent the said domestic corporation are persons who concurrently serve as officers or employees of the said foreign corporation or who used to serve as officers or employees of the said foreign corporation.

(12) The provisions of paragraph (2) and paragraph (3) of Article 39-12 shall apply mutatis mutandis to the determination as to whether or not 50 percent or more of the issued shares, etc. set forth in item (i) and item (ii) of the preceding paragraph are held directly or indirectly.

(13) A person who provides a domestic corporation with funds and a person specified by Cabinet Order as being related to such provision of funds as prescribed in Article 66-5, paragraph (4), item (ii) of the Act shall be any of the following:

(i) Where it is found that a foreign controlling shareholder, etc. related to the said domestic corporation has provided the said domestic corporation with funds via a third party: The said third party

(ii) Where it is found that a foreign controlling shareholder, etc. related to the said domestic corporation has offered guarantees for the said domestic corporation's liabilities to a third party and thereby the said third party has provided the said domestic corporation with funds: The said third party

(iii) Where it is found that bonds lent by a foreign controlling shareholder, etc. related to the said domestic corporation to the said domestic corporation (including bonds lent by a third party to the said domestic corporation based on guarantees for the said domestic corporation's liabilities offered by the said foreign controlling shareholder, etc.) have been provided to any other third party as security and have been transferred in a bond transaction with a repurchase/resale agreement (meaning a bond transaction with a repurchase/resale agreement prescribed in Article 42-2, paragraph (1) of the Act; the same shall apply in paragraph (27)) or lent in a cash-secured bond lending transaction (meaning a cash-secured bond lending transaction prescribed in Article 66-5, paragraph (4), item (viii) of the Act; the same shall apply in paragraph (27)) and thereby the said other third party has provided the said domestic corporation with funds: The said third party and other third party.

(14) The moneys specified by Cabinet Order as being equivalent to interest on liabilities prescribed in Article 66-5, paragraph (4), item (iii) of the Act shall be the discount on bills, the amount of the shortage prescribed in Article 136-2, paragraph (1) of the Order for Enforcement of the Corporation Tax Act and any other moneys whose economic characteristics are equivalent to those of interest.

(15) The expenses specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (iii) of the Act shall be the expenses listed as follows:

(i) In the case prescribed in Article 13, item (ii), the guarantee charge for liabilities set forth in the said item which a domestic corporation set forth in the said item pays to a foreign controlling shareholder, etc. related to the said domestic corporation

(ii) In the case prescribed in Article 13, item (iii), the charge for bonds set forth in the said item or guarantee charge for liabilities set forth in the said item which a domestic corporation set forth in the said item pays to a foreign controlling shareholder, etc. related to the said domestic corporation or the charge for bonds set forth in the said item which the said domestic corporation pays to a third party set forth in the said item.

(16) Any other expenses specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (iii) of the Act shall be interest on liabilities, etc. to be paid to a public corporation prescribed in Article 2, item (v) of the Corporation Tax Act or a corporation in the public interest, etc. prescribed in item (vi) of the said Article.

(17) The liabilities specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (iv) of the Act shall be the liabilities set forth in the items of paragraph (13) in the cases prescribed in the relevant items.

(18) The amount calculated as specified by Cabinet Order as the average amount of liabilities prescribed in Article 66-5, paragraph (4), item (v) of the Act shall be the amount calculated by a reasonable method as the average balance of the book value of the liabilities for the relevant business year.

(19) The amount calculated as specified by Cabinet Order as the interest on a domestic corporation's net assets held by a foreign controlling shareholder, etc. as prescribed in Article 66-5, paragraph (4), item (vi) of the Act shall be the amount obtained by multiplying the amount of equity capital for the relevant business year of the said domestic corporation by the ratio of the shares, etc. regarding the said domestic corporation held directly or indirectly by a foreign controlling shareholder, etc. on the final day of the relevant business year out of the said domestic corporation's issued shares, etc.

(20) The shares, etc. held directly or indirectly as prescribed in the preceding paragraph shall be the total number or the sum of the said domestic corporation's shares, etc. held directly by a foreign controlling shareholder, etc. related to the said domestic corporation and the said domestic corporation's shares, etc. held indirectly by the said foreign controlling shareholder, etc. (meaning the shares, etc. calculated by multiplying the said domestic corporation's issued shares, etc. by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)):

(i) Where the whole or a part of the issued shares, etc. of any other domestic corporation which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this item and paragraph (24)) of the said domestic corporation are held by a foreign controlling shareholder, etc. related to the said domestic corporation: The ratio obtained by multiplying the said foreign controlling shareholder, etc.'s ratio of shareholding (meaning the ratio of the shares, etc. held by a shareholder, etc. out of the total issued shares, etc.; hereinafter the same shall apply in this paragraph and paragraph (24)) pertaining to the said other domestic corporation by the said other domestic corporation's ratio of shareholding pertaining to the said domestic corporation (where there are two or more other domestic corporations, the sum of the ratios calculated for each of them)

(ii) Where a single domestic corporation or two or more domestic corporations intervene(s) between the said domestic corporation and any other domestic corporation, the whole or a part of whose issued shares, etc. are held by a foreign controlling shareholder, etc. related to the said domestic corporation (hereinafter such intervening domestic corporation(s) shall be referred to as a "capital contribution-related domestic corporation(s)" in this paragraph) and the said foreign controlling shareholder, etc., the said other domestic corporation, capital contribution-related domestic corporation(s) and the said domestic corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the said foreign controlling shareholder, etc.'s ratio of shareholding pertaining to the said other domestic corporation sequentially by the said other domestic corporation's ratio of shareholding pertaining to the capital contribution-related domestic corporation(s), by the capital contribution-related domestic corporation's(s') ratio of shareholding pertaining to other capital contribution-related domestic corporation(s), and by the capital contribution-related domestic corporation's(s') ratio of shareholding pertaining to the said domestic corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(21) Where the said domestic corporation and a foreign controlling shareholder, etc. related to the said domestic corporation are in a relationship listed in paragraph (11), item (ii), when the same person prescribed in the said item is a resident or any other domestic corporation prescribed in Article 2, paragraph (1), item (i)-2 of the Act, the provisions of the preceding two paragraphs shall be applied by deeming the said same person to be a foreign controlling shareholder, etc. related to the said domestic corporation.

(22) The amount calculated as specified by Cabinet Order as the amount of net assets prescribed in Article 66-5, paragraph (4), item (vii) of the Act shall be the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) (where the said remaining amount is less than the amount of stated capital, etc. prescribed in Article 2, item (xvi) of the Corporation Tax Act on the final day of the relevant business year of the said domestic corporation (where the said amount of stated capital, etc. is less than the amount of stated capital or capital contributions, the said amount of stated capital or capital contributions; hereinafter referred to as the "amount of stated capital, etc." in this paragraph and paragraph (24)), such calculated amount shall be the said amount of stated capital, etc.):

(i) The amount calculated by a reasonable method as the average balance of the book value of the total assets for the relevant business year of the said domestic corporation (such book value shall mean the amount that remains after deducting the amount reserved as a reserve fund by the appropriation of surplus and the amount reserved as a reserve for special depreciation pursuant to the provisions of Article 52-3 or Article 68-41 of the Act (limited to the amount reserved as a reserve fund by the appropriation of surplus) in lieu of reducing the book value of fixed assets by reckoning the amount into expenses for accounting purposes)

(ii) The amount calculated by a reasonable method as the average balance of the book value of the total liabilities for the relevant business year of the said domestic corporation.

(23) The book value set forth in paragraph (5) and paragraph (18) and the preceding paragraph shall be based on the amount of assets or liabilities that the said domestic corporation entered in its accounting books.

(24) Where any other domestic corporation which is a shareholder, etc. of the said domestic corporation or a capital contribution-related domestic corporation(s) (meaning a single domestic corporation or two or more domestic corporations which have a linkage with the said domestic corporation and the said other domestic corporation through holding the shares, etc.; the same shall apply in the following paragraph) intervene(s) between the said domestic corporation and a foreign controlling shareholder, etc. related to the said domestic corporation, when the amount obtained by multiplying the amount of stated capital, etc. on the final day of the relevant business year of the said domestic corporation by the ratio of shareholding pertaining to the said domestic corporation of the said other domestic corporation or capital contribution-related domestic corporation(s) exceeds the amount of stated capital, etc. of the said other domestic corporation or capital contribution-related domestic corporation(s) on the same day (for a corporation falling under the category of a corporation subject to corporation tax on consolidated income prescribed in Article 2, item (xvi) of the Corporation Tax Act, when such amount exceeds the amount of consolidated individual stated capital, etc. prescribed in Article 39-113, paragraph (20)), the amount of equity capital pertaining to the said domestic corporation shall be the amount that remains after deducting from the said amount of equity capital, either of the smaller amount of the said excess amount or the amount of liabilities owed by the said other domestic corporation or capital contribution-related domestic corporation(s) to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said domestic corporation on the same day (referred to as the " deductible amount" in the following paragraph).

(25) In the case prescribed in the preceding paragraph, when deeming a capital contribution-related domestic corporation(s) set forth in the said paragraph to be the said domestic corporation set forth in the said paragraph and if there is any deductible amount pertaining to the said capital contribution-related domestic corporation(s), the amount of stated capital, etc. set forth in the said paragraph of the said capital contribution-related domestic corporation(s) shall be the amount that remains after deducting the said deductible amount from the said amount of stated capital, etc.; and the amount of liabilities owed by the said capital contribution-related domestic corporation(s) to a foreign controlling shareholder, etc. and a fund provider, etc. set forth in the said paragraph shall be the amount obtained by adding the amount of liabilities owed to the said foreign controlling shareholder, etc. and fund provider, etc. and the said deductible amount.

(26) The amount calculated as specified by Cabinet Order as the interest on a domestic corporation's net assets prescribed in Article 66-5, paragraph (4), item (vi) of the Act and the amount calculated as specified by Cabinet Order as the amount of net assets prescribed in item (vii) of the said paragraph, where the said domestic corporation is a corporation in the public interest, etc. prescribed in Article 2, item (vi) of the Corporation Tax Act or an association or foundation without juridical personality, shall be, notwithstanding the provisions of paragraph (19) to the preceding paragraph, the amount obtained by multiplying the amount of equity capital for the relevant business year of the said domestic corporation by the ratio of the value of assets for the profit-making business prescribed in Article 2, item (xiii) of the Corporation Tax Act conducted by the said domestic corporation out of the value of the total assets on the final day of the relevant business year.

(27) The transaction specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (viii) of the Act shall be the relevant cash-secured bond lending transaction or bond transaction with a repurchase/resale agreement, where any of the bonds listed as follows are lent in a cash-secured bond lending transaction or transferred in a bond transaction with a repurchase/resale agreement:

(i) Bonds borrowed in a cash-secured bond lending transaction

(ii) Bonds purchased in a bond transaction with a repurchase/resale agreement.

(28) The domestic source income specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (ix) of the Act for a nonresident shall be the domestic source income of a nonresident set forth in the said item as specified in Article 164, paragraph (1), items (i) to (iii) of the Income Tax Act, in accordance with the category of the said nonresident listed in the said items (excluding the income for which income tax shall be reduced or exempted pursuant to the provisions of a tax convention (meaning a tax convention prescribed in Article 1-3, paragraph (1), item (ii); hereinafter the same shall apply in this paragraph)); and the domestic source income specified by Cabinet Order prescribed in Article 66-5, paragraph (4), item (ix) of the Act for a foreign corporation shall be the domestic source income of a foreign corporation set forth in Article 66-5, paragraph (4), item (ix) of the Act as specified in Article 164, paragraph (1), items (i) to (iii) of the Corporation Tax Act, in accordance with the category of the said foreign corporation listed in the said items (excluding the income for which corporation tax shall be reduced or exempted pursuant to the provisions of a tax convention).

(29) The provisions of paragraph (1), paragraphs (3) to (18), paragraph (22), paragraph (23), paragraph (27) and the preceding paragraph shall apply mutatis mutandis to the case of applying the provisions of paragraphs (1) to (4) and paragraphs (6) to (9) of Article 66-5 of the Act which are applied mutatis mutandis pursuant to paragraph (10) of the said Article. In this case, the terms listed in the middle column of the following table which are used in the provisions listed in the left-hand column of the said table shall be deemed to be replaced with the terms listed in the right-hand column of the said table.

|Paragraph (1), item (i)|domestic corporation|foreign corporation|

||(such expenses shall be limited to|and which pertains to a business that the said foreign corporation conducts in Japan (hereinafter referred to as a "domestic business" in this Article) (such expenses shall be limited, in the case where the said foreign corporation is an association or foundation without juridical personality, which pertains to a profit-making business prescribed in Article 2, item (xiii) of the Corporation Tax Act (hereinafter referred to as a "profit-making business" in this Article) conducted by the said foreign corporation and also limited to|

||(limited to liabilities|which pertain to a domestic business (where the said foreign corporation is an association or foundation without juridical personality, limited to liabilities pertaining to a profit-making business conducted by the said foreign corporation and also limited to liabilities|

|Paragraph (1), item (ii), and paragraph(4) and paragraph (5)|domestic corporation|foreign corporation|

|Paragraph (6)|in paragraph (10)) which pertain to|in paragraph (10) and paragraph (22)) which pertain to a domestic business (where the said foreign corporation is an association or foundation without juridical personality, limited to liabilities pertaining to a profit-making business conducted by the said foreign corporation) and which pertain to|

|Paragraph (7) and paragraph (8)|domestic corporation|foreign corporation|

|Paragraph (10)|a domestic corporation which intends to|a foreign corporation which intends to|

|Paragraph (11), item (i) and item (ii)|domestic corporation|foreign corporation|

||a foreign corporation|any other foreign corporation|

|Paragraph (11), item (iii)|domestic corporation|foreign corporation|

||a nonresident (meaning a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act; the same shall apply in paragraph (28)) or a foreign corporation (hereinafter such nonresident or foreign corporation shall be referred to as a "nonresident, etc." in this item)|a nonresident (meaning a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act; the same shall apply in paragraph (28)) or any other foreign corporation|

||the said nonresident, etc.|the said nonresident or other foreign corporation|

||the said foreign corporation's|the said other foreign corporation's|

|Paragraph (13) and paragraph (15)|domestic corporation|foreign corporation|

|Paragraph (22)|The amount calculated as specified by Cabinet Order as the amount of net assets prescribed in Article 66-5, paragraph (4), item (vii) of the Act|The amount calculated as specified by Cabinet Order as the interest on a domestic corporation's net assets held by a foreign controlling shareholder, etc. and the amount calculated as specified by Cabinet Order as the amount of net assets prescribed in item (vii) of the said paragraph|

||domestic corporation|foreign corporation|

||the amount of stated capital, etc. prescribed in Article 2, item (xvi) of the Corporation Tax Act on the final day of the relevant business year of the said domestic corporation (where the said amount of stated capital, etc. is less than the amount of stated capital or capital contributions, the said amount of stated capital or capital contributions;|the amount obtained by multiplying the amount of stated capital, etc. prescribed in Article 2, item (xvi) of the Corporation Tax Act on the final day of the relevant business year of the said domestic corporation by the ratio of the book value of the assets pertaining to a domestic business (where the said foreign corporation is an association or foundation without juridical personality, limited to assets pertaining to a profit-making business conducted by the said foreign corporation) out of the book value of the total assets on the same day (|

||the total assets|the total assets which pertain to a domestic business (where the said foreign corporation is an association or foundation without juridical personality, limited to assets pertaining to a profit-making business conducted by the said foreign corporation)|

||the total liabilities|the total liabilities which pertain to a domestic business (where the said foreign corporation is an association or foundation without juridical personality, limited to liabilities pertaining to a profit-making business conducted by the said foreign corporation)|

|Paragraph (23)|domestic corporation|foreign corporation|

(30) With respect to the application of the provisions of Article 22 of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 66-5, paragraph (1) of the Act shall apply, the term "the sum of the amount of interest on liabilities prescribed in the said paragraph to be paid for the relevant business year" in Article 22, paragraph (1) of the said Order shall be deemed to be replaced with "the sum of the amount of interest on liabilities prescribed in the said paragraph to be paid for the relevant business year (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 66-5, paragraph (1) (Special Provisions for Taxation on Interest on Liabilities, etc. Payable to Foreign Controlling Shareholders, etc.) of the Act on Special Measures Concerning Taxation, such sum shall be the amount that remains after deducting the said amount);" the term "the sum of the amount of interest on liabilities that a domestic corporation set forth in the said paragraph pays for the business year set forth in the said paragraph" in paragraph (2) of the said Article shall be deemed to be replaced with "the sum of the amount of interest on liabilities that a domestic corporation set forth in the said paragraph pays for the business year set forth in the said paragraph (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 66-5, paragraph (1) (Special Provisions for Taxation on Interest on Liabilities, etc. Payable to Foreign Controlling Shareholders, etc.) of the Act on Special Measures Concerning Taxation, such sum shall be the amount that remains after deducting the said amount);" the term "the amount listed in item (i)" in paragraph (1) and paragraph (2) of the said Article shall be deemed to be replaced with "the amount listed in item (i) (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 66-5, paragraph (1) of the Act on Special Measures Concerning Taxation, such amount shall be the amount that remains after deducting the amount equivalent to the amount exceeding the average balance of liabilities prescribed in Article 39-13, paragraph (1), item (i) (Calculation of the Amount of Interest on Liabilities, etc. Payable to Foreign Controlling Shareholders, etc. to be Excluded from Deductible Expenses) of the Order for Enforcement of the Act on Special Measures Concerning Taxation (Cabinet Order No. 43 of 1957) (including the cases where it is applied by replacing the terms under the provisions of paragraph (9) of the said Article) (in the case where the provisions of paragraph (1) of the said Article is applied by replacing the terms under the provisions of paragraph (2) of the said Article, after deducting the amount equivalent to the amount exceeding the average balance of the total liabilities prescribed in the said item which is applied by replacing the terms under the provisions of paragraph (2) of the said Article));" the term "(hereinafter referred to as the 'sum of" in paragraph (3) of the said Article shall be deemed to be replaced with "(where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 66-5, paragraph (1) of the Act on Special Measures Concerning Taxation, the amount that remains after deducting the said amount; hereinafter referred to as the 'sum of"; and the term "paragraph (4), item (i) of the said Article" in the said paragraph shall be deemed to be replaced with "Article 23, paragraph (4), item (i) of the Act."

Section 8-4 Special Provisions for Taxation on Income of Specified Foreign Subsidiary Companies, etc. of Domestic Corporations

(Scope of Specified Foreign Subsidiary Companies, etc.)

Article 39-14 (1) The affiliated foreign company specified by Cabinet Order prescribed in Article 66-6, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign company (meaning an affiliated foreign company prescribed in Article 66-6, paragraph (2), item (i) of the Act; hereinafter the same shall apply in this Article) that has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) An affiliated foreign company whose tax imposed on its income for the relevant business year is 25 percent or less of the said income.

(2) Whether or not an affiliated foreign company falls under the category of an affiliated foreign company set forth in item (ii) of the preceding paragraph shall be determined as specified as follows:

(i) The amount of income set forth in item (ii) of the preceding paragraph shall be the amount obtained by adding the amount of income calculated pursuant to the provisions of the laws and regulations concerning foreign corporation taxes (meaning foreign corporation taxes prescribed in Article 69, paragraph (1) of the Corporation Tax Act; hereinafter the same shall apply in this Section) of the state or territory where the head office or principal office of the said affiliated foreign company is located (hereinafter referred to as the "state of the head office" in this Section) (where there are two or more laws and regulations concerning the said foreign corporation taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph) with regard to the said affiliated foreign company's amount of income in its settlement of accounts for the relevant business year and the sum of the amounts listed in (a) to (e) pertaining to the said calculated amount of income and then deducting therefrom the amount listed in (f) pertaining to the said calculated amount of income:

(a) The amount of income which shall not be included in the foreign corporation tax base under the laws and regulations of the state of the head office (excluding the following amounts):

1. The amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act to be received from a corporation located in the state of the head office (including the amount of profit reserve to be reduced by reason of the delivery of money or other assets on any of the grounds listed in the items of Article 254, paragraph (1) of the said Act; hereinafter referred to as the "amount of a dividend, etc." in this item and the following Article)

2. The amount of a dividend, etc. received from a corporation located in a state or territory other than the state of the head office, which shall not be included in the foreign corporation tax base on condition that the ratio of the shares, etc. (meaning the shares or capital contributions; hereinafter the same shall apply in this Section) held by the affiliated foreign company out of the total number or total amount of the said corporation's issued shares or capital contributions (excluding its own shares held by the said corporation) (hereinafter referred to as the "issued shares, etc." in this Section) is not less than the ratio specified by the said laws and regulations of the state of the head office)

(b) The amount of a dividend, etc. that the affiliated foreign company shall pay and which is included in deductible expenses

(c) The amount of foreign corporation tax that the affiliated foreign company shall pay and which is included in deductible expenses

(d) The amount of reserve belonging to the reserve for casualty set forth in Article 57-5, paragraph (1) or Article 57-6, paragraph (1) of the Act (hereinafter referred to as the "insurance reserve" in this paragraph and paragraph (2) of the following Article) that the affiliated foreign company has reserved and which is included in deductible expenses and which is equivalent to the amount to be excluded from deductible expenses when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied

(e) Where the amount that has been included in gross profits regarding the insurance reserve reserved by the affiliated foreign company (limited to the insurance reserve that can be reserved when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied) does not reach the amount to be included in gross profits when these provisions shall be applied, the amount of the said shortfall

(f) The amount of foreign corporation tax that shall be refunded to the affiliated foreign company and which is included in gross profits

(ii) The amount of tax set forth in item (ii) of the preceding paragraph shall be the sum of the amounts listed as follows:

(a) The amount of foreign corporation tax to be imposed on the amount of the affiliated foreign company's income in its settlement of accounts for the relevant business year in the state of the head office or in a state or territory other than the state of the head office (including the amount to be deducted from the foreign corporation tax of the state of the head office by deeming that the said affiliated foreign company has paid the said amount under the laws and regulations of the state of the head office and excluding the amount of foreign corporation tax to be imposed on the amount listed in (a), 2. of the preceding item)

(b) The amount of foreign corporation tax reduced or exempted for the affiliated foreign company for the relevant business year in the state of the head office, which is deemed to have been paid by the said affiliated foreign company pursuant to the provisions of a tax convention prescribed in Article 1-3, paragraph (1), item (ii)

(iii) Where the foreign corporation tax rates of the state of the head office increase in accordance with the amount of income, the amount of foreign corporation tax set forth in (a) of the preceding item shall be the amount calculated based on the highest rates out of such tax rates

(iv) Where the amount of income set forth in item (ii) of the preceding paragraph proves to be a loss, the amount of foreign corporation tax shall be determined based on the foreign corporation tax rate to be applied in the state of the head office to any income that arises from revenue pertaining to the affiliated foreign company's principal business (in the case where the said revenue falls under what is listed in 1. or 2. of item (i), (a), revenue other than the said revenue).

(3) A nonresident who has a special relationship specified by Cabinet Order with a resident or domestic corporation prescribed in Article 66-6, paragraph (2), item (i) of the Act shall be a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act listed as follows:

(i) A relative of the resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act (hereinafter referred to as a "resident" in this paragraph and Article 39-16, paragraph (6))

(ii) A person in a relationship with the resident where a marital relationship is de facto, though a marriage has not been registered

(iii) An employee of the resident

(iv) A person other than those listed in the preceding three items who maintains his/her living by receiving money or any other assets from the resident

(v) A relative of any of the persons listed in the preceding three items who depends on such person for his/her livelihood

(vi) An officer of the domestic corporation (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply through to Article 39-16) and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer.

(Calculation of Amount of Eligible Income of Specified Foreign Subsidiary Companies, etc.)

Article 39-15 (1) The amount of eligible income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the amounts listed in item (iii) and item (iv) pertaining to the amount of income of a specified foreign subsidiary company, etc. prescribed in paragraph (1) of the said Article (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article and paragraph (1) of the following Article) in its settlement of accounts for the relevant business year from the sum of the amounts listed in item (i) and item (ii) pertaining to the said income (where the amount listed in item (i) pertaining to the said income is a loss, the said amount of eligible income shall be the amount that remains after deducting the sum of the said amount of loss and the amounts listed in item (iii) and item (iv) pertaining to the said amount of income from the amount listed in item (ii) pertaining to the said amount of income):

(i) The amount of income or amount of a loss calculated, with regard to the amount of income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, in accordance with the provisions of Part II, Chapter 1, Section 1, Subsection 2 to Subsection 9 (excluding Article 23, Article 23-2, Article 26, paragraphs (1) to (5), Articles 38 to 41, Article 55, paragraph (3), Article 57, Article 58, Article 59, and Articles 61-11 to 61-13 of the Corporation Tax Act), and Subsection 11 of the said Act, and the provisions of Article 43, Article 45-2, Article 52-2, Article 57-5, Article 57-6, Article 57-8, Article 57-10, Article 61-4, Articles 65-7 to 65-9 (limited to the part pertaining to item (xix) of the table in Article 65-7, paragraph (1) of the Act), Article 66-4, paragraph (3), Article 67-12 and Article 67-13 of the Act (hereinafter referred to as the "provisions of the laws and regulations of Japan" in this item) (where the provisions of paragraph 66-4, paragraph (1) or Article 68-88, paragraph (1) of the Act is applied to a transaction with a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act related to the said specified foreign subsidiary company, etc., the amount of income or amount of a loss calculated in accordance with the provisions of the laws and regulations of Japan by deeming that the transaction was carried out at the arm's length price prescribed in these provisions)

(ii) The amount of corporate income tax payable in the relevant business year (meaning taxes to be imposed based on the amount of the corporation's income in the state of the head office or in a state or territory other than the state of the head office or by local entities in such state or territory including the state of the head office (including taxes listed in the items of Article 141, paragraph (2) of the Order for Enforcement of the Corporation Tax Act to be imposed in such state or territory or by local entities in such state or territory) and taxes equivalent to incidental taxes to be imposed incidentally as prescribed in Article 2, item (xlv) of the Corporation Tax Act (excluding interest tax) and other taxes similar to the tax equivalent to the said incidental taxes; hereinafter the same shall apply in this Article)

(iii) The amount of corporate income tax to be refunded in the relevant business year.

(iv) The amount of a dividend, etc. to be received in the relevant business year from a subsidiary company (meaning another corporation (excluding any of the corporations listed as follows) in the case where the percentage of the number or the amount of shares, etc. held by the said specified foreign subsidiary company, etc. in the issued shares, etc. of such other corporation or the percentage of the number or the amount of voting shares, etc. held by the said specified foreign subsidiary company, etc. in the issued shares, etc. of such other corporation is not less than 25 percent, and such shares have been held for six months or more until the day on which the obligation to pay the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from such other corporation is determined (or the day preceding that day in the case where the said amount of dividend, etc. is the amount of a dividend, etc. specified by Cabinet Order pertaining to the grounds prescribed in Article 24, paragraph (1) of the Corporation Tax Act) (in the case where such other corporation is a corporation established within six months until the day on which such obligation is determined, during the period from the date of the establishment until the day on which such obligation is determined)):

(a) The special purpose company prescribed in Article 67-14, paragraph (1)

(b) The investment corporation prescribed in Article 67-15, paragraph (2)

(c) The trust corporation prescribed in Article 68-3-2, paragraph (1) or paragraph (9) for a special purpose trust prescribed in paragraph (1) of the said Article

(d) The trust corporation prescribed in Article 68-3-3, paragraph (1) or paragraph (9) for a special investment trust prescribed in paragraph (1) of the said Article (limited to those that satisfy the requirements listed in item (i), (b) and (c) of paragraph (1) of the said Article)

(2) Notwithstanding the provisions of the preceding paragraph, a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act may deem that the amount obtained by adding the amount of income calculated, with regard to the amount of income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, pursuant to the provisions of the laws and regulations concerning corporate income taxes of the state of the head office of the said specified foreign subsidiary company, etc. (where there are two or more laws and regulations concerning the said corporate income taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph), (where the provisions of Article 66-4, paragraph (1) or Article 68-88, paragraph (1) of the Act is applied to a transaction between the said specified foreign subsidiary company, etc. and the said domestic corporation, the amount of income calculated pursuant to the provisions of the laws and regulations of the state of the head office by deeming that the transaction was carried out at the arm's length price prescribed in these provisions), and the sum of the amount listed in items (i) to (xiii) pertaining to the said calculated amount of income and then deducting therefrom the amount listed in item (xiii) and item (xiv) pertaining to the said calculated amount of income (where the amount calculated pursuant to the provisions of the laws and regulations of the state of the head office proves to be a loss, the said amount shall be the amount that remains after deducting the sum of the said amount of loss and the amount listed in items (xiv) to (xvi) pertaining to the said calculated amount from the sum of the amounts listed in items (i) to (xiii) pertaining to the said calculated amount) shall be the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (ii) of the Act:

(i) The amount of income which shall not be included in the corporate income tax base for the relevant business year under the laws and regulations of the state of the head office

(ii) The amount of a dividend, etc. that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year

(iii) The excess amount that exceeds the amount equivalent to that to be included in deductible expenses, when the provisions of Article 31 of the Corporation Tax Act shall be applied, out of the amount included in deductible expenses for the relevant business year as the depreciation allowance for the depreciable assets that the specified foreign subsidiary company, etc. holds (excluding goodwill obtained on or before March 31, 1998) (such inclusive amount shall be limited to the amount calculated, with the acquisition costs of the said depreciable assets (where there is any amount of past depreciation already included in deductible expenses for the relevant business year, the amount after deducting the said amount) as the limit of the amount to be included in deductible expenses for the relevant business year)

(iv) The amount equivalent to that included in deductible expenses for the relevant business year due to changes in the valuation of the assets that the specified foreign subsidiary company, etc. holds, which shall not be included in deductible expenses when the provisions of Article 33 of the Corporation Tax Act shall be applied

(v) The amount equivalent to the amount of remuneration to be paid to the officers of the specified foreign subsidiary company, etc. included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 34 or Article 35 of the Corporation Tax Act shall be applied

(vi) The amount equivalent to the amount of remuneration to be paid to employees of the specified foreign subsidiary company, etc. included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 36 of the Corporation Tax Act shall be applied

(vii) The amount equivalent to the amount of a contribution that the specified foreign subsidiary company, etc. shall make (excluding a contribution to the state of the head office or local entities in such state which is equivalent to that prescribed in Article 37, paragraph (3), item (i) of the Corporation Tax Act) and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of paragraph (1) of the said Article and Article 66-4, paragraph (3) of the Act shall be applicable

(viii) The amount of corporate income tax that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year

(ix) The amount of a loss incurred in business years preceding the said relevant business year, pursuant to the provisions of the laws and regulations of the state of the head office that are equivalent to those of Article 57, Article 58 or Article 59 of the Corporation Tax Act, which is included in deductible expenses for the relevant business year

(x) The amount equivalent to the amount of insurance reserve that the specified foreign subsidiary company, etc. has reserved and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied

(xi) Where the amount that has been included in gross profits for the relevant business year regarding the insurance reserve reserved by the specified foreign subsidiary company, etc. (limited to the insurance reserve that can be reserved when these provisions shall be applied) is less than the amount to be included in gross profits when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied, the amount of the said shortfall

(xii) The amount equivalent to the amount of expenses equivalent to entertainment and social expenses prescribed in Article 61-4, paragraph (1) of the Act that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of the said Article shall be applied

(xiii) The amount equivalent to the amount of a loss of the specified foreign subsidiary company, etc. (meaning the amount of a loss related to a partnership, etc. prescribed in Article 67-12, paragraph (1) of the Act or the amount of a loss prescribed in Article 67-13, paragraph (1) of the Act incurred due to a partnership business prescribed in the said paragraph), which shall not be included in deductible expenses when the provisions of Article 67-12, paragraph (1) or Article 67-13, paragraph (1) of the Act shall be applied

(xiv) The amount equivalent to the amount which shall be included in deductible expenses when the provisions of Article 67-12, paragraph (2) or Article 67-13, paragraph (2) of the Act shall be applied

(xv) The amount of corporate income tax to be refunded to the specified foreign subsidiary company, etc. which is included in gross profits for the relevant business year

(xvi) The amount equivalent to that included in gross profits for the relevant business year due to changes in the valuation of the assets that the specified foreign subsidiary company, etc. holds, which shall not be included in gross profits when the provisions of Article 25 of the Corporation Tax Act shall be applied

(xvii) The amount listed in item (iv) of the preceding paragraph.

(3) Where there is any amount of deductible dividend, etc. (meaning the amount equivalent to the amount specified respectively in the following items for the category of cases listed in the relevant items; hereinafter the same shall apply in this paragraph) for the relevant business year of a specified foreign subsidiary company, etc. related to a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act, the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the said amount of deductible dividend, etc. from the amount calculated pursuant to these provisions, notwithstanding the provisions of paragraph (1) or the preceding paragraph:

(i) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said domestic corporation (including a specified foreign subsidiary company, etc. prescribed in Article 68-90, paragraph (1) of the Act and excluding those falling under the category of subsidiary companies prescribed in paragraph (1), item (iv); hereinafter referred to as the "other specified foreign subsidiary company, etc." in this paragraph) in the relevant business year does not exceed the amount of a dividend payable corresponding to the capital contributions of the said specified foreign subsidiary company, etc. out of the total amount of a dividend payable by the said other specified foreign subsidiary company, etc. in the business year containing the base date for paying the said dividend, etc. (hereinafter referred to as the "base business year" in this paragraph) and the said base business year is the business year during which the taxable income prescribed in Article 66-6, paragraph (1) of the Act (hereinafter referred to as the "taxable income" in this Section) or individually taxable income prescribed in Article 68-90, paragraph (1) of the Act (hereinafter referred to as the "individually taxable income" in the following item) arises: The amount of the said dividend, etc.

(ii) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said domestic corporation in the relevant business year exceeds the amount of a dividend payable corresponding to the capital contributions for the base business year pertaining to the said amount of a dividend, etc.: Where the amount of a dividend payable corresponding to the capital contributions for the relevant business year preceding the base business year of the said other specified foreign subsidiary company, etc. shall be appropriated to the said amount of a dividend, etc. in reverse chronological order and the said amount of a dividend, etc. has been categorized for the relevant business year in accordance with the said amount of dividend payable corresponding to the capital contributions for the relevant business year, the sum of the amount of a dividend, etc. to be appropriated with the amount of a dividend payable corresponding to the capital contributions for the business year during which the taxable income or individually taxable income arises.

(4) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) Amount of dividend payable: The amount that remains after deducting the sum of the amounts listed in (e) and (f) pertaining to eligible income (meaning eligible income prescribed in Article 66-6, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this item) of a specialized foreign subsidiary company, etc. for the relevant business year, from the amount calculated by adding the said eligible income to the sum of the amounts listed in (a) to (d):

(a) The amount listed in paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii)) to be deducted pursuant to the provisions of paragraph (1)

(b) The amount of a deductible dividend, etc. prescribed in the preceding paragraph to be deducted pursuant to the provisions of the said paragraph

(c) In the case where the provisions of Article 66-4, paragraph (1) or Article 68-88, paragraph (1) of the Act are applied to a transaction with a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act pertaining to the said specified foreign subsidiary company, etc., and the amount of income to be reduced pursuant to the provisions of paragraph (1) or paragraph (2) contains any amount that shall not be paid to the said domestic corporation, such amount that shall not be paid

(d) The amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (ii) to be deducted pursuant to the provisions of the said item in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article

(e) The amount payable due to the appropriation of surplus for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.)

(f) The amount paid as the expenses for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.) which was included in the amount of eligible income for the relevant business year, because the said amount was not included in deductible expenses for calculating the amount of income pursuant to the provisions of paragraph (1) or paragraph (2) or was included in the amount of income pursuant to the provisions of the said paragraph.

(ii) The amount of a dividend payable corresponding to the capital contributions: The amount obtained by multiplying the amount of a dividend payable by a specified foreign subsidiary company, etc. by the ratio of the number or the amount of the shares, etc. of the said specified foreign subsidiary company, etc. that any other specified foreign subsidiary company, etc. (hereinafter referred to as the "other specified foreign subsidiary company, etc." in this item) holds out of the total issued shares, etc. of the said specified foreign subsidiary company, etc. (where the said specified foreign subsidiary company, etc. has issued the shares, etc. in which claims prescribed in Article 66-6, paragraph (1) of the Act (hereinafter referred to as the "claims" through to Article 39-19) with different contents are vested, or the shares, etc. in which claims with different contents are deemed to be substantially vested (referred to as the "shares, etc. in which different claims are vested" in paragraph (2) of the following Article and paragraph (1) of Article 39-19, paragraph (1)), the ratio of the amount of a dividend of surplus, etc. that the said other specified foreign subsidiary company, etc. can receive based on the said claims out of the total amount of a dividend, etc.).

(5) The amount obtained as a result of an adjustment for the amount of loss and base income prescribed in Article 66-6, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting, from the base income amount, prescribed in the said item, of a specified foreign subsidiary company, etc. for the relevant business year (referred to as the "base income amount" in paragraph (7) and paragraph (8)), the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (ii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in business years that started within seven years prior to the first day of the relevant business year of the specified foreign subsidiary company, etc. (excluding the business years that started before April 1, 1978 and the business years during which the company did not fall under the category of specified foreign subsidiary companies, etc. (including specified foreign subsidiary companies, etc. prescribed in Article 40-4, paragraph (1) or Article 68-90, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph and Article 39-115, paragraph (5))

(ii) The amount of corporate income tax that the specified foreign subsidiary company, etc. is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(6) A loss prescribed in item (i) of the preceding paragraph shall be a loss calculated where the provisions of paragraph (1), paragraph (2) or paragraph (3) are applied to the amount of income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year.

(7) When making a calculation set forth in paragraph (1), item (i), if there is any amount to be included in deductible expenses in the relevant business year, pursuant to the provisions of Article 33 and Articles 42 to 53 of the Corporation Tax Act, and the provisions of Article 43, Article 45-2, Article 52-2, Article 57-5, Article 57-6, Article 57-8, Articles 65-7 to 65-9 (limited to the part pertaining to item (xix) of the table in Article 65-7, paragraph (1) of the Act), Article 67-12, paragraph (2) and Article 67-13, paragraph (2) of the Act, whose provisions shall be applicable under the provisions of the said item, the said amount shall be included in deductible expenses for calculating the base income amount for the relevant business year, only when detailed statements concerning the inclusion of the said amount in deductible expenses are attached to a final return form set forth in Article 66-6, paragraph (5) of the Act (referred to as a "final return form" in the following paragraph) for the relevant business year; provided, however, that this shall not apply when the district director of the tax office finds that there was any unavoidable reason for the failure to attach detailed statements and the said detailed statements have been submitted.

(8) When calculating the base income amount pursuant to the provisions of paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii)), if there is any amount to be deducted for the relevant business year pursuant to these provisions, such amount shall be deducted in the calculation of the base income amount of the said business year only where a detailed statement concerning the calculation of such amount is attached to the final return form pertaining to the said business year; provided, however, that this shall not apply when the district director of the tax office finds any unavoidable reason for the failure to attach such detailed statement, and the said detailed statement is submitted.

(9) Where a domestic corporation, which was subject to the provisions of paragraph (1) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (2) for calculating the amount of income of the said specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in business years following the one to which the provisions of paragraph (1) have been applied; or where a domestic corporation, which was subject to the provisions of paragraph (2) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (1) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in business years following the one to which the provisions of paragraph (2) have been applied, it shall receive approval from the competent district director having jurisdiction over its place for tax payment, in advance.

(Calculation, etc. of the Amount of Taxable Income of Specified Foreign Subsidiary Companies, etc. Related to Domestic Corporations)

Article 39-16 (1) The amount calculated as specified by Cabinet Order prescribed in Article 66-6, paragraph (1) of the Act shall be the amount obtained by multiplying the amount of eligible income prescribed in the said paragraph for the relevant business year of a specified foreign subsidiary company, etc. pertaining to a domestic corporation listed in the items of the said paragraph by the ratio of the shares, etc. for considering the claims held by the said domestic corporation out of the total issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc.

(2) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) Shares, etc. for considering the claims held: The number or the amount adding together the number or the amount of the shares, etc. of a foreign corporation directly held by a domestic corporation (where the said foreign corporation has issued the shares, etc. in which different claims are vested, the number or the amount obtained by multiplying the issued shares, etc. of the said foreign corporation by the ratio of the amount of a dividend of surplus, dividend of profit, or distribution of surplus as prescribed in Article 23, paragraph (1), item (i) of the Corporation Tax Act (hereinafter referred to as a "dividend of surplus, etc." in this Article and Article 39-19, paragraph (1)) that the said domestic corporation can receive based on the said claims out of the total amount) and the shares, etc. for considering the claims indirectly held

(ii) Shares, etc. for considering the claims indirectly held: The number or the amount of the shares, etc. obtained by multiplying the issued shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(a) Where a domestic corporation holds the whole or a part of the issued shares, etc. of other foreign corporations which are shareholders, etc. (meaning shareholders, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this Article) of the said foreign corporation (hereinafter such other foreign corporations shall be simply referred to as "other foreign corporations" in (a)): The ratio obtained by multiplying the said domestic corporation's ratio of shareholding (meaning the ratio of the number or the amount of the shares, etc. held by the shareholders, etc. out of the total issued shares, etc. of the corporation issuing the said shares, etc. (where the said issuing corporation has issued the shares, etc. in which different claims are vested, the ratio of the amount of a dividend of surplus, etc. that the said shareholder, etc. can receive based on the said claims out of the total amount); hereinafter the same shall apply in this item) pertaining to the said other foreign corporations by the said other foreign corporations' ratio of shareholding pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(b) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation, the whole or a part of whose issued shares, etc. are held by a domestic corporation; hereinafter referred to as the "other foreign corporation" in this item) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this item) and the said domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the said domestic corporation's ratio of shareholding pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of shareholding pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them)

(3) The number of the shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as those held indirectly as prescribed in Article 66-6, paragraph (2), item (iii) of the Act shall be the number or the amount of the shares, etc. obtained by multiplying the issued shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the issued shares, etc. of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of shareholding (meaning the ratio of the number or the amount of the shares, etc. held by the shareholders, etc. out of the total issued shares, etc. of the corporation issuing the said shares, etc.; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of shareholding pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation, the whole or a part of whose issued shares, etc. are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the ratio of the shareholding of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of shareholding pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(4) The number of voting rights of a foreign corporation specified by Cabinet Order as being held indirectly as prescribed in Article 66-6, paragraph (2), item (iv) of the Act shall be the number of voting rights obtained by multiplying the total number of voting rights (meaning the voting rights prescribed in Article 66-6, paragraph (1), item (i), (a) of the Act; hereinafter the same shall apply in this paragraph) of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the voting rights of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of voting rights (meaning the ratio of the number of voting rights held by the shareholders, etc. out of the total number; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of voting rights pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation, the whole or a part of whose voting rights are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the voting rights: The ratio obtained by multiplying the ratio of voting rights of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of voting rights pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of voting rights pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of voting rights pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(5) The amount of a dividend of surplus, etc. specified by Cabinet Order as being receivable based on the claims vested in the shares, etc. of a foreign corporation held indirectly as prescribed in Article 66-6, paragraph (2), item (v) of the Act shall be the amount of a dividend of surplus, etc. obtained by multiplying the total amount of a dividend of surplus, etc. receivable based on the claims vested in the shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where an individual or domestic corporation holds the whole or a part of the claims vested in the shares, etc. of other foreign corporations which are shareholders, etc. of the said foreign corporation (hereinafter referred to as "other foreign corporations" in this item): The ratio obtained by multiplying the ratio of claims (meaning the ratio of the amount of a dividend of surplus, etc. receivable based on the claims vested in the shares, etc. held by the shareholders, etc. out of the total amount; hereinafter the same shall apply in this paragraph) of the said individual or domestic corporation pertaining to the said other foreign corporations by the said other foreign corporations' ratio of claims pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation, the whole or a part of whose claims vested in the shares, etc. are held by an individual or domestic corporation; hereinafter referred to as the "other foreign corporation" in this paragraph) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this paragraph) and the said individual or domestic corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the claims vested in the shares, etc.: The ratio obtained by multiplying the ratio of claims of the said individual or domestic corporation pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of claims pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of claims pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of claims pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(6) A person who has a special relationship specified by Cabinet Order with a resident or a domestic corporation prescribed in Article 66-6, paragraph (2), item (vi) of the Act shall be an individual or corporation listed as follows:

(i) An individual listed as follows:

(a) A relative of the resident

(b) A person in a relationship with the resident where a marital relationship is de facto, though a marriage has not been registered

(c) An employee of the resident

(d) A person other than those listed in (a) to (c) who maintains his/her living by receiving money or any other assets from the resident

(e) A relative of any of the persons listed in (b) to (d) who depends on such person for his/her livelihood

(f) An officer of the domestic corporation and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer

(ii) A corporation listed as follows:

(a) Where a resident or a domestic corporation (including an individual who has a special relationship prescribed in the preceding item with the said resident or domestic corporation; hereinafter referred to as a "resident, etc." in this paragraph) controls any other corporation, the said other corporation

(b) Where a resident, etc. or a corporation which has a special relationship prescribed in (a) with the said resident, etc. controls any other corporation, the said other corporation

(c) Where a resident, etc. or a corporation which has a special relationship prescribed in (a) and (b) with the said resident, etc. controls any other corporation, the said other corporation

(d) Where any of the two or more corporations which have a special relationship prescribed in (a) to (c) with the same person is a resident, etc., a corporation other than the one falling under the said resident, etc. out of those which have such special relationship with the same person

(7) The provisions of Article 4, paragraph (3) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis when controlling any other corporation listed in (a) to (c) of item (ii) of the preceding paragraph.

(8) The amount of expenses specified by Cabinet Order set forth in Article 66-6, paragraph (2), item (ii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the sum of personnel expenses for officers and employees of a specified foreign subsidiary company, etc. engaged in the business at the said specified foreign subsidiary company, etc. prescribed in paragraph (3) of the said Article (limited to the amount of income calculated in accordance with the provisions of the laws and regulations of Japan prescribed in paragraph (1), item (i) of the preceding Article or pursuant to the provisions of paragraph (2) of the said Article or the amount to be included in deductible expenses for calculating the amount of a loss for the relevant business year of the said specified foreign subsidiary company, etc.).

(Determination, etc. of Business of Specified Foreign Subsidiary Companies, etc.)

Article 39-17 (1) The persons specified by Cabinet Order prescribed in Article 66-6, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations which have the consolidated full controlling interest with a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (4) of the Act (hereinafter referred to as a "specified foreign subsidiary company, etc." in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph

(ii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding item who is related to the said specified foreign subsidiary company, etc.)

(iii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act (where the said consolidated corporation is a consolidated subsidiary corporation, a consolidated parent corporation related to the said consolidated corporation) which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding two items who is related to the said specified foreign subsidiary company, etc.)

(iv) Where a person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act holds the shares, etc. indirectly pertaining to the said specified foreign subsidiary company, etc. (such shares, etc. shall mean the number of the shares or the amount of the capital contributions of a foreign corporation specified by Cabinet Order as being held through indirect ownership as prescribed in Article 66-6, paragraph (2), item (iii) of the Act), the other foreign corporations prescribed in paragraph (3), item (i) of the preceding Article or the other foreign corporation and capital contribution-related foreign corporation(s) prescribed in item (ii) of the said paragraph which pertain to the said shares, etc. held indirectly

(v) A person who has a special relationship specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (vi) of the Act with any of the persons listed as follows (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act):

(a) A specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act

(b) A person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 66-6, paragraph (4), item (i) of the Act

(c) A person listed in the preceding items.

(2) The case specified by Cabinet Order prescribed in Article 66-6, paragraph (4), item (i) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Wholesale business: Where, out of the total revenue from selling inventory assets for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets for the relevant business year, such revenues shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of sales transactions" in this item), the ratio of the sum of the amount of sales transactions with a person other than affiliated persons (meaning those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who are related to the said specified foreign subsidiary company, etc.; hereinafter the same shall apply in this paragraph and the following paragraph) exceeds 50 percent, or out of the sum of the acquisition costs for acquiring inventory assets for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets for the relevant business year, such acquisition costs shall include the amount of transactions for which the said commissions were generated; hereinafter referred to as the "amount of purchase transactions" in this item), the ratio of the sum of the amount of purchase transactions with a person other than affiliated persons exceeds 50 percent

(ii) Banking business: Where, out of the sum of the total interest received for the relevant business year, the ratio of the sum of the said interest to be received from a person other than affiliated persons exceeds 50 percent, or out of the sum of the total interest paid for the relevant business year, the ratio of the sum of the said interest to be paid to a person other than affiliated persons exceeds 50 percent

(iii) Trust business: Where, out of the sum of the total trust charge for the relevant business year, the ratio of the sum of the said trust charge to be received from a person other than affiliated persons exceeds 50 percent

(iv) Financial instruments business: Where, out of the sum of the total commissions received (including profits from the buying and selling of securities) for the relevant business year, the ratio of the sum of the said commissions to be received from a person other than affiliated persons exceeds 50 percent

(v) Insurance business: Where, out of the sum of the total premium income for the relevant business year, the ratio of the sum of the said premium income to be received from a person other than affiliated persons (where the said premium income pertains to reinsurance, limited to premium income from insurance for assets held by a person other than affiliated persons or damages incurred by a person other than affiliated persons) exceeds 50 percent

(vi) Water transportation business or air transportation business: Where, out of the total revenue from the operation or rental of vessels or operation or rental of aircraft for the relevant business year, the ratio of the sum of the said revenue to be received from a person other than affiliated persons exceeds 50 percent.

(3) Where transactions prescribed in the preceding paragraph between a specified foreign subsidiary company, etc. and an affiliated person related to the said specified foreign subsidiary company, etc. are conducted indirectly via a person other than an affiliated person related to the said specified foreign subsidiary company, etc. (hereinafter referred to as a "non-affiliated person" in this paragraph), transactions between the said specified foreign subsidiary company, etc. and the said non-affiliated person shall be deemed to have been conducted directly between the said specified foreign subsidiary company, etc. and the said affiliated person and the provisions of the items of the preceding paragraph shall be applied, except in the case where there are justifiable grounds for having the said non-affiliated person intervene in such transactions.

(4) The water areas specified by Cabinet Order prescribed in Article 66-6, paragraph (4), item (ii) of the Act shall be inland water and territorial sea and exclusive economic zones or water areas equivalent to continental shelves related to a state or territory prescribed in the said item.

(5) The case specified by Cabinet Order prescribed in Article 66-6, paragraph (4), item (ii) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Real estate business: Where conducting a buying and selling or rental business of real estate (including acts to let others use the said real estate) (real estate shall include the rights thereon; hereinafter the same shall apply in this item) mainly located in the state of the head office, providing agent or intermediary services for the buying and selling or rental business of the said real estate, and managing the said real estate

(ii) Rental and leasing business: Where conducting a rental business for goods to be provided for use mainly in the state of the head office

(iii) Business other than those listed in paragraph (2) and the preceding two items: Where conducting a business mainly in the state of the head office.

(Calculation, etc. of Foreign Corporation Tax on Taxable Income of Specified Foreign Subsidiary Companies, etc.)

Article 39-18 (1) The amount calculated as specified by Cabinet Order prescribed in Article 66-7, paragraph (1) of the Act shall be the amount obtained by multiplying the amount of foreign corporation tax to be imposed on a specified foreign subsidiary company, etc. prescribed in the said paragraph (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article) on its income for a business year containing eligible income (meaning eligible income prescribed in Article 66-6, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this paragraph and paragraph (1) and paragraph (2) of the following Article) (hereinafter such business year shall be referred to as a "taxable business year" through to paragraph (4)) by the ratio of the taxable income pertaining to a domestic corporation prescribed in Article 66-7, paragraph (1) of the Act out of the sum of the eligible income for the relevant taxable business year (where there is any amount to be deducted as prescribed in Article 39-15, paragraph (1), item (iv) pursuant to the provisions of paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii) of the said Article, or any amount of a deductible dividend, etc. prescribed in paragraph (3) of the said Article to be deducted pursuant to the provisions of the said paragraph, the amount obtained by adding the said amounts) and the amount of a dividend of surplus, etc. to be deducted for calculating the amount of the said eligible income (where the said amount exceeds the said taxable income, the amount equivalent to the said taxable income).

(2) In the case where a specified foreign subsidiary company, etc. has been subject to two or more foreign corporation taxes or to a foreign corporation tax twice or more on its income for a taxable business year, when a domestic corporation related to the said specified foreign subsidiary company, etc. seeks the application of the provisions of Article 66-7, paragraph (1) (including the cases where it is applied pursuant to the provisions of paragraph (2) of the said Article by deeming the amount to be as specified therein; hereinafter the same shall apply in this Article) or Article 68-91, paragraph (1) (including the cases where it is applied pursuant to the provisions of paragraph (2) of the said Article by deeming the amount to be as specified therein; hereinafter the same shall apply in this Article) of the Act, regarding the amount of the said foreign corporation taxes in two or more business years or consolidated business years; with respect to the application of the provisions of Article 66-7, paragraph (1) of the Act for a business year following the first one of the said two or more business years or consolidated business years, the amount obtained by deducting the amount listed in item (ii) (the amount listed in item (iii), when seeking the application of the provisions of Article 66-7, paragraph (1) of the Act for the first time after receiving the application of the provisions of Article 68-91, paragraph (1) of the Act) from the amount listed in item (i) shall be deemed to be the calculated amount prescribed in the preceding paragraph:

(i) The amount calculated pursuant to the provisions of the preceding paragraph regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the final day of a business year subject to the provisions of Article 66-7, paragraph (1) of the Act (hereinafter referred to as the "applicable business year" in this paragraph) (such amount of foreign corporation taxes shall be limited to those to which the provisions of Article 66-7, paragraph (1) or Article 68-91, paragraph (1) of the Act, pursuant to the provisions of paragraph (4) or Article 39-118, paragraph (4); hereinafter the same shall apply in this paragraph)

(ii) The amount calculated pursuant to the provisions of the preceding paragraph regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the day preceding the first day of the applicable business year

(iii) The amount calculated pursuant to the provisions of Article 39-118, paragraph (1) regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the day preceding the first day of the applicable business year.

(3) Out of the amount of foreign corporation taxes that were imposed on a specified foreign subsidiary company, etc. on its income for a taxable business year, the amount deemed to be the amount of creditable foreign corporation taxes prescribed in Article 66-7, paragraph (1) of the Act that shall be paid by a domestic corporation related to the said specified foreign subsidiary company, etc., pursuant to the provisions of the said paragraph, (hereinafter referred to as the "amount of creditable foreign corporation taxes" in this Article) shall be deemed to be payable by the domestic corporation in a business year specified respectively in the following items for the category of foreign corporation taxes listed in the relevant items:

(i) The foreign corporation tax that was imposed on the domestic corporation on its income for the relevant taxable business year of the said specified foreign subsidiary company, etc. on or prior to the final day of the business year for which the provisions of Article 66-6, paragraph (1) of the Act are applied regarding the amount equivalent to the taxable income for the relevant taxable business year: The business year subject to the provisions of Article 66-6, paragraph (1) of the Act

(ii) The foreign corporation tax that was imposed on the domestic corporation on its income for the relevant taxable business year of the said specified foreign subsidiary company, etc. after the final day of the business year for which the provisions of Article 66-6, paragraph (1) of the Act are applied regarding the amount equivalent to the taxable income for the relevant taxable business year (where the provisions of Article 66-7, paragraph (2) of the Act are applied, after the final day of the consolidated business year for which the provisions of Article 68-90, paragraph (1) of the Act were applied regarding the amount equivalent to the individually taxable income prescribed in the said paragraph for the relevant taxable business year): The said business year involving the day on which the tax was imposed.

(4) Where a specified foreign subsidiary company, etc. has been subject to two or more foreign corporation taxes or to a foreign corporation tax twice or more on its income for a taxable business year, a domestic corporation to which the provisions of Article 66-6, paragraph (1) of the Act are applied, regarding the amount equivalent to the taxable income for the relevant taxable business year of the said specified foreign subsidiary company, etc., shall choose whether or not it will seek the application of the provisions of Article 66-7, paragraph (1) of the Act regarding the amount of respective foreign corporation taxes on the taxable income subject to the provisions of Article 66-6, paragraph (1) of the Act.

(5) In the case where a domestic corporation was subject to the provisions of Article 66-7, paragraph (1) of the Act, regarding the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc. related to the domestic corporation, when the said amount of foreign corporation tax was reduced in the relevant business year of the domestic corporation that starts within seven years following the first day of the business year subject to the provisions of the said paragraph (hereinafter referred to as the "applicable business year" in this paragraph), it shall be deemed that the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) has been reduced from the part of the said amount of foreign corporation tax that was deemed to be the amount of creditable foreign corporation tax payable by the domestic corporation, pursuant to the provisions of paragraph (1) of the said Article, as on the day of the reduction of the said foreign corporation tax:

(i) The part of the said amount of foreign corporation tax that was deemed to be the amount of creditable foreign corporation tax payable by the domestic corporation in the applicable business year

(ii) The part that shall be deemed to be the amount of creditable foreign corporation tax payable by the domestic corporation when the provisions of Article 66-7, paragraph (1) of the Act are applied in the applicable business year to the said amount of foreign corporation tax after the reduction.

(6) In the case where a domestic corporation was subject to the provisions of Article 68-91, paragraph (1) of the Act, regarding the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc. related to the domestic corporation, when the said amount of foreign corporation tax was reduced in the relevant business year that starts within seven years following the first day of the consolidated business year subject to the provisions of the said paragraph (hereinafter referred to as the "applicable consolidated business year" in this paragraph), it shall be deemed that the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) has been reduced from the part of the said amount of foreign corporation tax that was deemed to be the amount of individually creditable foreign corporation tax payable by the domestic corporation, pursuant to the provisions of paragraph (1) of the said Article (hereinafter referred to as the "amount of individually creditable foreign corporation tax" in this Article), as on the day of the reduction of the said foreign corporation tax:

(i) The part of the said amount of foreign corporation tax that was deemed to be the amount of individually creditable foreign corporation tax payable by the domestic corporation in the applicable consolidated business year

(ii) The part that shall be deemed to be the amount of individually creditable foreign corporation tax payable by the domestic corporation when the provisions of Article 68-91, paragraph (1) of the Act are applied in the applicable consolidated business year to the said amount of foreign corporation tax after the reduction.

(7) Where the amount of creditable foreign corporation tax or individually creditable foreign corporation tax has been deemed to have been reduced, pursuant to the provisions of paragraph (5) or the preceding paragraph, the provisions of Article 69, paragraph (8) of the Corporation Tax Act shall be applied as specified in Article 150 (excluding paragraph (2)) of the Order for Enforcement of the Corporation Tax Act. In this case, in paragraph (1) of the said Article, the phrase "the said domestic corporation pertaining to the said amount of foreign corporation tax " shall be deemed to be replaced with "the said domestic corporation pertaining to the said amount of foreign corporation tax (including any part of the amount of foreign corporation tax to be imposed on the income of a specified foreign subsidiary company, etc. prescribed in Article 66-7, paragraph (1) (Credit for Foreign Tax on Taxable Income of Specified Foreign Subsidiary Companies, etc. for Domestic Corporations) or Article 68-91, paragraph (1) (Credit for Foreign Tax on Individually Taxable Income of Specified Foreign Subsidiary Companies, etc. for Consolidated Corporations) of the Act on Special Measures Concerning Taxation, which shall be deemed to be payable by the said domestic corporation pursuant to these provisions; hereinafter the same shall apply in this paragraph);" and the phrase "amount of creditable foreign corporation tax that" shall be deemed to be replaced with "amount of creditable foreign corporation tax (including the amount which shall be deemed to be payable by the said domestic corporation pursuant to the provisions of Article 66-7, paragraph (1) of the Act on Special Measures Concerning Taxation (including the case where it is applied by deeming the amount as prescribed in paragraph (2) of the said Article to be the amount specified therein)) that;" and the term "the amount of reduced creditable foreign corporation tax" shall be deemed to be replaced with "the amount of reduced creditable foreign corporation tax (including the amount of creditable foreign corporation tax or the amount of individually creditable foreign corporation tax that is deemed to have been reduced pursuant to the provisions of Article 39-18, paragraph (5) or paragraph (6) (Reduction of Foreign Corporation Tax on Taxable Income of Specified Foreign Subsidiary Companies, etc.) of the Order for Enforcement of the Act on Special Measures Concerning Taxation)."

(8) Where there is any amount included in the gross profits pursuant to the provisions of Article 66-6, paragraph (1) of the Act for calculating the amount of income for the relevant business year of a domestic corporation listed in the items of the said paragraph, the said amount included in gross profits shall be included in the foreign income prescribed in the main clause of Article 142, paragraph (3) of the Order for Enforcement of the Corporation Tax Act for calculating the limitation on a creditable amount prescribed in Article 69, paragraph (1) of the Corporation Tax Act for the relevant business year of the said domestic corporation; provided, however, that in the case where the state of the head office of a specified foreign subsidiary company, etc. related to the domestic corporation is a state or territory that does not impose any foreign corporation taxes prescribed in Article 141, paragraph (1) of the said Order on income of the said specified foreign subsidiary company, etc., the amount to be included in the said foreign income shall be the amount equivalent to one-third of the said amount included in the gross profits.

(9) The part of the amount of foreign corporation taxes listed in the items of paragraph (3) that are deemed to be the amount of creditable foreign corporation tax payable by a domestic corporation related to a specified foreign subsidiary company, etc., pursuant to the provisions of Article 66-7, paragraph (1) of the Act, shall be included in foreign income prescribed in the main clause of Article 142, paragraph (3) of the Order for Enforcement of the Corporation Tax Act for calculating the limitation on a creditable amount prescribed in Article 69, paragraph (1) of the Corporation Tax Act for a business year specified respectively in the relevant items of the domestic corporation.

(10) Out of the amount deemed to have been reduced from the amount of creditable foreign corporation tax or individually creditable foreign corporation tax, pursuant to the provisions of paragraph (5) or paragraph (6), the amount equivalent to the amount to be appropriated, pursuant to the provisions of paragraph (7), for deduction from the amount of creditable foreign corporation tax to be paid prescribed in Article 150, paragraph (1) of the Order for Enforcement of the Corporation Tax Act under the provisions of the said paragraph or for deduction from the amount exceeding the limitation on a creditable amount prescribed in paragraph (3) of the said Article under the provisions of the said paragraph shall be included in deductible expenses for calculating the amount of income for a business year of a domestic corporation prescribed in paragraph (5) or paragraph (6) for making such deduction. In this case, the said amount to be included in deductible expenses shall be allocated as the amount of deductible expenses for calculating the amount of foreign income prescribed in the main clause of Article 142, paragraph (3) of the said Order.

(11) The business year specified by Cabinet Order prescribed in Article 66-7, paragraph (3) of the Act shall be the business year specified respectively in the items of paragraph (3), in accordance with the category of the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc.

(Calculation of the Specified Taxable Income of Specified Foreign Subsidiary Companies, etc.)

Article 39-19 (1) The amount specified by Cabinet Order prescribed in Article 66-8, paragraph (3), item (iii) of the Act shall be the amount obtained by multiplying the eligible income pertaining to a specified foreign subsidiary company, etc. prescribed in the said item (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article) (such eligible income shall be limited to that which pertains to taxable income to be included in gross profits in the calculation of the amount of income for a business year, prescribed in the said item, of a domestic corporation; hereinafter the same shall apply in this paragraph) by the ratio of the shares, etc. for considering the claims held directly by the said domestic corporation (meaning the number or the amount of shares, etc. of a foreign corporation held by a domestic corporation (where the said foreign corporation has issued the shares, etc. in which different claims are vested, the number or the amount obtained by multiplying the issued shares, etc. of the said foreign corporation by the ratio of the amount of a dividend of surplus, etc. that the said domestic corporation can receive based on the said claims out of the total amount); hereinafter the same shall apply in this Article) out of the total issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc. that pertains to the said eligible income.

(2) The amount specified by Cabinet Order prescribed in Article 66-8, paragraph (3), item (ii) of the Act shall be the sum of the amounts obtained by multiplying the eligible income of a specified subsidiary company, etc. for the relevant business years (such eligible income shall be limited to that which pertains to taxable income that was included in gross profits in the calculation of the amount of income for the business years within the preceding ten years prescribed in the said item; hereinafter the same shall apply in this paragraph) by the ratio of the shares, etc. for considering the claims held directly by the said domestic corporation out of the total issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business years of the specified foreign subsidiary company, etc. that pertains to the said eligible income.

(3) With respect to the application of the provisions of Article 66-8, paragraph (3) of the Act in or after the business year containing the day of a qualified merger prescribed in paragraph (3) of the said Article (referred to as a "qualified merger, etc." in the following paragraph) of a domestic corporation set forth in the said paragraph, in the case where the provisions of the said paragraph apply, the taxed amount of income specified in the items of paragraph (5) of the said Article (meaning the amount listed in paragraph (3), item (ii) of the said Article; hereinafter the same shall apply in this Article) or the individually taxed amount of income (meaning the amount listed in Article 68-92, paragraph (3), item (ii) of the Act; hereinafter the same shall apply in this Article) shall be deemed to be the taxed amount of income for a business year of the said domestic corporation specified respectively in the following items for the category of business years or consolidated business years listed in the relevant items of a merged corporation, split corporation, corporation making a capital contribution in kind, or corporation effecting post-formation acquisition of assets and/or liabilities (referred to as a "merged corporation, etc." in the following paragraph):

(i) A business year within ten years prior to the merger prescribed in Article 66-8, paragraph (5), item (i) of the Act (hereinafter referred to as a "business year within ten years prior to the merger" in this paragraph and the following paragraph) of a merged corporation pertaining to a qualified merger or a business year within ten years prior to the company split prescribed in paragraph (5), item (ii) of the said Article (hereinafter referred to as a "business year within ten years prior to the company split" through to paragraph (5)) of a split corporation pertaining to a qualified split-off-type company split (excluding a business year within ten years prior to the merger or business year within ten years prior to the company split listed in the following item): The relevant business year of the said domestic corporation including the first day of a business year within ten years prior to the merger of the said merged corporation or the relevant business year of the said domestic corporation including the first day of a business year within ten years prior to the company split of the said split corporation

(ii) A business year within ten years prior to the merger of a merged corporation pertaining to a qualified merger that started on or after the first day of the business year containing the day of the said qualified merger of the domestic corporation (hereinafter referred to as the "business year of the merger" in this item) or a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split that started on or after the first day of the business year containing the day of the said qualified split-off-type company split of the domestic corporation (hereinafter referred to as the "business year of the split succession" in this item): The business year containing the day preceding the first day of the business year of the merger or business year of the split succession of the said domestic corporation

(iii) A business year within ten years prior to the company split, etc. prescribed in Article 66-8, paragraph (5), item (iii) of the Act (hereinafter referred to as a "business year within ten years prior to the company split, etc." in this Article) of a split corporation, etc. (meaning a split corporation, corporation making a capital contribution in kind , or corporation effecting post-formation acquisition of assets and/or liabilities ; hereinafter the same shall apply in this paragraph and paragraph (6)) pertaining to a qualified spin-off-type company split, etc. (meaning a qualified spin-off-type company split, etc. prescribed in Article 66-8, paragraph (5), item (iii) of the Act; hereinafter the same shall apply in this paragraph and paragraph (6)) (excluding a business year within ten years prior to the company split when falling under the case listed in the following item and a business year within ten years prior to the company split, etc. listed in item (v)): The relevant business year of the said domestic corporation including the first day of a business year within ten years prior to the company split, etc. of the said split corporation, etc.

(iv) A business year of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. that includes the day of the said qualified spin-off-type company split, etc. or a business year within ten years prior to the company split, etc. of the split corporation, etc. where the first day of the consolidated business year is before the first day of the business year of the said domestic corporation that includes the day of the said qualified spin-off-type company split, etc.: The relevant business year of the said domestic corporation including the final day of a business year within ten years prior to the company split, etc. of the said split corporation, etc.

(v) A business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. that started on or after the first day of a business year of the said domestic corporation including the day of the said qualified spin-off-type company split, etc. (hereinafter referred to as the "business year of the split succession, etc." in this item): The relevant business year of the said domestic corporation including the day preceding the first day of the business year of the split succession, etc.

(4) In the case where the first day of the oldest business year or consolidated business year out of the relevant business years or consolidated business years that started within ten years prior to the first day of the business year containing the day of a qualified merger, etc. of a domestic corporation set forth in Article 66-8, paragraph (5) of the Act (hereinafter referred to as the "first day of the business year of the domestic corporation ten years before" in this paragraph) falls after the first day of the oldest business year or consolidated business year out of a business year within ten years prior to the merger, business year within ten years prior to the company split or business year within ten years prior to the company split, etc. of a merged corporation(s), etc. pertaining to the said qualified merger, etc. (hereinafter referred to as a "business year of the merged corporation(s), etc. within the preceding ten years" in this paragraph) (in the case of a qualified merger, etc. made among two or more merged corporations, etc., after the first day of the relevant business year or consolidated business year of the merged corporations, etc. whichever started the earliest; hereinafter referred to as the "first day of the business year of the merged corporations, etc. ten years before" in this paragraph), the provisions of the preceding paragraph shall apply by deeming the respective periods classifying the period between the said first day of the business year of the merged corporations, etc. ten years before and the day preceding the said first day of the business year of the domestic corporation ten years before (in the case where the said domestic corporation is to be established through the said qualified merger, etc., the day preceding the first day of the business year of the domestic corporation including the day of the qualified merger, etc.; hereinafter the same shall apply in this paragraph) by the corresponding business year of the merged corporation(s), etc. within the preceding ten years pertaining to the said first day of the business year of the merged corporations, etc. ten years before (for the period including the said preceding day, the period between the first day of the business year or consolidated business year of the said merged corporation, etc. including the said preceding day and the day preceding the said first day of the business year of the domestic corporation ten years before) to be the relevant business year of the said domestic corporation.

(5) The amount calculated as specified by Cabinet Order prescribed in Article 66-8, paragraph (5), item (ii) of the Act shall be the amount specified respectively in the following items for the category of the taxed amount of income or individually taxed amount of income listed in the relevant items:

(i) The taxed amount of income: The amount obtained by multiplying respectively the taxed amount of income for a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held which the split corporation held directly immediately prior to the said qualified split-off-type company split

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation to a domestic corporation as set forth in Article 66-8, paragraph (5) of the Act through the said qualified split-off-type company split

(ii) The individually taxed amount of income: The amount obtained by multiplying respectively the individually taxed amount of income for a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held which the split corporation held directly immediately prior to the said qualified split-off-type company split

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation to a domestic corporation set forth in Article 66-8, paragraph (5) of the Act through the said qualified split-off-type company split.

(6) The amount calculated as specified by Cabinet Order prescribed in Article 66-8, paragraph (5), item (iii) of the Act shall be the amount specified respectively in the following items for the category of the taxed amount of income or individually taxed amount of income listed in the relevant items:

(i) The taxed amount of income: The amount obtained by multiplying respectively the taxed amount of income for a business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which the split corporation, etc. held immediately prior to the said qualified spin-off-type company split, etc.

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation, etc. to a domestic corporation set forth in Article 66-8, paragraph (5) of the Act through the said qualified spin-off-type company split

(ii) The individually taxed amount of income: The amount obtained by multiplying respectively the individually taxed amount of income for a business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held which the split corporation, etc. held directly immediately prior to the said qualified spin-off-type company split, etc.

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation, etc. to a domestic corporation set forth in Article 66-8, paragraph (5) of the Act through the said qualified spin-off-type company split.

(7) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 66-8, paragraph (1) of the Act apply, the phrase "of the Act" in Article 9, paragraph (1), item (i), (c) of the said Order shall be deemed to be replaced with "of the Act and Article 66-8 (Exclusion from Gross Profits of Dividend of Surplus, etc. to be Received from Specified Foreign Subsidiary Company, etc.) of the Act on Special Measures Concerning Taxation)."

(8) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 66-8, paragraph (2) of the Act apply, the phrase "of the Act" in Article 9, paragraph (1), item (i), (c) of the said Order shall be deemed to be replaced with "of the Act (including cases where applied by replacing the relevant terms and phrases pursuant to the provisions of the first sentence of Article 66-8, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. to be Received from Specified Foreign Subsidiary Company, etc.) of the Act on Special Measures Concerning Taxation)."

(Determination, etc. of Affiliated Foreign Companies)

Article 39-20 (1) In the case referred to in Article 66-6, paragraph (1) of the Act, whether or not a foreign corporation falls under the category of an affiliated foreign company prescribed in paragraph (2), item (i) of the said Article (hereinafter referred to as an "affiliated foreign company" in this paragraph and the following paragraph) shall be determined according to its status at the end of the relevant business year of the said foreign corporation and whether or not a domestic corporation falls under the category of a corporation listed in the items of paragraph (1) of the said Article shall be determined according to its status at the end of the relevant business year of an affiliated foreign company related to such corporation.

(2) Where a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act has been dissolved through a merger by the day on which two months have elapsed after the final day of the relevant business year of an affiliated foreign company related to the said domestic corporation, the number of the shares, etc. of the said affiliated foreign company prescribed in paragraph (2), item (iii) of the said Article which were directly and indirectly held by the domestic corporation (hereinafter referred to as the "number of the shares, etc. directly and indirectly held" in this paragraph) and which have been succeeded to by the merging corporation pertaining to the merger shall be deemed to be the number of the shares, etc. directly and indirectly held by the merging corporation on the final day of the relevant business year of the said affiliated foreign company.

(3) The amount included in the gross profits of a domestic corporation subject to the provisions of Article 66-6, paragraph (1) of the Act, pursuant to the provisions of the said paragraph, shall not be included in the amount of income, etc. prescribed in the provisions of Article 67, paragraph (3) and paragraph (5) of the Corporation Tax Act for applying these provisions.

(4) The amount included in the gross profits pursuant to the provisions of Article 66-6, paragraph (1) of the Act shall not be included in the amount of income prescribed in Article 9, paragraph (1), item (i), (a) of the Order for Enforcement of the Corporation Tax Act for calculating the amount of profit reserve of a domestic corporation subject to the provisions of Article 66-6, paragraph (1) of the Act.

(5) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 66-6, paragraph (7) of the Act shall apply under the provisions of the said Article (excluding paragraph (3), paragraph (4), and paragraph (6)) to Article 66-9 of the Act, Articles 39-14 to 39-16 (excluding paragraph (8)), and Article 39-18 to this Article.

(6) With regard to a trust corporation or a beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 66-6 (excluding paragraph (3), paragraph (4), and paragraph (6)) to Article 66-9 of the Act, Articles 39-14 to 39-16 (excluding paragraph (8)), or Article 39-18 to this Article shall be specified by Ordinance of the Ministry of Finance.

Section 8-5 Special Provisions for Taxation on Income of Specified Foreign Corporations Related to Domestic Corporations who are Specially-related Shareholders, etc.

(Scope, etc. of Specially-related Shareholders, etc.)

Article 39-20-2 (1) An individual who has a special relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be any of the following:

(i) An individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with an individual falling under the category of a specified shareholder, etc. (meaning a specified shareholder, etc. prescribed in Article 66-9-2, paragraph (2), item (i) of the Act; hereinafter the same shall apply in the following item and item (i) of the following paragraph)

(ii) An officer (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this paragraph and Article 39-20-4, paragraph (3)) of a corporation falling under the category of a specified shareholder, etc. and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer (referred to as a "specially-related person" in the following item)

(iii) An officer of a specially-related domestic corporation (meaning a specially-related domestic corporation prescribed in Article 66-9-2, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this Section) and a specially-related person who is related to the said officer.

(2) A corporation which has a special relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be any of the following:

(i) Where a specified shareholder, etc. (including an individual who has a special relationship with the said specified shareholder, etc. as prescribed in item (i) or item (ii) of the preceding paragraph) or an individual who has a special relationship with a specially-related domestic corporation as prescribed in item (iii) of the said paragraph (hereinafter referred to as a "determined shareholder, etc." in this paragraph) controls any other corporation, the said other corporation

(ii) Where a determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding item control any other corporation, the said other corporation

(iii) Where a determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding two items control any other corporation, the said other corporation.

(3) The provisions of Article 4, paragraph (3) and paragraph (4) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply.

(4) The relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be the relevant relationship in the case where a specially-related shareholder, etc. prescribed in the said paragraph (hereinafter referred to as a "specially-related shareholder, etc." in this Section) and a specially-related domestic corporation have a relationship where the ratio of the shares, etc. indirectly held by the specially-related shareholder, etc. pertaining to the specially-related domestic corporation (meaning the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)) is 80 percent or more:

(i) Where out of the total number or total amount of shares or capital contributions issued by a foreign corporation (excluding that falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this item) which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this Article) of a specially-related domestic corporation (such issued shares or capital contributions shall exclude those held on their own by the said foreign corporation and the total number or total amount of such issued shares or capital contributions shall be referred to as the "issued shares, etc." in this Section), a specially-related shareholder, etc. holds 80 percent or more of the number or the amount of such shares, etc. (meaning shares or capital contributions; hereinafter the same shall apply in this Section): The ratio of the number or the amount of the shares, etc. of the specially-related domestic corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of a specially-related domestic corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item and a corporation falling under the category of a specially-related shareholder, etc.) and a specially-related shareholder, etc. and has(have) a linkage with them through holding the shares, etc. (where the said corporation which is a shareholder, etc. is a domestic corporation and the said intervening corporation(s) is a (are all) domestic corporation(s), excluding the said domestic corporation(s) and a corporation falling under the category of a specially-related shareholder, etc.; hereinafter referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where 80 percent or more of the number or the amount of the issued shares, etc. of each of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held by a specially-related shareholder, etc. or a capital contribution-related corporation(s) (such specially-related shareholder, etc. or capital contribution-related foreign corporation(s) shall be limited to those 80 percent or more of the number or the amount of whose issued shares, etc. are held by a specially-related shareholder, etc. or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of a specially-related domestic corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(5) A foreign corporation specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be any of the following:

(i) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (i) of the preceding paragraph, where the ratio of the shares, etc. held indirectly as prescribed in the preceding paragraph is 80 percent or more

(ii) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (ii) of the preceding paragraph and a foreign corporation falling under the category of a capital contribution-related corporation prescribed in the said item, where the ratio of the shares, etc. held indirectly as prescribed in the preceding paragraph is 80 percent or more

(iii) A foreign corporation, over 50 percent of the number or the amount of whose issued shares, etc. are held directly or indirectly by a foreign corporation listed in the preceding two items (excluding a foreign corporation falling under the category of a foreign corporation listed in the preceding two items and a foreign corporation falling under the category of a specially-related shareholder, etc.).

(6) In item (iii) of the preceding paragraph, whether or not a foreign corporation directly or indirectly holds over 50 percent of the issued shares, etc. shall be determined based on the sum of the ratio of the shares, etc. held directly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to any other foreign corporation (excluding a foreign corporation falling under the category of a foreign corporation listed in item (i) or item (ii) of the said paragraph and a foreign corporation falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this paragraph) (such ratio of the shares, etc. held directly shall mean the ratio of the number or the amount of the shares, etc. of any other foreign corporation held by a foreign corporation listed in item (i) and item (ii) of the preceding paragraph out of the total issued shares, etc. of the said other foreign corporation) and the ratio of the shares, etc. held indirectly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to the said other foreign corporation (such ratio of the shares, etc. held indirectly shall mean the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)):

(i) Where a foreign corporation listed in item (i) and item (ii) of the preceding paragraph holds over 50 percent of the number or the amount of the issued shares, etc. of a foreign corporation which is a shareholder, etc. of the said other foreign corporation: The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between a foreign corporation which is a shareholder, etc. of the said other foreign corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item) and a foreign corporation listed in item (i) and item (ii) of the preceding paragraph and has(have) a linkage with them through holding the shares, etc. (hereinafter referred to as a "capital contribution-related foreign corporation(s)" in this item) (limited to the case where over 50 percent of the number or the amount of the issued shares, etc. of each of a capital contribution-related foreign corporation(s) and the said foreign corporation which is a shareholder, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or a capital contribution-related foreign corporation(s) (such foreign corporation or capital contribution-related foreign corporation(s) shall be limited to those over 50 percent of the number or the amount of whose issued shares, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(7) An affiliated foreign corporation specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign corporation (meaning an affiliated foreign corporation prescribed in Article 66-9-2, paragraph (1) of the Act; hereinafter the same shall apply in this Section) which has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) An affiliated foreign corporation whose tax imposed on its income for the relevant business year is 25 percent or less of the said income.

(8) The provisions of Article 39-14, paragraph (2) shall apply mutatis mutandis to the determination as to whether or not an affiliated foreign corporation falls under the category of an affiliated foreign corporation set forth in item (ii) of the preceding paragraph.

(9) An individual who has a special relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (2), item (i) of the Act shall be an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with a shareholder, etc. of a domestic corporation.

(10) A corporation which has a special relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (2), item (i) of the Act shall be any of the following:

(i) Where one of the shareholders, etc. of a domestic corporation (where the said domestic corporation holds its own shares, etc., excluding the said domestic corporation; hereinafter referred to as a "determined shareholder, etc." in this paragraph) (regarding a determined shareholder, etc. who is an individual, the said determined shareholder, etc. and an individual who has a special relationship with him/her as prescribed in the preceding paragraph; hereinafter the same shall apply in this paragraph) controls any other corporation, the said other corporation

(ii) Where one of the determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding item govern any other corporation, the said other corporation

(iii) Where one of the determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding two items control any other corporation, the said other corporation.

(11) The provisions of Article 4, paragraph (3) and paragraph (4) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply.

(12) A domestic corporation specified by Cabinet Order prescribed in Article 66-9-2, paragraph (2), item (ii) of the Act shall be a domestic corporation which has received the transfer of almost all the assets and liabilities of a specified domestic corporation prescribed in the said item immediately prior to a merger, split, transfer of business or for other reasons (hereinafter referred to as "specified reasons" in this paragraph) due to the said specified reasons.

(Calculation of Amount of Eligible Income of Specified Foreign Corporations)

Article 39-20-3 (1) The amount of undistributed income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 66-9-2, paragraph (2), item (iii) of the Act shall be the amount calculated, pursuant to the provisions of Article 39-15, paragraph (1) or paragraph (2), or paragraph (3) of the said Article, with regard to the income of a specified foreign corporation prescribed in Article 66-9-6, paragraph (1) of the Act (hereinafter referred to as a "specified foreign corporation" in this Article and paragraph (1) of the following Article) in its settlement of accounts for the relevant business year.

(2) The amount obtained as a result of an adjustment for the amount of loss and base income prescribed in Article 66-9-2, paragraph (2), item (iii) of the Act shall be the amount that remains after deducting, from the base income amount, prescribed in the said item, of a specified foreign subsidiary company, etc. for the relevant business year, the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount that accounts for ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 66-9-2, paragraph (2), item (iii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in the business years that started within seven years prior to the first day of the relevant business year of the specified foreign subsidiary company, etc. (excluding the business years that started before October 1, 2007 and the business years during which the company did not fall under the category of specified foreign subsidiary companies, etc. (including specified foreign subsidiary companies, etc. prescribed in Article 40-7, paragraph (1) or Article 68-93-2, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph or Article 39-120-3, paragraph (2))

(ii) The amount of corporate income tax prescribed in Article 39-15, paragraph (1), item (ii) (hereinafter referred to as "corporate income tax" in this item) that the specified foreign subsidiary company, etc. is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(3) A loss prescribed in item (i) of the preceding paragraph shall be a loss calculated with regard to the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year, where the calculation has been made pursuant to the provisions of paragraph (1).

(4) The provisions of Article 39-15, paragraphs (7) to (9) shall apply mutatis mutandis where the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year is calculated pursuant to the provisions of paragraph (1) or paragraph (2) of the said Article.

(Calculation, etc. of the Amount of Taxable Income of Specified Foreign Corporations)

Article 39-20-4 (1) The amount calculated as specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act shall be the amount calculated with regard to the eligible income (meaning the eligible income prescribed in the said paragraph; hereinafter the same shall apply in this Section) for the relevant business year of a specified foreign corporation related to a domestic corporation which is a specially-related shareholder, etc., pursuant to the provisions of Article 39-16, paragraph (1) and paragraph (2).

(2) The provisions of Article 39-16, paragraph (3) shall apply mutatis mutandis to the number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as being held indirectly as prescribed in Article 66-9-2, paragraph (2), item (iv) of the Act. In this case, in Article 39-16, paragraph (3), item (i), the term "an individual" shall be deemed to be replaced with "a resident (meaning a resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act; hereinafter the same shall apply in this paragraph);" the term "the said individual" shall be deemed to be replaced with "the said resident;" and in item (ii) of the said paragraph, the term "an individual" shall be deemed to be replaced with "a resident;" and the term "the said individual" shall be deemed to be replaced with "the said resident."

(3) The amount of expenses specified by Cabinet Order set forth in Article 66-9-2, paragraph (2), item (iii) of the Act in which the terms and phrases are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the amount calculated with regard to the sum of personnel expenses for officers and employees of a specified foreign corporation engaged in the business of the said specified foreign corporation prescribed in paragraph (3) of the said Article, pursuant to the provisions of Article 39-16, paragraph (8).

(Determination, etc. of Business of Specified Foreign Corporations)

Article 39-20-5 (1) The person specified by Cabinet Order prescribed in Article 66-9-2, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations which have the consolidated full controlling interest with a consolidated corporation falling under the category of a specially-related shareholder, etc. which pertains to a specified foreign corporation prescribed in Article 66-9-2, paragraph (4), item (i) of the Act (hereinafter referred to as a "specified foreign corporation" in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph (such other consolidated corporations shall exclude those falling under the category of specially-related shareholders, etc. pertaining to the said specified foreign corporation)

(ii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding item)

(iii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a consolidated corporation falling under the category of a specially-related shareholder, etc. (where the said consolidated corporation is a consolidated subsidiary corporation, a consolidated parent corporation related to the said consolidated corporation) which pertains to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding two items)

(iv) An affiliated foreign corporation related to a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act

(v) A corporation which is a shareholder, etc. prescribed in Article 39-20-2, paragraph (4), item (ii) or capital contribution-related corporation(s) which intervene(s) between a specially-related domestic corporation and a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of persons listed in item (i) or the preceding item)

(vi) A person who has a special relationship specified by Cabinet Order prescribed in Article 66-9-2, paragraph (1) of the Act with those listed as follows (excluding a person falling under the category of a specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act, a person falling under the category of a specially-related shareholder, etc. and a person falling under the category of persons listed in the preceding items):

(a) A specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act

(b) A specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act

(c) An individual or corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 66-9-2, paragraph (4), item (i) of the Act

(d) Those listed in the preceding items

(2) The provisions of Article 39-17, paragraph (2) and paragraph (3) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 66-9-2, paragraph (4), item (i) of the Act. In this case, the term "those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items" in Article 39-17, paragraph (2), item (i) shall be deemed to be replaced with "a specially-related domestic corporation prescribed in Article 66-9-2, paragraph (2), item (ii) of the Act, specially-related shareholder, etc. prescribed in paragraph (1) of the said Article and those listed in the items of Article 39-20-5, paragraph (1)."

(3) The provisions of Article 39-17, paragraph (5) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 66-9-2, paragraph (4), item (ii) of the Act.

(Calculation, etc. of Foreign Corporation Tax on Taxable Income of Specified Foreign Corporations)

Article 39-20-6 (1) The amount calculated as specified by Cabinet Order prescribed in Article 66-9-3, paragraph (1) of the Act shall be the amount calculated, pursuant to the provisions of Article 39-18, paragraph (1), with regard to the amount of foreign corporation tax (meaning foreign corporation tax prescribed in Article 69, paragraph (1) of the Corporation Tax Act; the same shall apply in paragraph (3)) to be imposed on a specified foreign corporation prescribed in Article 66-9-7, paragraph (1) of the Act (referred to as a "specified foreign corporation" in paragraph (3)) on its income for a business year containing eligible income.

(2) In the case where the provisions of Article 69, paragraphs (1) to (12) of the Corporation Tax Act are applied by deeming the calculated amount to be the amount of creditable foreign corporation tax prescribed in paragraph (1) of the said Article payable by a domestic corporation that is a specially-related shareholder, etc. pursuant to the provisions of Article 66-9-3, paragraph (1) of the Act, the matters concerning the application of these provisions shall be as prescribed in the provisions of Article 39-18, paragraphs (2) to (10).

(3) The business year specified by Cabinet Order prescribed in Article 66-9-3, paragraph (3) of the Act shall be the business year specified respectively in the items of Article 39-18, paragraph (3), in accordance with the category of the amount of foreign corporation tax imposed on the income of a specified foreign corporation.

(Calculation, etc. of Specified Taxable Income of Specified Foreign Corporation)

Article 39-20-7 (1) The amount specified by Cabinet Order as prescribed in Article 66-9-4, paragraph (3), item (i) of the Act shall be the amount calculated in accordance with the provisions of Article 39-19, paragraph (1) with regard to the eligible income (limited to that which pertains to the taxable income prescribed in the said item that is included in gross profits in the calculation of the amount of income for the business year, prescribed in the said item, of a domestic corporation that is a specially-related shareholder, etc.) pertaining to a specified foreign corporation prescribed in the said item (referred to as a "specified foreign corporation" in the following paragraph).

(2) The amount specified by Cabinet Order as prescribed in Article 66-9-4, paragraph (3), item (ii) of the Act shall be the amount calculated in accordance with the provisions of Article 39-19, paragraph (2) with regard to the eligible income (limited to that which pertains to the taxable income prescribed in the said item that is included in gross profits in the calculation of the amount of income for each business year within the ten preceding years, prescribed in the said item, of a domestic corporation that is a specially-related shareholder, etc.) for each business year of a specified foreign corporation.

(3) The matters concerning the application of the provisions of Article 66-8, paragraphs (5) through (8) of the Act as applied mutatis mutandis pursuant to Article 66-9-4, paragraph (5) of the Act shall be as prescribed in the provisions of Article 39-19, paragraphs (3) through (6).

(4) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 66-9-4, paragraph (1) of the Act apply, the phrase "(Exclusion from Gross Profits...) of the Act" in Article 9, paragraph (1), item (i), (c) of the said Order shall be deemed to be replaced with "(Exclusion from Gross Profits ...) of the Act or Article 66-9-4 (Exclusion from Gross Profits of Dividend of Surplus, etc. Received from Specified Foreign Corporation) of the Act on Special Measures Concerning Taxation)"

(5) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of the first sentence of Article 66-9-4, paragraph (2) apply, the phrase "(Exclusion of Gross Profit...) of the Act" in Article 9, paragraph (1), item (i), (c) of the said Order shall be deemed to be replaced with "(Exclusion of Gross Profit ...) of the Act (including the case where it is applied by replacing the term and phrase pursuant to the provisions of the first sentence of Article 66-9-4, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. Received from Specified Foreign Corporation) of the Act on Special Measures Concerning Taxation)."

(Determination, etc. of Specified Relationship)

Article 39-20-8 (1) Where the provisions of Article 66-9-2, paragraph (1) of the Act shall apply, whether or not a domestic corporation falls under the category of a specified domestic corporation prescribed in Article 66-9-2, paragraph (2), item (i) of the Act shall be determined according to its status immediately before an event causing a specified relationship prescribed in paragraph (1) of the said Article occurred, and whether or not the said specified relationship actually exists afterwards between a specially-related shareholder, etc. and a specially-related domestic corporation and whether or not a foreign corporation falls under the category of an affiliated foreign corporation shall be determined according to its status at the end of the relevant business year of the said specially-related domestic corporation.

(2) Where a foreign corporation has been determined as falling under the category of an affiliated foreign corporation at the end of the relevant business year of a specially-related domestic corporation, pursuant to the provisions of the preceding paragraph, the provisions of Article 66-9-2 of the Act shall apply to the eligible income for the relevant business year containing the day on which the said affiliated foreign corporation (limited to that falling under the category of a specified foreign corporation prescribed in Article 66-9-6, paragraph (1) of the Act) was determined as falling under such category.

(3) Where a domestic corporation which is a specially-related shareholder, etc. pertaining to a specially-related domestic corporation has been dissolved through a merger by the day on which two months have elapsed after the final day of the relevant business year of an affiliated foreign corporation related to the said domestic corporation, the number of the shares, etc. of the said affiliated foreign corporation prescribed in Article 66-9-2, paragraph (2), item (iv) of the Act which were directly and indirectly held by the domestic corporation (hereinafter referred to as the "number of the shares, etc. directly and indirectly held" in this paragraph) and which have been transferred to the merging corporation pertaining to the merger (such merging corporation shall be limited to one falling under the category of a specially-related shareholder, etc. related to the said specially-related domestic corporation and one that proves to fall under the category of a specially-related shareholder, etc. related to the said specially-related domestic corporation by receiving the transfer of the number of the shares, etc. of the said affiliated foreign corporation directly and indirectly held by the said domestic corporation through the merger; hereinafter the same shall apply in this paragraph) shall be deemed to be the number of the shares, etc. directly and indirectly held by the merging corporation on the final day of the relevant business year of the said affiliated foreign corporation.

(4) The provisions of Article 39-20, paragraph (3) and paragraph (4) shall apply mutatis mutandis to the application of the provisions of Article 67, paragraph (3) and paragraph (5) of the Corporation Tax Act and the calculation of the amount of profit reserve of a domestic corporation which is a specially-related shareholder, etc., where there is any amount included in the gross profits of the said domestic corporation pursuant to the provisions of Article 66-9-2, paragraph (1) of the Act.

(5) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 66-9-2, paragraph (8) of the Act shall apply under the provisions of the said Article (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 66-9-5 of the Act, Articles 39-20-2 to 39-20-4 (excluding paragraph (3)), and Article 39-20-6 to this Article.

(6) With regard to a trust corporation or a beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 66-9-2 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 66-9-5 of the Act, Articles 39-20-2 to 39-20-4 (excluding paragraph (3)), or Article 39-20-6 to this Article shall be specified by Ordinance of the Ministry of Finance.

Section 9 Other Special Provisions

(Exclusion from Taxation of Interest on Deposits, etc. Settled in the Special International Financial Transactions Account)

Article 39-30 (1) The transaction specified by Cabinet Order as a bond transaction with a repurchase or resale agreement prescribed in Article 67-11, paragraph (1) of the Act shall be a bond transaction with a repurchase/resale agreement prescribed in Article 180, paragraph (4) of the Order for Enforcement of the Corporation Tax Act (referred to as a "bond transaction with a repurchase/resale agreement" in the following paragraph).

(2) The margin specified by Cabinet Order as prescribed in Article 67-11, paragraph (1) of the Act shall be a margin equivalent to the amount calculated, in the case where in a bond transaction with a repurchase/resale agreement that a foreign corporation prescribed in the said paragraph conducts with a financial institution prescribed in the said paragraph and that has been settled in the special international financial transactions account, the value for purchasing bonds upon the purchase is less than the value for reselling bonds of the same type and the same quantity upon resale, by deducting the value for the said purchase from the value for the said resale.

(3) The interest specified by Cabinet Order prescribed in Article 67-11, paragraph (1) of the Act shall be the interest to be received by a foreign corporation prescribed in the said paragraph which is attributed to a business that is conducted by the said person in Japan at any fixed place prescribed in Article 141, item (i) of the Corporation Tax Act.

(Special Provisions for Taxation on Special Purpose Companies)

Article 39-32-2 (1) Article 39-32-2

(10) With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act to special purpose companies, the term "without applying the following provisions" in these provisions shall be deemed to be replaced with "without applying the following provisions and the provisions of Article 67-14, paragraph (1) (Special Provisions for Taxation on Special Purpose Companies) of the Act on Special Measures Concerning Taxation."

(11) The amount of foreign corporation tax prescribed in Article 67-14, paragraph (4) of the Act that is to be credited under the said paragraph (hereinafter referred to as the "amount of creditable foreign corporation tax" in this Article) shall be the sum of the amounts that remain after deducting, from the amounts specified in the following items for persons listed in the respective items, the amount of a dividend of profit (meaning the amount of a dividend of profit prescribed in Article 67-14, paragraph (1) of the Act; hereinafter the same shall apply in this Article) of a special purpose company pertaining to the amount of creditable foreign corporation tax that these persons are to receive (where the said sum of the amounts exceeds the amount of foreign corporation tax prescribed in Article 67-14, paragraph (4) of the Act that the special purpose company has paid, the amount of the said paid foreign corporation tax):

(i) A resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act: The amount obtained by dividing the amount of the dividend of profit that the resident is to receive by the rate that remains after deducting the tax rate prescribed in Article 182, item (ii) of the Income Tax Act from one

(ii) A domestic corporation: The amount obtained by dividing the amount of the dividend of profit that the domestic corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (2), item (ii) of the Income Tax Act from one

(iii) A nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act or a foreign corporation: The amount obtained by dividing the amount of the dividend of profit that the nonresident or foreign corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (1), item (i) of the Income Tax Act from one.

(12) When a special purpose company collects income tax on the amount of a dividend of profit (limited to the amount pertaining to the business year for which it is to pay the amount of creditable foreign corporation tax) pursuant to the provisions of Article 181 or Article 212 of the Income Tax Act, the said amount of creditable foreign corporation tax shall be credited against the amount of income tax that it is to collect and pay.

(13) Where the provisions of Article 67-14, paragraph (4) of the Act has applied to the amount of a dividend of profit of a special purpose company that an individual or a corporation is to receive, the amount of creditable foreign corporation tax pertaining to the said amount of dividend of profit shall be added to the said amount of dividend of profit that these persons are to receive.

(14) A special purpose company, which was subject to the provisions of Article 67-14, paragraph (4) of the Act, shall preserve a document certifying that the amount of foreign corporation tax prescribed in the said paragraph has been imposed and other documents specified by Ordinance of the Ministry of Finance, as specified by Ordinance of the Ministry of Finance.

(Special Provisions for Taxation on Investment Corporations)

Article 39-32-3 (1) Article 39-32-3

(8) The requirements specified by Cabinet Order prescribed in Article 67-15, paragraph (1), item (ii), (e) of the Act shall be that an investment corporation has not borrowed funds from any person other than an institutional investor prescribed in item (i), (b), 2. of the said paragraph.

(9) With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act to investment corporations, the term "without applying the following provisions" in these provisions shall be deemed to be replaced with "without applying the following provisions and the provisions of Article 67-15, paragraph (1) (Special Provisions for Taxation on Investment Corporations) of the Act on Special Measures Concerning Taxation."

(10) The amount of foreign corporation tax prescribed in Article 67-15, paragraph (5) of the Act that is to be credited under the said paragraph (hereinafter referred to as the "amount of creditable foreign corporation tax" in this Article) shall be the sum of the amounts that remain after deducting, from the amount specified in the following items for persons listed in the respective items, the amount of a dividend, etc. (meaning the amount of a dividend, etc. prescribed in Article 67-15, paragraph (1) of the Act; hereinafter the same shall apply in this Article) of an investment corporation pertaining to the amount of creditable foreign corporation tax that these persons are to receive (where the said sum of the amounts exceeds the amount of foreign corporation tax prescribed in Article 67-15, paragraph (5) of the Act that the investment corporation has paid, the amount of the said paid foreign corporation tax):

(i) A resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act: The amount obtained by dividing the amount of the dividend, etc. that the resident is to receive by the rate that remains after deducting the tax rate prescribed in Article 182, item (ii) of the Income Tax Act from one

(ii) A domestic corporation: The amount obtained by dividing the amount of the dividend, etc. that the domestic corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (2), item (ii) of the Income Tax Act from one

(iii) A nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act or a foreign corporation: The amount obtained by dividing the amount of the dividend, etc. that the nonresident or foreign corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (1), item (i) of the Income Tax Act from one.

(11) When an investment corporation collects income tax on the amount of a dividend, etc. (limited to the amount pertaining to the business year for which it is to pay the amount of creditable foreign corporation tax) pursuant to the provisions of Article 181 or Article 212 of the Income Tax Act, the said amount of creditable foreign corporation tax shall be credited against the amount of income tax that it is to collect and pay.

(12) Where the provisions of Article 67-15, paragraph (5) of the Act have applied to the amount of a dividend, etc. of an investment corporation that an individual or a corporation is to receive, the amount of creditable foreign corporation tax pertaining to the said amount of a dividend, etc. shall be added to the said amount of a dividend, etc. that these persons are to receive.

(13) An investment corporation which was subject to the provisions of Article 67-15, paragraph (5) of the Act shall preserve a document certifying that the amount of foreign corporation tax prescribed in the said paragraph has been imposed and other documents specified by Ordinance of the Ministry of Finance, as specified by Ordinance of the Ministry of Finance.

(Special Provisions for Taxation on Foreign Partners)

Article 39-33 (1) The foreign corporation prescribed in Article 67-16, paragraph (3) of the Act shall submit the documents prescribed in the said paragraph to the competent district director of the a tax office having jurisdiction over the place for tax payment by the due date for filing a return form prescribed in the provisions of Article 74, paragraph (1) of the Corporation Tax Act as applied mutatis mutandis pursuant to Article 145, paragraph (1) of the said Act for the business year containing the day on which the said foreign corporation has obtained any amount of income categorized as domestic source income prescribed in Article 67-16, paragraph (3) of the Act.

(2) Where a foreign corporation which is a partner having concluded an investment partnership contract (meaning an investment partnership contract prescribed in Article 41-21, paragraph (2), item (i) of the Act; hereinafter the same shall apply in this Article and the following Article) and which has not satisfied the requirements listed in Article 41-21, paragraph (1), item (v) of the Act (hereinafter referred to as the "Item (v) requirement" in this paragraph and the following paragraph) by the time of the conclusion of the said investment partnership contract, comes to satisfy the Item (v) requirement in respect of the said investment partnership contract, with regard to the application of the provisions of Article 41-21, paragraph (3) of the Act as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act in respect of the said investment partnership contract in the case where the foreign corporation satisfies the requirements listed in Article 41-21, paragraph (1), items (i) through (iv) continuously during the period from the day of the conclusion until the day on which the foreign corporation comes to satisfy the Item (v) requirement, the phrase "the date of the conclusion of" in paragraph (3) of the said Article shall be deemed to be replaced with "the day on which the foreign corporation comes to satisfy the requirements listed in paragraph (1), item (v) in respect of"; and the phrase "items in paragraph (1)" in the said paragraph shall be deemed to be replaced with "items of the said paragraph."

(3) Where a foreign corporation which is a partner having concluded two or more investment partnership contracts and which has not satisfied the Item (v) requirement at the time of the conclusion of each investment partnership contract, would come to satisfy the Item (v) requirement in respect of one of the said two or more investment partnership contracts provided that the said foreign corporation does not conduct a business in Japan based on an investment partnership contract(s) other than the said one of the two or more investment partnership contracts (hereinafter referred to as the "other investment partnership contract(s)" in this paragraph), with regard to the application of the provisions of Article 41-21, paragraph (3) of the Act as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act to the said one investment partnership contract in the case where the foreign corporation satisfies the requirements listed in Article 41-21, paragraph (1), items (i) through (iv) of the Act in respect of each investment partnership contract continuously during the period from the date of conclusion until the day on which the foreign corporation comes to satisfy the Item (v) requirement, the phrase "the date of the conclusion of" in paragraph (3) of the said Article shall be deemed to be replaced with "the day on which the foreign corporation comes to satisfy the requirements listed in paragraph (1), item (v) in respect of"; the phrase "items in paragraph (1)" in the said paragraph shall be deemed to be replaced with "items of the said paragraph"; and the phrase "on the date of the submission and thereafter" in the said paragraph shall be deemed to be replaced with "on the day on which the said foreign corporation has submitted written applications for special provisions in respect of all of the investment partnership contracts concluded thereby, and thereafter."

(4) Where a foreign corporation which seeks the application of the provisions of Article 67-16, paragraph (1) of the Act has submitted a written application for special provisions prescribed in Article 41-21, paragraph (3) of the Act pursuant to the provisions of the said paragraph or where a foreign corporation has submitted a written statement of change prescribed in paragraph (7) of the said Article pursuant to the provisions of the said paragraph, it shall be deemed that the foreign corporation has submitted a written application for the special provisions prescribed in Article 41-21, paragraph (3) of the Act pursuant to the provisions of the said paragraph as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act or a written statement of change prescribed in Article 41-21, paragraph (7) of the Act pursuant to the provisions of the said paragraph as applied mutatis mutandis pursuant to Article 67-16, paragraph (2) of the Act, respectively.

(Special Provisions for Taxable Income of Foreign Partner Having No Permanent Establishments)

Article 39-33-2 (1) Where a foreign corporation listed in Article 141, item (iv) of the Corporation Tax Act (hereinafter referred to as a "foreign corporation having no permanent establishments in Japan" in this Article) has concluded an investment partnership contract subject to special provisions, etc. (meaning an investment partnership contract subject to special provisions (meaning an investment partnership contract subject to the provisions of Article 67-16, paragraph (1) of the Act, which is concluded by a foreign corporation which is subject to the provisions of the said paragraph; hereinafter the same shall apply in this paragraph) and an investment partnership contract (limited to the investment partnership contract in the case where the said foreign corporation having no permanent establishments in Japan satisfies the requirements listed in items (i) and (ii) in respect of an investment partnership contract other than an investment partnership contract subject to special provisions; hereinafter the same shall apply in this paragraph); hereinafter the same shall apply in this Article), when the said foreign corporation has transferred shares of or capital contributions to a domestic corporation that satisfies the requirements listed in the items of Article 187, paragraph (6) of the Order for Enforcement of the Corporation Tax Act (including the case where the domestic corporation is deemed, pursuant to the provisions of paragraph (7) of the said Article, to have transferred shares or capital contributions prescribed in paragraph (6), item (ii) of the said Article that satisfies the requirements listed in the said item, and limited to the case where the foreign corporation satisfies the requirements listed in item (iii) in respect of the said shares or capital contributions), with regard to the said transfer of shares of or capital contributions to the domestic corporation, the provisions of Article 187 of the said Order shall apply by deeming that the person listed in paragraph (4), item (iii) of the said Article pertaining to the said investment partnership contract subject to special provisions, etc. is not included in the scope of specially-related shareholders, etc. prescribed in paragraph (6) and paragraph (7) of the said Article:

(i) For the period within the three years preceding or including the last day of the business year containing the date of transfer (hereinafter referred to as the "business year containing the date of transfer" in this paragraph), during which the foreign corporation has been under an investment partnership contract, it has been a limited liability partner, prescribed in Article 41-21, paragraph (2), item (iii) of the Act, of an investment partnership, prescribed in item (ii) of the said paragraph, which is established by the said investment partnership contract.

(ii) For the period within the three years preceding or including the last day of the business year containing the date of transfer, during which the foreign corporation has been under an investment partnership contract, it has not performed any act listed in the items of Article 26-30, paragraph (1) (including any act that the foreign corporation is deemed to have performed pursuant to the provisions of Article 26-30, paragraph (2) as applied mutatis mutandis pursuant to Article 26-31, paragraph (2)) pertaining to the business conducted under the said investment partnership contract.

(iii) At any time within the three years preceding or including the last day of the business year containing the date of transfer, the specially-related shareholder, etc. (excluding the person listed in Article 187, paragraph (4), item (iii) of the Order for Enforcement of the Corporation Tax Act pertaining to an investment partnership contract subject to special provisions, etc.) of a domestic corporation set forth in paragraph (1), item (iii), (b) of the said Article which pertains to the said foreign corporation having no permanent establishments in Japan, has not held shares or capital contribution that account for 25 percent or more of the total number or total amount of issued shares of or capital contributions to the said domestic corporation (in the case where the said specially-related shareholder, etc. is a person listed in paragraph (4), item (iii) of the said Article pertaining to the partnership contract prescribed in the said item (excluding the said investment partnership contract subject to special provisions, etc.), limited to those that are partnership property set forth in the said item).

(2) Where a foreign corporation having no permanent establishments in Japan has transferred shares of or capital contributions to a domestic corporation which are partnership property prescribed in Article 41-21, paragraph (2), item (iv) of the Act (hereinafter referred to as "investment partnership property" in the following paragraph) pertaining to the investment partnership contract subject to special provisions, etc. concluded by the said foreign corporation and which fall under the items of Article 26-31, paragraph (3), the provisions of the preceding paragraph shall not apply.

(3) The provisions of Article 26-31, paragraph (4) shall apply mutatis mutandis to the determination as to whether shares of or capital contributions to a domestic corporation which are investment partnership property transferred by a foreign corporation having no permanent establishments in Japan fall under the category of shares or capital contributions listed in paragraph (3), item (i) of the said Article.

(4) The provisions of Article 26-31, paragraph (5) shall apply mutatis mutandis where a foreign corporation having no permanent establishments in Japan applies the provisions of paragraph (1). In this case, the phrase "his/her name and address (in the case of a nonresident having no permanent establishments in Japan who has a residence in Japan, his/her residence)" in paragraph (5) of the said Article shall be deemed to be replaced with "its name and the location of its head office or principal office"; and the phrase "March 15 of the year following the year containing the date of transfer" in the said paragraph shall be deemed to be replaced with "due date for filing a return form under the provisions of Article 74, paragraph (1) of the Corporation Tax Act as applied mutatis mutandis pursuant to Article 145, paragraph (1) of the said Act for the business year, prescribed in Article 2, paragraph (2), item (xix) of the Act, which contains the date of transfer."

(Interest on Foreign-issued Company Bonds and Discount on Bonds, etc. to Which Special Provisions for Tax Exemption are not Applied)

Article 39-33-3 (1) The interest or discount on bonds specified by Cabinet Order prescribed in Article 67-17, paragraph (2) of the Act shall be the interest or discount on bonds listed as follows:

(i) The interest or discount on bonds to be received by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act which is attributed to a business that is conducted by the said person in Japan at any fixed place prescribed in the said item

(ii) The interest or discount on bonds to be received by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act which is attributed to the person's business prescribed in these items.

(2) The profit from redemption specified by Cabinet Order as prescribed in Article 67-17, paragraph (3) of the Act shall be the profit from redemption listed as follows:

(i) Any profit from redemption as prescribed in Article 41-12, paragraph (7) of the Act (hereinafter referred to as "profit from redemption" in this paragraph) of discount bonds prescribed in paragraph (7) of the said Article (hereinafter referred to as "discount bonds" in this paragraph) issued by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act, which corresponds to the amount calculated by multiplying the amount of such profit from redemption by the rate prescribed in Article 26-9-2, paragraph (1), item (i) pertaining to the said discount bonds.

(ii) Any profit from redemption of discount bonds issued by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act, which corresponds to the amount calculated by multiplying the amount of such profit from redemption by the rate prescribed in Article 26-9-2, paragraph (1), item (ii) pertaining to the said discount bonds.

(3) The profit from redemption specified by Cabinet Order prescribed in Article 67-17, paragraph (5) of the Act shall be the profit from the redemption listed as follows:

(i) The profit from redemption prescribed in Article 41-12, paragraph (7) of the Act (referred to as "profit from redemption" in the following item) to be received by a foreign corporation listed in Article 141, item (i) of the Corporation Tax Act which is attributed to a business that is conducted by the said person in Japan at any fixed place prescribed in Article 141, item (i) of the Corporation Tax Act.

(ii) The profit from the redemption to be received by a foreign corporation listed in Article 141, item (ii) or item (iii) of the Corporation Tax Act which is attributed to the person's business prescribed in these items.

(Special Provisions for Taxation on Book-entry Transfer National Government Bonds in Separate Trading)

Article 39-33-4 The amount specified by Cabinet Order prescribed in Article 67-18, paragraph (2) of the Act shall be the amount specified respectively in the following items for the category of cases listed in the relevant items:

(i) Where a foreign corporation holds book-entry transfer national government bonds in separate trading (meaning book-entry transfer national government bonds in separate trading prescribed in Article 67-18, paragraph (1) of the Act; hereinafter the same shall apply in this Article) that falls under the category of securities for buying and selling prescribed in Article 61-3, paragraph (1), item (i) of the Corporation Tax Act at the end of a business year, and when any valuation loss prescribed in Article 61-3, paragraph (2) of the Corporation Tax Act has been incurred for the said book-entry transfer national government bonds in separate trading: The amount equivalent to the said valuation loss

(ii) Where a foreign corporation holds book-entry transfer national government bonds in separate trading that falls under the category of securities for redemption prescribed in Article 119-14 of the Order for Enforcement of the Corporation Tax Act at the end of a business year, and when any adjusted loss prescribed in Article 139-2, paragraph (2) of the said Order has been incurred for the said book-entry transfer national government bonds in separate trading: The amount equivalent to the said adjusted loss

(iii) Where an event listed in Article 68, paragraph (1), item (ii), (a) of the Order for Enforcement of the Corporation Tax Act has occurred with regard to book-entry transfer national government bonds in separate trading held by a foreign corporation, and when their book value has been reduced by reckoning the amount into expenses for accounting purposes through changes in the valuation pursuant to the provisions of Article 33, paragraph (2) of the Corporation Tax Act: The amount equivalent to the amount with the variance prescribed in the said paragraph as the upper limit

(iv) Where a foreign corporation has transferred book-entry transfer national government bonds in separate trading, and when any loss on the transfer prescribed in Article 61-2, paragraph (1) of the Corporation Tax Act has been incurred for the transfer of the said book-entry transfer national government bonds in separate trading: The amount equivalent to the said loss on the transfer

(v) Where, in a business year when a foreign corporation holds book-entry transfer national government bonds in separate trading, the amount to be included in deductible expenses for calculating the amount of income for the relevant business year contains the amount of selling expenses, general administrative expenses and any other expenses prescribed in Article 22, paragraph (3), item (ii) of the Corporation Tax Act that arose in connection with both a business that creates income for the holding or transfer of book-entry transfer national government bonds in separate trading and a business that creates income other than the said income (hereinafter referred to as the "amount of common expenses" in this item): The amount equivalent to the part of the said amount of common expenses that is to be appropriated as deductible expenses for calculating the amount of income for the holding or transfer of the said book-entry transfer national government bonds in separate trading, based on the amount of revenue, asset value, the number of employees, and any other standards that are deemed to be rational in light of the details of the business conducted by the said foreign corporation and the nature of the expenses.

(Special Provisions Concerning the Scope of Qualified Merger, etc.)

Article 39-34-3 (1) The merger satisfying the requirements specified by Cabinet Order prescribed in Article 68-2-3, paragraph (1) of the Act shall be the merger that satisfies all of the following requirements:

(i) Any of the principal businesses conducted by a merged corporation before the merger and any of the businesses conducted by a merging corporation before the merger are interrelated

(ii) The sum of the amounts of sales, revenue and any other profits from the businesses conducted without interruption by a merging corporation before the merger does not fall below approximately half of the sum of such amounts from the businesses conducted without interruption by a merged corporation before the merger

(iii) The principal businesses conducted by a merging corporation before the merger do not fall under any of the following:

(a) The holding of shares (including capital contributions; hereinafter the same shall apply in this Article) or bonds

(b) The provision of industrial property rights or any other rights concerning technology, production methods involving special technology or any other equivalent rights or methods (including the right to use such rights) or copyrights (including publication rights, neighboring rights and any other equivalent rights)

(iv) Before the merger, a merging corporation has an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in Japan, and takes charge of managing, controlling and operating the business on its own account

(v) The majority of specified officers (meaning specified officers prescribed in Article 4-2, paragraph (4), item (ii) of the Order for Enforcement of the Corporation Tax Act; hereinafter the same shall apply in this Article) of a merging corporation before the merger are not those listed as follows:

(a) Persons who concurrently serve as officers (meaning officers as prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this Article) or employees of a merged corporation or who used to serve as officers or employees of the said merged corporation

(b) Persons who concurrently serve as officers or employees of a foreign parent corporation related to a merging corporation (meaning a corporation (limited to a foreign corporation) that has a relationship specified by Cabinet Order prescribed in Article 2, item (xii)-8 of the Corporation Tax Act; hereinafter the same shall apply in this item) or who used to serve as officers or employees of the said foreign parent corporation

(c) Persons who have a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with a person listed in (a) or (b).

(2) The company split satisfying the requirements specified by Cabinet Order prescribed in Article 68-2-3, paragraph (2) of the Act shall be the company split that satisfies all of the following requirements:

(i) Any of the businesses conducted by a split corporation before the company split, which is to be conducted by a succeeding corporation in the company split as a result of the said company split, and any of the businesses conducted by the succeeding corporation in the company split before the said company split are interrelated

(ii) The sum of the amounts of sales, revenue and any other profits from the businesses conducted without interruption by a succeeding corporation in the company split before the company split does not fall below approximately half of the sum of such amounts from the businesses conducted without interruption by a split corporation before the company split

(iii) The principal businesses conducted by a succeeding corporation in the company split before the company split do not fall under any of the following:

(a) The holding of shares or bonds

(b) The provision of industrial property rights or any other rights concerning technology, production methods involving special technology or any other equivalent rights or methods (including the right to use such rights) or copyrights (including publication rights, neighboring rights and any other equivalent rights)

(iv) Before the company split, a succeeding corporation in the company split has an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in Japan, and takes charge of managing, controlling and operating the business on its own account

(v) The majority of specified officers of a succeeding corporation in the company split before the company split are not those listed as follows:

(a) Persons who concurrently serve as officers or employees of a split corporation or who used to serve as officers or employees of the said split corporation

(b) Persons who concurrently serve as officers or employees of a foreign parent corporation related to a succeeding corporation in the company split (meaning a corporation (limited to a foreign corporation) that has a relationship specified by Cabinet Order prescribed in Article 2, item (xii)-11 of the Corporation Tax Act; hereinafter the same shall apply in this item) or who used to serve as officers or employees of the said foreign parent corporation

(c) Persons who have a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with a person listed in (a) or (b).

(3) The company split specified by Cabinet Order prescribed in Article 68-2-3, paragraph (2), item (i) of the Act shall be the company split in which almost all of the assets and liabilities pertaining to a split corporation immediately prior to the said company split are to be transferred to a succeeding corporation in the company split.

(4) The share exchange satisfying the requirements specified by Cabinet Order prescribed in Article 68-2-3, paragraph (3) of the Act shall be the share exchange that satisfies all of the following requirements:

(i) Any of the principal businesses conducted by a wholly owned subsidiary corporation in a share exchange before the share exchange and any of the businesses conducted by a fully controlling parent corporation in a share exchange before the share exchange are interrelated

(ii) The sum of the amounts of sales, revenue and any other profits from the businesses conducted without interruption by a fully controlling parent corporation in a share exchange before the share exchange does not fall below approximately half of the sum of such amounts from the businesses conducted without interruption by a wholly owned subsidiary corporation in a share exchange before the share exchange

(iii) The principal businesses conducted by a fully controlling parent corporation in a share exchange before the share exchange do not fall under any of the following:

(a) The holding of shares or bonds

(b) The provision of industrial property rights or any other rights concerning technology, production methods involving special technology or any other equivalent rights or methods (including the right to use such rights) or copyrights (including publication rights, neighboring rights and any other equivalent rights)

(iv) Before the share exchange, a fully controlling parent corporation in a share exchange has an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in Japan, and takes charge of managing, controlling and operating the business on its own account

(v) The majority of specified officers of a fully controlling parent corporation in a share exchange before the share exchange are not those listed as follows:

(a) Persons who concurrently serve as officers or employees of a wholly owned subsidiary corporation in a share exchange or who used to serve as officers or employees of the said wholly owned subsidiary corporation in a share exchange

(b) Persons who concurrently serve as officers or employees of a foreign parent corporation related to a fully controlling parent corporation in a share exchange (meaning a corporation (limited to a foreign corporation) that has a relationship specified by Cabinet Order prescribed in Article 2, item (xii)-16 of the Corporation Tax Act; hereinafter the same shall apply in this item) or who used to serve as officers or employees of the said foreign parent corporation

(c) Persons who have a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with a person listed in (a) or (b).

(5) The foreign corporation specified by Cabinet Order prescribed in Article 68-2-3, paragraph (5), item (i) of the Act shall be that listed as follows:

(i) A foreign corporation that has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) A foreign corporation, in any of the business years that started within two years prior to the first day of the business year of the foreign corporation including the date of a merger, company split, share exchange, or capital contribution in kind set forth in Article 68-2-3, paragraphs (1) to (4) of the Act, whose tax imposed on its income for the relevant business year was 25 percent or less of the said income.

(6) The provisions of Article 39-14, paragraph (2) shall apply mutatis mutandis to the determination as to whether or not a foreign corporation falls under the category of a foreign corporation set forth in item (ii) of the preceding paragraph.

(7) A foreign corporation that satisfies all of the following requirements shall not be included in the category of foreign corporations listed in the items of paragraph (5):

(i) A corporation's principal businesses do not fall under any of the categories of the holding of shares or bonds, the provision of industrial property rights or any other rights concerning technology, production methods involving special technology or any other equivalent rights or methods (including the right to use such rights) or copyrights (including publication rights, neighboring rights and any other equivalent rights), or the lending of vessels or aircraft

(ii) A corporation has an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in the state or territory where its head office or principal office is located, and takes charge of managing, controlling and operating the business on its own account

(iii) In any of the business years that started within two years prior to the first day of the business year of the foreign corporation including the date of a merger, company split, share exchange, or capital contribution in kind set forth in Article 68-2-3, paragraphs (1) to (4) of the Act (hereinafter such business year shall be referred to as a "business year(s) within the preceding two years" in this item), the foreign corporation falls under any of the cases specified respectively as follows for the category of its principal businesses listed as follows:

(a) Wholesale business, banking business, trust business, financial instruments business, insurance business, water transportation business or air transportation business: The cases specified respectively as follows for the category of its principal businesses listed as follows:

1. Wholesale business: Where, out of the total revenue from selling inventory assets for any of the business years within the preceding two years (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets, such revenues shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of sales transactions" in this item), the ratio of the sum of the amount of sales transactions with a person other than affiliated persons exceeds 50 percent, or out of the sum of the acquisition costs for acquiring inventory assets for any of the business years within the preceding two years (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets, such acquisition costs shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of purchase transactions" in this item), the ratio of the sum of the amount of purchase transactions with a person other than affiliated persons exceeds 50 percent

2. Banking business: Where, out of the sum of the total interest received for any of the business years within the preceding two years, the ratio of the sum of the said interest to be received from a person other than affiliated persons exceeds 50 percent, or out of the sum of the total interest paid for any of the business years within the preceding two years, the ratio of the sum of the said interest to be paid to a person other than affiliated persons exceeds 50 percent

3. Trust business: Where, out of the sum of the total trust charge for any of the business years within the preceding two years, the ratio of the sum of the said trust charge to be received from a person other than affiliated persons exceeds 50 percent

4. Financial instruments business: Where, out of the sum of the total commissions received (including profits from the buying and selling of securities) for any of the business years within the preceding two years, the ratio of the sum of the said commissions to be received from a person other than affiliated persons exceeds 50 percent

5. Insurance business: Where, out of the sum of the total premium income for any of the business years within the preceding two years, the ratio of the sum of the said premium income to be received from a person other than affiliated persons (where the said premium income pertains to reinsurance, limited to premium income from insurance for assets held by a person other than affiliated persons or damages incurred by a person other than affiliated persons) exceeds 50 percent

6. Water transportation business or air transportation business: Where, out of the total revenue from the operation or rental of vessels or operation or rental of aircrafts for any of the business years within the preceding two years, the ratio of the sum of the said revenue to be received from a person other than affiliated persons exceeds 50 percent.

(b) Business other than those listed in (a): The cases specified respectively as follows for the category of its principal businesses listed as follows:

1. Real estate business: Where conducting a buying and selling or rental business of real estate (including acts to let others use the said real estate) (real estate shall include the rights thereon; hereinafter the same shall apply in this item) mainly located in the state of the head office (meaning a state or territory where the head office or principal office is located; hereinafter the same shall apply in this item), providing agent or intermediary services for the buying and selling or rental business of the said real estate, and managing the said real estate

2. Rental and leasing business: Where conducting a rental business for goods to be provided for use mainly in the state of the head office

3. Business other than those listed in (a) and in 1. and 2.: Where conducting a business mainly in the state of the head office.

(8) Where transactions between a foreign corporation and an affiliated person related to the said foreign corporation are conducted indirectly via a person other than an affiliated person related to the said foreign corporation (hereinafter referred to as a "non-affiliated person" in this paragraph), transactions between the said foreign corporation and the said non-affiliated person shall be deemed to have been conducted directly between the said foreign corporation and the said affiliated person and the provisions of item(iii), item (a) of the preceding paragraph shall be applied, except in the case where there are justifiable grounds for having the said non-affiliated person intervene in such transactions.

(9) The affiliated person prescribed in paragraph (7), item (iii), (a) and the preceding paragraph shall be that listed as follows:

(i) When there is a relationship between a foreign corporation and any other corporation whereby either of them directly or indirectly holds over 50 percent of the total number or total amount of the other corporation's issued shares or capital contributions (excluding the own shares held by either of the said corporations; hereinafter referred to as the "issued shares, etc." in this Article), the said other corporation (excluding a corporation falling under the category of persons listed in the following item)

(ii) When there is a relationship whereby over 50 percent of the total number or total amount of the issued shares, etc. of a foreign corporation and any other corporation are respectively held directly or indirectly by the same person (where the said person is an individual, the said individual and an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the said other corporation.

(10) The relationship specified by Cabinet Order prescribed in Article 68-2-3, paragraph (5), item (ii) of the Act shall be the relationship listed as follows:

(i) When there is a relationship whereby either of two domestic corporations directly or indirectly holds over 50 percent of the total number or total amount of the other domestic corporation's issued shares, etc., the said relationship (excluding relationships falling under the category of relationships listed in the following item)

(ii) When there is a relationship whereby over 50 percent of the total number or total amount of the issued shares, etc. of two domestic corporations are respectively held directly or indirectly by the same person (where the said person is an individual, the said individual and an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the relationship between the said two domestic corporations.

(11) Whether or not there is any relationship listed in the items of the preceding paragraph shall be determined according to its status immediately prior to a merger, company split or share exchange set forth in Article 68-2-3, paragraphs (1) to (3) of the Act.

(12) The provisions of Article 39-12, paragraph (2) and paragraph (3) shall apply mutatis mutandis where the provisions of paragraph (9) or paragraph (10) shall apply. In this case the term "50 percent or more" in paragraph (2) and paragraph (3) of the said Article shall be deemed to be replaced with "over 50 percent."

(13) A nonresident who has a special relationship specified by Cabinet Order prescribed in Article 68-2-3, paragraph (5), item (iii) of the Act shall be a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act who has a special relationship prescribed in Article 39-14, paragraph (3) with a resident or domestic corporation prescribed in the said item.

(14) The relationship specified by Cabinet Order prescribed in Article 68-2-3, paragraph (5), item (iv) of the Act shall be the relationship listed as follows:

(i) When there is a relationship between a foreign corporation and a domestic corporation whereby the said foreign corporation directly or indirectly holds 80 percent or more of the total number or total amount of the said domestic corporation's issued shares, etc., the said relationship (excluding relationships falling under the category of relationships listed in the following item)

(ii) When there is a relationship whereby 80 percent or more of the total number or total amount of the issued shares, etc. of a foreign corporation and a domestic corporation are respectively held directly or indirectly by the same person (where the said person is an individual, the said individual and an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the relationship between the said foreign corporation and domestic corporation.

(15) The provisions of Article 39-12, paragraph (2) and paragraph (3) shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply. In this case the term "50 percent or more" in paragraph (2) and paragraph (3) of the said Article shall be replaced with "80 percent or more."

(16) Matters concerning the determination as to whether or not the merger, company split or share exchange satisfies the requirements listed in the items of paragraph (1), the items of paragraph (2) or the items of paragraph (3) and any other matters necessary for the application of the provisions of the preceding items shall be specified by Ordinance of the Ministry of Finance.

(Special Provisions for Taxation on Shareholders, etc. in the Event of Specified Merger, etc.)

Article 39-35 (1) The provisions of Article 119-7-2, paragraph (1) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis to the relationship specified by Cabinet Order prescribed in Article 68-3, paragraph (1) of the Act; and the provisions of Article 119-7-2, paragraph (3) of the said Order shall apply mutatis mutandis to the relationship specified by Cabinet Order prescribed in Article 68-3, paragraph (3) of the Act, respectively.

(2) Where a corporation has, as a result of a merger (limited to a merger that does not fall under the category of a qualified merger) of a domestic corporation to which the said corporation issued old shares (meaning shares (including capital contributions; hereinafter the same shall apply in this Article) that were held by the said corporation), been provided with shares of a foreign corporation which has a relationship specified by Cabinet Order prescribed in Article 68-3, paragraph (1) of the Act, when the shares of the said foreign corporation are shares of a specified foreign corporation with less tax burden (meaning a specified foreign corporation with less tax burden prescribed in Article 68-2-3, paragraph (5), item (i) of the Act; hereinafter the same shall apply in paragraph (4)), the provisions of Article 119, paragraph (1), item (v) of the Order for Enforcement of the Corporation Tax Act (including the cases where it is applicable to the calculation made pursuant to the provisions of Article 142 of the Corporation Tax Act) shall not apply to the acquisition costs of the provided shares.

(3) Where a corporation has, as a result of a specified split-off-type company split prescribed in Article 68-3, paragraph (2) of the Act which was implemented by a domestic corporation to which the said corporation issued old shares (meaning shares that were held by the said corporation), been provided with shares of a specified foreign parent corporation prescribed in the said paragraph, the provisions of Article 119, paragraph (1), item (vi) of the Order for Enforcement of the Corporation Tax Act (including the cases where it is applicable to the calculation made pursuant to the provisions of Article 142 of the Corporation Tax Act) shall not apply to the acquisition costs of the provided shares.

(4) Where a corporation has, as a result of a share exchange (limited to a share exchange that does not fall under the category of a qualified share exchange) implemented by a domestic corporation to which the said corporation issued old shares (meaning shares that were held by the said corporation), been provided with shares of a foreign corporation which has a relationship specified by Cabinet Order prescribed in Article 68-3, paragraph (3) of the Act, when the shares of the said foreign corporation are shares of a specified foreign corporation with less tax burden, the provisions of Article 119, paragraph (1), item (viii) of the Order for Enforcement of the Corporation Tax Act (including the cases where it is applicable to the calculation made pursuant to the provisions of Article 142 of the Corporation Tax Act) shall not apply to the acquisition costs of the provided shares.

(5) Where a foreign corporation has, as a result of a specified split-off-type company split prescribed in Article 68-3, paragraph (2) of the Act which was implemented by a domestic corporation to which the said corporation issued old shares (meaning shares that were held by the said corporation), been provided with shares of a specified foreign parent corporation prescribed in the said paragraph, the provisions of Article 188, paragraph (1), item (xvii) of the Order for Enforcement of the Corporation Tax Act shall not apply to the calculation made, with regard to the amount of the said foreign corporation's income categorized as domestic source income prescribed in Article 142 of the Corporation Tax Act, in accordance with the provisions of Article 61-2, paragraph (4) of the said Act in which the terms and phrases are replaced pursuant to the provisions of the said paragraph.

(Special Provisions for Taxation on Trust Corporations for Special Purpose Trusts)

Article 39-35-2 (1) Article 39-35-2

(8) With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-3-2, paragraph (1) of the Act apply, the term "without applying the following provisions" in these provisions shall be deemed to be replaced with "without applying the following provisions and the provisions of Article 68-3-2, paragraph (1) (Special Provisions for Taxation on Trust Corporations for Special Purpose Trusts) of the Act on Special Measures Concerning Taxation."

(9) The provisions of paragraph (1) to the preceding paragraph shall apply mutatis mutandis when applying the provisions of Article 68-3-2, paragraphs (1) to (3), paragraph (7) and paragraph (8) of the Act which shall apply mutatis mutandis pursuant to paragraph (9) of the said Article. In this case, the terms listed in the middle column of the following table which are used in the provisions listed in the left-hand column of the said table shall be deemed to be replaced with the terms listed in the right-hand column of the said table.

|Paragraph (2)|calculated without applying the provisions of the said paragraph and Article 57, paragraph (1), Article 58, paragraph (1) and Article 59, paragraph (2) of the Corporation Tax Act|calculated without applying the provisions of Article 57, paragraph (1), Article 58, paragraph (1) and Article 59, paragraph (2) of the Corporation Tax Act in the case where the calculation is made, with regard to the income categorized as domestic source income prescribed in Article 141 of the said Act, in accordance with these provisions, pursuant to the provisions of Article 68-3-2, paragraph (1) of the Act and Article 142 of the Corporation Tax Act|

||income for the relevant business year|income categorized as domestic source income|

|Paragraph (4)|the said paragraph|Article 68-3-2, paragraph (9) of the Act|

|The preceding paragraph|With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-3-2, paragraph (1) applies|In the case where the provisions of Article 68-3-2, paragraph (1) applies and where calculation is to be made, in accordance with the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Ac, with regard to income categorized as domestic source income prescribed in Article 141 of the Corporation Tax Act under Article 142 of the said Act, with regard to the application of these provisions|

||Article 68-3-2, paragraph (1) (Special Provisions for Taxation on Trust Corporations for Special Purpose Trusts)|paragraph (1) of the said Article which is applied mutatis mutandis pursuant to Article 68-3-2, paragraph (9) (Special Provisions for Taxation on Trust Corporations for Special Purpose Trusts)|

(10) The amount of foreign corporation tax prescribed in Article 68-3-2, paragraph (4) of the Act that is to be credited under the said paragraph (hereinafter referred to as the "amount of creditable foreign corporation tax" in this Article) shall be the sum of the amounts that remain after deducting, from the amounts specified in the following items for the persons listed in the respective items, the amount of a distribution of profit (meaning the amount of a distribution of profit prescribed in Article 68-3-2, paragraph (1) of the Act; hereinafter the same shall apply in this Article) of special purpose trusts pertaining to the amount of creditable foreign corporation tax that these persons are to receive (where the said sum of the amounts exceeds the amount of foreign corporation tax prescribed in Article 68-3-2, paragraph (4) of the Act that a trust corporation for special purpose trusts has paid, the amount of the said paid foreign corporation tax):

(i) A resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act: The amount obtained by dividing the amount of the distribution of profit that the resident is to receive by the rate that remains after deducting the tax rate prescribed in Article 182, item (ii) of the Income Tax Act from one

(ii) A domestic corporation: The amount obtained by dividing the amount of the distribution of profit that the domestic corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (2), item (ii) of the Income Tax Act from one

(iii) A nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act or a foreign corporation: The amount obtained by dividing the amount of the distribution of profit that the nonresident or foreign corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (1), item (i) of the Income Tax Act from one.

(11) When a trust corporation for special purpose trusts collects income tax on the amount of a distribution of profit (limited to the amount pertaining to the business year for which it is to pay the amount of creditable foreign corporation tax) pursuant to the provisions of Article 181 or Article 212 of the Income Tax Act, the said amount of creditable foreign corporation tax shall be credited against the amount of income tax that it is to collect and pay.

(12) Where the provisions of Article 68-3-2, paragraph (4) of the Act have applied to the amount of a distribution of profit of special purpose trusts that an individual or a corporation is to receive, the amount of creditable foreign corporation tax pertaining to the said amount of distribution of profit shall be added to the said amount of distribution of profit that these persons are to receive.

(13) A trust corporation for special purpose trusts, which was subject to the provisions of Article 68-3-2, paragraph (4) of the Act, shall preserve a document certifying that the amount of foreign corporation tax prescribed in the said paragraph has been imposed and other documents specified by Ordinance of the Ministry of Finance, as specified by Ordinance of the Ministry of Finance.

(14) With regard to the application of the provisions of Article 68-3-2, paragraph (10) of the Act in the case where the amount of the distribution of profit from a foreign special purpose trust prescribed in Article 68-3-2, paragraph (10) of the Act is received from a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (1) of the Act (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 66-9-2, paragraph (1) of the Act (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act), in Article 68-3-2, paragraph (10) of the Act, the phrase "referred to in the following paragraph" shall be deemed to be replaced with "hereinafter referred to in this paragraph and the following paragraph," and the phrase "as "amount of the distribution of profit from a foreign special purpose trust") shall be deemed to be excluded .... prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act" shall be deemed to be replaced with "as "amount of the distribution of profit from a foreign special purpose trust") (excluding the amount of the distribution of profit from a foreign special purpose trust to be received from a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (1) (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 66-9-2, paragraph (1) (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the said Act) (limited to the amount up to the specified taxable income prescribed in Article 66-8, paragraph (3) or the amount up to the specified taxable income prescribed in Article 66-9-4, paragraph (3))) shall be deemed to be excluded .... prescribed in Article 23-2, paragraph (1) of the said Act."

(Special Provisions for Taxation on Trust Corporations for Special Investment Trusts)

Article 39-35-3 (1) Article 39-35-3

(7) With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-3-3, paragraph (1) of the Act apply, the term "without applying the following provisions" in these provisions shall be deemed to be replaced with "without applying the following provisions and the provisions of Article 68-3-3, paragraph (1) (Special Provisions for Taxation on Trust Corporations of Special Investment Trusts) of the Act on Special Measures Concerning Taxation."

(8) The provisions of paragraph (1) to the preceding paragraph shall apply mutatis mutandis when applying the provisions of Article 68-3-3, paragraphs (1) to (3), paragraph (7) and paragraph (8) of the Act which shall apply mutatis mutandis pursuant to paragraph (9) of the said Article. In this case, the terms listed in the middle column of the following table which are used in the provisions listed in the left-hand column of the said table shall be deemed to be replaced with the terms listed in the right-hand column of the said table.

|Paragraph (1)|trust corporation prescribed in Article 68-3-3, paragraph (1) of the Act|trust corporation prescribed in Article 68-3-3, paragraph (9) of the Act|

|Paragraph (2)|calculated without applying the provisions of the said paragraph and Article 57, paragraph (1), Article 58, paragraph (1) and Article 59, paragraph (2) of the Corporation Tax Act|calculated without applying the provisions of Article 57, paragraph (1), Article 58, paragraph (1) and Article 59, paragraph (2) of the Corporation Tax Act in the case where the calculation is made, with regard to the income categorized as domestic source income prescribed in Article 141 of the said Act, in accordance with these provisions, pursuant to the provisions of Article 68-3-2, paragraph (1) of the Act and Article 142 of the Corporation Tax Act|

||income for the relevant business year|income categorized as domestic source income|

|The preceding paragraph|With regard to the application of the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-3-2, paragraph (1) applies|In the case where the provisions of Article 68-3-2, paragraph (1) applies and where calculation is to be made, in accordance with the provisions of Article 73, paragraph (2) and Article 77-2, paragraph (2) of the Order for Enforcement of the Corporation Tax Ac, with regard to income categorized as domestic source income prescribed in Article 141 of the Corporation Tax Act under Article 142 of the said Act, with regard to the application of these provisions|

||Article 68-3-3, paragraph (1) (Special Provisions for Taxation on Trust Corporations for Special Investment Trusts)|paragraph (1) of the said Article which is applied mutatis mutandis pursuant to Article 68-3-3, paragraph (9) (Special Provisions for Taxation on Trust Corporations for Special Investment Trusts)|

(9) The amount of foreign corporation tax prescribed in Article 68-3-3, paragraph (4) of the Act that is to be credited under the said paragraph (hereinafter referred to as the "amount of creditable foreign corporation tax" in this Article) shall be the sum of the amounts that remain after deducting, from the amount specified respectively in the following items for persons listed in the relevant items, the amount of a distribution of proceeds (meaning the amount of a distribution of proceeds prescribed in Article 68-3-3, paragraph (1) of the Act; hereinafter the same shall apply in this Article) of special investment trusts pertaining to the amount of creditable foreign corporation tax that these persons are to receive (where the said sum of the amounts exceeds the amount of foreign corporation tax prescribed in Article 68-3-3, paragraph (4) of the Act that a trust corporation for special investment trusts has paid, the amount of the said paid foreign corporation tax):

(i) A resident prescribed in Article 2, paragraph (1), item (i)-2 of the Act: The amount obtained by dividing the amount of the distribution of proceeds that the resident is to receive by the rate that remains after deducting the tax rate prescribed in Article 182, item (ii) of the Income Tax Act from one

(ii) A domestic corporation: The amount obtained by dividing the amount of the distribution of proceeds that the domestic corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (2), item (ii) of the Income Tax Act from one

(iii) A nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act or a foreign corporation: The amount obtained by dividing the amount of the distribution of proceeds that the nonresident or foreign corporation is to receive by the rate that remains after deducting the tax rate prescribed in Article 213, paragraph (1), item (i) of the Income Tax Act from one.

(10) When a trust corporation for special investment trusts collects income tax on the amount of a distribution of proceeds (limited to the amount pertaining to the business year for which it is to pay the amount of creditable foreign corporation tax) pursuant to the provisions of Article 181 or Article 212 of the Income Tax Act, the said amount of creditable foreign corporation tax shall be credited against the amount of income tax that it is to collect and pay.

(11) Where the provisions of Article 68-3-3, paragraph (4) of the Act has applied to the amount of a distribution of proceeds of special investment trusts that an individual or a corporation is to receive, the amount of creditable foreign corporation tax pertaining to the said amount of distribution of proceeds shall be added to the said amount of distribution of proceeds that these persons are to receive.

(12) A trust corporation for special investment trusts, which was subject to the provisions of Article 68-3-3, paragraph (4) of the Act, shall preserve a document certifying that the amount of foreign corporation tax prescribed in the said paragraph has been imposed and other documents specified by Ordinance of the Ministry of Finance, as specified by Ordinance of the Ministry of Finance.

(13) With regard to the application of the provisions of Article 68-3-3, paragraph (10) of the Act in the case where the amount of the distribution of profit from a foreign special investment trust prescribed in Article 68-3-3, paragraph (10) of the Act is received from a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (1) of the Act (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 66-9-2, paragraph (1) of the Act (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act), in Article 68-3-3, paragraph (10) of the Act, the phrase "referred to in the following paragraph" shall be deemed to be replaced with "hereinafter referred to in this paragraph and the following paragraph," and the phrase "as "amount of the distribution of profit from a foreign special investment trust") shall be deemed to be excluded .... prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act" shall be deemed to be replaced with "as "amount of the distribution of profit from a foreign special investment trust") (excluding the amount of the distribution of profit from a foreign special investment trust to be received from a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (1) (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 66-9-2, paragraph (1) (limited to the one that falls under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the said Act) (limited to the amount up to the specified taxable income prescribed in Article 66-8, paragraph (3) or the amount up to the specified taxable income prescribed in Article 66-9-4, paragraph (3))) shall be deemed to be excluded .... prescribed in Article 23-2, paragraph (1) of the said Act."

Section 25 Special Provisions, etc. for Taxation on Transactions of Consolidated Corporations with Foreign Affiliated Persons)

(Special Provisions for Taxation on Transactions of Consolidated Corporations with Foreign Affiliated Persons)

Article 39-112 (1) The special relationship specified by Cabinet Order prescribed in Article 68-88, paragraph (1) of the Act shall be the relationship listed as follows:

(i) A relationship whereby either of two corporations directly or indirectly holds 50 percent or more of the total number or total amount of the other corporation's issued shares or capital contributions (excluding the own shares held by either of the said two corporations; hereinafter referred to as the "issued shares, etc." through to paragraph (3))

(ii) Where 50 percent or more of the total number or total amount of the issued shares, etc. of two corporations are respectively held directly or indirectly by the same person (where the said person is an individual, the said individual and an individual who has a special relationship specified by Cabinet Order prescribed in Article 2, item (x) of the Corporation Tax Act with the said individual; the same shall apply in item (v)), the relationship between the said two corporations (excluding relationships falling under the category or relationships listed in the preceding item)

(iii) A relationship whereby the existence of the facts listed as follows or any other facts equivalent thereto (referred to as a "specified fact" in the following item and item (v)) enables either of two corporations to determine substantially the whole or a part of the other corporation's business policies (excluding relationships falling under the category of relationships listed in the preceding two items):

(a) The fact that 50 percent or more of the officers of the said other corporation or any officers who have authority to represent the said other corporation are persons who concurrently serve as officers or employees of the said one of the two corporations or who used to serve as officers or employees of the said one of the two corporations

(b) The fact that the said other corporation depends on transactions with the said one of the two corporations for a considerable part of its business activities

(c) The fact that the said other corporation procures a considerable part of the funds necessary for its business activities by receiving loans from the said one of the two corporations or by obtaining guarantees from the said one of the two corporations

(iv) The relationship between a single corporation and any of the corporations listed as follows (excluding relationships falling under the category of relationships listed in the preceding three items):

(a) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by the said single corporation or the whole or a part of its business policies can be substantially determined by the said single corporation due to the existence of a specified fact

(b) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or the whole or a part of its business policies can be substantially determined by the said corporation due to the existence of a specified fact

(c) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by a corporation listed in (b) or the whole or a part of its business policies can be substantially determined by the said corporation due to the existence of a specified fact

(v) The relationship between two corporations whereby the two corporations respectively fall under the category of any of the corporations listed as follows (limited to the case where a single person prescribed in (a) is the same person and excluding relationships falling under the category of relationships listed in the preceding items):

(a) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by a single person or the whole or a part of its business policies can be substantially determined by the said person due to the existence of a specified fact

(b) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or the whole or a part of its business policies can be substantially determined by the said corporation due to the existence of a specified fact

(c) A corporation in a relationship whereby 50 percent or more of the number or the amount of its issued shares, etc. are held directly or indirectly by a corporation listed in (b) or the whole or a part of its business policies can be substantially determined by the said corporation due to the existence of a specified fact.

(2) In the case referred to in item (i) of the preceding paragraph, whether or not one of the said two corporations directly or indirectly holds 50 percent or more of the number or the amount of the other corporation's issued shares, etc. shall be determined according to the ratio obtained by adding the ownership ratio for the shares, etc. pertaining to the said other corporation held directly by the said one of the two corporations (meaning the ratio of the number or the amount of the said other corporation's shares or capital contributions held by the said one of the two corporations out of the total issued shares, etc. of the said other corporation) and the ownership ratio for the shares, etc. pertaining to the said other corporation held indirectly by the said one of the two corporations.

(3) The ownership ratio for the shares, etc. held indirectly that is prescribed in the preceding paragraph shall be the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(i) Where 50 percent or more of the number or the amount of the issued shares, etc. of a corporation which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; the same shall apply in the following item) of the other corporation set forth in the preceding paragraph are held by the said one of the two corporations set forth in the preceding paragraph: The ratio of the number or the amount of shares or capital contributions of the said other corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of the other corporation set forth in the preceding paragraph (excluding a corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item) and the said one of the two corporations set forth in the preceding paragraph and has(have) a linkage with them through holding the issued shares, etc. (hereinafter such intervening corporation(s) shall be referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where 50 percent or more of the number or the amount of the issued shares, etc. of each of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held by the said one of the two corporations or a capital contribution-related corporation(s) (such one of the two corporations or capital contribution-related foreign corporation(s) shall be limited to those, 50 percent or more of the number or the amount of whose issued shares, etc. are held by the said one of the two corporations or other capital contribution-related corporation(s))): The ratio of the number or the amount of shares or capital contributions of the said other corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(4) The provisions of paragraph (2) shall apply mutatis mutandis to the determination of a relationship whereby the shares, etc. are directly or indirectly held as set forth in item (ii), item (iv) and item (v) of paragraph (1).

(5) The normal profit margin specified by Cabinet Order prescribed in Article 68-88, paragraph (2), item (i), (b) of the Act shall be the ratio of the amount of gross profits gained by a person who purchased the same or similar inventory assets as those for a foreign affiliated transaction prescribed in paragraph (1) of the said Article (hereinafter referred to as a "foreign affiliated transaction" in this Article) from a person who is not in a special relationship (meaning a special relationship prescribed in the said paragraph) (hereinafter such person who is not in such special relationship shall be referred to as a "non-affiliated person" through to paragraph (7) and such person who purchased such inventory assets shall be referred to as a "reseller" in this paragraph and paragraph (7), item (ii)) through a transaction to sell the said same or similar inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this paragraph) (such gross profits shall mean the amount obtained by deducting the sum of the costs of the said inventory assets for a comparable transaction from the total revenue arising from the sale of the said inventory assets for a comparable transaction) against the sum of the said revenue; provided, however, that where functions performed by the selling side or any other matters differ between a comparable transaction and a transaction in which the purchasing side of the said inventory assets for a foreign affiliated transaction sold the inventory assets to a non-affiliated person, such normal profit margin shall be the ratio after making the necessary adjustment for the differences in ratios caused by such disparity.

(6) The normal profit margin specified by Cabinet Order prescribed in Article 68-88, paragraph (2), item (i), (c) of the Act shall be the ratio of the amount of gross profits gained by a person who acquired the same or similar inventory assets as those for a foreign affiliated transaction through the purchase (limited to a purchase from a non-affiliated person), manufacture or any other acts (hereinafter such person shall be referred to as a "seller" in this paragraph and item (iii) of the following paragraph) through a transaction to sell the said same or similar inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this paragraph) (such gross profits shall mean the amount obtained by deducting the sum of the costs of the said inventory assets for a comparable transaction from the total revenue arising from the sale of the said inventory assets for a comparable transaction) against the sum of the said costs; provided, however, that where functions performed by the selling side or any other matters differ between a comparable transaction and the said foreign affiliated transaction, such normal profit margin shall be the ratio after making a necessary adjustment for the differences in ratios caused by such disparity.

(7) The method specified by Cabinet Order prescribed in Article 68-88, paragraph (2), item (i), (d) of the Act shall be the method listed as follows:

(i) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount calculated by deeming that the income, which arises from the purchase, manufacture, sale or any other acts conducted with regard to inventory assets for the said foreign affiliated transaction by a consolidated corporation set forth in Article 68-88, paragraph (1) of the Act or a foreign affiliated person prescribed in the said paragraph who is related to the said consolidated corporation, is to be attributed to the said consolidated corporation or foreign affiliated person, in accordance with the factors sufficient to estimate the amount of expenses or the value of fixed assets that such persons have spent or used for conducting such acts or any other levels of such persons' contribution to the said income

(ii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount that remains after deducting, from the amount of consideration gained by the purchasing side of inventory assets for a foreign affiliated transaction for having sold the said inventory assets to a non-affiliated person (hereinafter such amount of consideration shall be referred to as the "resale price" in this item), the amount obtained by multiplying the said resale price by the ratio of the amount listed in (a) against the amount listed in (b) (where functions performed by the selling side or any other matters differ between a transaction in which a reseller has sold the same or similar inventory assets as the said inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this item) and a transaction in which the purchasing side of the said inventory assets for a foreign affiliated transaction sold the inventory assets to a non-affiliated person, by the ratio after making a necessary adjustment for the differences in ratios caused by such disparity) and then adding the selling expenses and general administrative expenses needed for the sale of the said inventory assets for a foreign affiliated transaction:

(a) The sum of the operating profits arising from the sale of the said inventory assets for a comparable transaction

(b) The total revenue arising from the sale of the said inventory assets for a comparable transaction

(iii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount obtained by adding the amount of the costs spent by the selling side of inventory assets for a foreign affiliated transaction for acquiring the inventory assets through the purchase, manufacture or any other acts (hereinafter referred to as the "amount of acquisition costs" in this item), the amount obtained by multiplying the amount listed in (a) by the ratio of the amount listed in (b) against the amount listed in (c) (where functions performed by the selling side or any other matters differ between a transaction in which a seller sold the same or similar inventory assets as the said inventory assets to a non-affiliated person (hereinafter referred to as a "comparable transaction" in this item) and the said foreign affiliated transaction, by the ratio after making a necessary adjustment for the differences in ratios caused by such disparity), and the sum of the amounts listed in (a)2.:

(a) The sum of the amounts listed as follows:

1. The amount of the said acquisition costs

2. The amount of the selling expenses and general administrative expenses needed for the sale of the said inventory assets for a foreign affiliated transaction

(b) The sum of the operating profits arising from the sale of the said inventory assets for a comparable transaction

(c) The amount obtained by deducting the amount listed in (b) from the total revenue arising from the sale of the said inventory assets for a comparable transaction

(iv) The method equivalent to those listed in the preceding two items.

(8) The case specified by Cabinet Order prescribed in Article 68-88, paragraph (5) of the Act shall be the case where it has been determined in advance at the time of a transaction between a consolidated corporation set forth in the said paragraph and a non-affiliated person set forth in the said paragraph (hereinafter referred to as a "non-affiliated person" in this paragraph and the following paragraph), under a contract or the like, that the assets for the said transaction are to be sold, transferred, lent or provided to a foreign affiliated person related to the said consolidated corporation set forth in paragraph (5) of the said Article and where the amount of consideration for the said sale, transfer, lending or provision is deemed to have been substantially determined between the said consolidated corporation and the said foreign affiliated person, and the case where it has been determined in advance at the time of a transaction between a foreign affiliated person related to the said consolidated corporation set forth in the said paragraph and a non-affiliated person, under a contract or the like, that the assets for the said transaction are to be sold, transferred, lent or provided to a consolidated corporation set forth in the said paragraph and where the amount of consideration for the said sale, transfer, lending or provision is deemed to have been substantially determined between the said consolidated corporation and the said foreign affiliated person.

(9) Notwithstanding the provisions of Article 68-88, paragraph (2) of the Act, the arm's length price prescribed in paragraph (1) of the said Article for a transaction that was deemed to be a foreign affiliated transaction under the provisions of paragraph (5) of the said Article shall be the amount calculated by applying the provisions of paragraph (2) of the said Article by deeming that the said transaction has been conducted between a consolidated corporation set forth in the preceding paragraph and a foreign affiliated person related to the said consolidated corporation set forth in the said paragraph and by making a necessary adjustment with regard to the differences in the amount of consideration caused when a transaction between the said consolidated corporation and the said foreign affiliated person is conducted via a non-affiliated person.

(10) The gross profit margin prescribed in Article 68-88, paragraph (6), item (i) of the Act or any other ratio specified by Cabinet Order as a ratio equivalent thereto shall be the ratio of the amount of gross profits gained by a corporation which is engaged in the same type of business and whose size and other details are similar as prescribed in the said item through the said business for a business year containing the day on which a foreign affiliated transaction set forth in the said item was conducted or for any other period equivalent thereto (such amount of gross profits shall mean the amount obtained by deducting the sum of the costs of inventory assets for the relevant business year or any other period equivalent thereto (where the said business is other than that pertaining to the sale of inventory assets, the sum of equivalent costs or expenses; hereinafter referred to as the "amount of gross costs" in this paragraph) from the total revenue arising from the sale of the said inventory assets (where the said business is other than that pertaining to the sale of inventory assets, the total revenue pertaining to the said business; hereinafter referred to as the "amount of gross revenue" in this paragraph)) against the amount of gross revenue or gross costs.

(11) The method specified by Cabinet Order as the method similar to the method specified by Cabinet Order prescribed in Article 68-88, paragraph (2), item (i), (d) of the Act or the method listed in paragraph (2), item (ii), (b) of the said Article (limited to the method equal to that specified by the said Cabinet Order) as prescribed in paragraph (6), item (ii) of the said Article shall be the method listed in items (i) to (iv), in the case where a foreign affiliated transaction is for the sale or purchase of inventory assets, and the method listed in item (i) or item (v), in the case where a foreign affiliated transaction is for other than the sale or purchase of inventory assets:

(i) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount calculated by deeming that the income, which arises from a business pertaining to a foreign affiliated transaction set forth in Article 68-88, paragraph (6) of the Act for the business year containing the date on which the said foreign affiliated transaction was conducted, based on financial statements containing the consolidated status of property and profits and losses of a corporate group which includes the said consolidated corporation and a foreign affiliated person (meaning a foreign affiliated person prescribed in paragraph (1) of the said Article) pertaining to the said foreign affiliated transaction conducted by the said consolidated corporation (where the income arising from the said business is not recorded separately from the income arising from other businesses in the said financial statements, the income arising from businesses including the said business; hereinafter the same shall apply in this item), or for any other period equivalent thereto, is to be attributed to such persons, in accordance with the factors sufficient to estimate the amount of expenses or the value of fixed assets that such persons have spent or used for conducting the said foreign affiliated transaction (where the amount of expenses or the value of fixed assets spent or used for the said business is not recorded separately from the amount of expenses or the value of fixed assets spent or used for other businesses in the said financial statements, the amount of expenses or the value of fixed assets spent or used for businesses including the said business) or any other levels of such persons' contribution to the said income

(ii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the remaining amount of consideration gained by the purchasing side of inventory assets for a foreign affiliated transaction for having sold the said inventory assets to a non-affiliated person (meaning a person who is not in a special relationship therewith as prescribed in Article 68-88, paragraph (1) of the Act) (hereinafter such amount of consideration shall be referred to as the "resale price" in this item) after deducting the amount obtained by multiplying the said resale price by the ratio of the amount listed in (a) against the amount listed in (b) and then adding the selling expenses and general administrative expenses needed for the sale of the said inventory assets for a foreign affiliated transaction:

(a) The sum of the operating profits gained by a corporation which is engaged in the same or similar type of business as those pertaining to the said foreign affiliated transaction and whose size and other details are similar (hereinafter referred to as a "comparable business" in this item) through the sale of inventory assets for the said comparable business for a business year containing the day on which the said foreign affiliated transaction was conducted or for any other period equivalent thereto (hereinafter referred to as a "comparable business year" in this item)

(b) The total revenue arising from the sale of the said inventory assets for a comparable business for the said comparable business year

(iii) The method which uses, as the amount of consideration for a foreign affiliated transaction, the amount obtained by adding the amount of the costs spent by the selling side of inventory assets for the foreign affiliated transaction for acquiring the inventory assets through the purchase, manufacture or any other acts (hereinafter referred to as the "amount of acquisition costs" in this item), the amount obtained by multiplying the amount listed in (a) by the ratio of the amount listed in (b) against the amount listed in (c), and the sum of the amounts listed in (a), 2.:

(a) The sum of the amounts listed as follows:

1. The amount of the said acquisition costs

2. The amount of the selling expenses and general administrative expenses needed for the sale of the said inventory assets for the foreign affiliated transaction

(b) The sum of the operating profits gained by a corporation which is engaged in the same or similar type of business as those pertaining to the said foreign affiliated transaction and whose size and other details are similar (hereinafter referred to as a "comparable business" in this item) through the sale of inventory assets for the said comparable business for a business year containing the day on which the said foreign affiliated transaction was conducted or for any other period equivalent thereto (hereinafter referred to as a "comparable business year" in this item)

(c) The amount obtained by deducting the amount listed in (b) from the total revenue arising from the sale of the said inventory assets for the comparable business for the said comparable business year

(iv) The method equivalent to those listed in the preceding two items

(v) The method equal to those listed in the preceding three items

(12) The requirements specified by Cabinet Order prescribed in Article 68-88, paragraph (19) of the Act shall be the requirements listed as follows:

(i) With regard to the arm's length price prescribed in Article 68-88, paragraph (19) of the Act which pertains to a foreign affiliated transaction prescribed in the said paragraph, the Minister of Finance has reached an agreement, under a tax convention prescribed in the said paragraph, with the competent authority of a contracting state other than Japan of the said tax convention

(ii) The contracting state other than Japan set forth in the preceding item reduces a tax for a foreign affiliated person prescribed in Article 68-88, paragraph (19) of the Act, based on the agreement set forth in the preceding item, and does not add to the amount to be refunded due to the said tax reduction, the part of the amount equivalent to the interest on refund that corresponds to the base period for the calculation for which the Minister of Finance has reached an agreement with the competent authority of the said contracting state other than Japan.

(13) The delinquent tax imposed with regard to the corporation tax payable as prescribed in Article 68-88, paragraph (19) of the Act shall be the delinquent tax to be imposed on the amount obtained by deducting the amount equivalent to the corporation tax payable where the provisions of paragraph (1) of the said Article do not apply from the corporation tax payable where the provisions of the said paragraph apply.

(14) Where the provisions of Article 68-88, paragraph (1), paragraph (2), item (i), (a) or (b), or paragraph (5) of the Act or the provisions of paragraph (5) shall apply, the existence or not of any special relationship prescribed in these provisions shall be determined according to its status at the time when respective transactions were conducted.

(15) With respect to the application of Article 155-16 of the Order for Enforcement of the Corporation Tax Act where the provisions of Article 68-88, paragraph (3) of the Act shall apply, the term "Article 81-6, paragraph (1) or paragraph (2) (Calculation of the Amount of Contributions Expended by Consolidated Corporations to be Excluded from Deductible Expenses) of the Act" in the said Article shall be deemed to be replaced with "Article 81-6, paragraph (1) or paragraph (2) (Calculation of the Amount of Contributions Expended by Consolidated Corporations to be Excluded from Deductible Expenses) of the Act or Article 68-88, paragraph (3) (Special Provisions for Taxation on Transactions of Consolidated Corporations with Foreign Affiliated Persons) of the Act on Special Measures Concerning Taxation;" and the term "Article 81-6, paragraph (2) of the Act" in item (ii) of the said Article shall be deemed to be replaced with "Article 81-6, paragraph (2) of the Act or Article 68-88, paragraph (3) of the Act on Special Measures Concerning Taxation."

(Application Procedures, etc. for Grace of Tax Payment under the Special Provisions for Taxation on Transactions of Consolidated Corporations with Foreign Affiliated Persons)

Article 39-112-2 (1) The amount calculated as specified by Cabinet Order as the amount of corporation tax and additional tax for the said corporation tax prescribed in Article 68-88-2, paragraph (1) of the Act shall be the sum of the amounts listed as follows:

(i) The amount obtained by deducting the amount of corporation tax payable where the calculation has been made by deeming that the reassessment or determination for the objection prescribed in Article 68-88-2, paragraph (1) of the Act (meaning the reassessment or determination listed in Article 68-88, paragraph (16), item (i) of the Act; hereinafter the same shall apply in this item and paragraph (3), item (ii)) does not cover the part pertaining to the corporation tax prescribed in Article 68-88-2, paragraph (1) of the Act (referred to as the "amount of corporation tax not under grace" in the following item) from the amount of corporation tax payable based on the said reassessment or determination (referred to as the "amount of corporation tax based on the reassessment or determination" in the following item)

(ii) The amount obtained by deducting the amount of additional tax (meaning additional tax prescribed in Article 69 of the Act on General Rules for National Taxes; hereinafter the same shall apply in this item) to be imposed based on the amount of corporation tax not under grace from the amount of additional tax to be imposed based on the amount of corporation tax based on the reassessment or determination.

(2) The case where there is no agreement prescribed in Article 68-88-2, paragraph (1) of the Act or any other case specified by Cabinet Order shall be the case listed respectively in the following items and the date specified by Cabinet Order prescribed in the said paragraph shall be the date on which the Commissioner of the National Tax Agency notified the fact that the case falls under any of those listed in the relevant items:

(i) Where the Commissioner of the National Tax Agency finds that an agreement set forth in Article 68-88-2, paragraph (1) of the Act (referred to as an "agreement" in the following item and item (iii)) cannot be reached even if the consultation prescribed in the said paragraph (hereinafter referred to as a "mutual consultation" in this paragraph) is continued (excluding the case listed in the items of Article 68-88-2, paragraph (5) of the Act), when he/she has made a request for the termination of the said mutual consultation to the competent authority of the other contracting state pertaining to the said mutual consultation (meaning a contracting state other than Japan of a tax convention prescribed in Article 1-3, paragraph (1), item (ii); the same shall apply in the following item) and has obtained consent from the said competent authority

(ii) Where the competent authority of the other contracting state pertaining to a consultation finds that an agreement cannot be reached even if the said mutual consultation were continued, when the Commissioner of the National Tax Agency has received a request for the termination of the said mutual consultation from the said competent authority and has given his/her consent

(iii) Where an agreement has been reached on the amount of corporation tax prescribed in Article 68-88-2, paragraph (1) of the Act, when the said agreement is not to change the said amount of corporation tax.

(3) A person intending to receive a grace of tax payment under the provisions of Article 68-88-2, paragraph (1) of the Act shall submit a written application containing the matters listed as follows along with a document certifying that he/she has filed an objection set forth in the said paragraph and other documents specified by Ordinance of the Ministry of Finance to the district director, etc. prescribed in Article 46, paragraph (1) of the Act on General Rules for National Taxes:

(i) The name and place for tax payment of a corporation intending to receive the said grace of tax payment (where the place for tax payment and the location of its head office or principal office are different, the corporation's name, place for tax payment and location of the head office or principal office)

(ii) The business year, due date and the amount of payable corporation tax based on the reassessment or determination

(iii) The amount for which the corporation intends to receive a grace of tax payment out of the amount set forth in the preceding item

(iv) Where the said amount for which the corporation intends to receive a grace of tax payment exceeds 500,000 yen, the type, amount, value and location of the security listed in the items of Article 50 of the Act on General Rules for National Taxes which it intends to provide at the time of filing the application (when the security is a guarantee by a guarantor, the guarantor's name and the location, address or domicile of his/her head office or principal office) and any other matters for reference concerning the security (where there is any special circumstance whereby the corporation cannot provide security, the said circumstance).

(4) With respect to the application of the provisions of Article 23, paragraph (1) of the Order for Enforcement of the Act on General Rules for National Taxes, regarding the corporation tax for which a grace of tax payment has been received pursuant to the provisions of Article 68-88-2, paragraph (1) of the Act, the term "or national tax" in Article 23, paragraph (1) of the said Order shall be deemed to be replaced with "(including a grace of tax payment under the provisions of Article 68-88-2, paragraph (1) (Grace of Tax Payment under the Special Provisions for Taxation on Transactions of Consolidated Corporations with Foreign Affiliated Persons) of the Act on Special Measures Concerning Taxation) or national tax."

Section 26 Special Provisions for Taxation on Interest on Liabilities, etc. Payable by Consolidated Corporations to Foreign Controlling Shareholders, etc.

(Special Provisions for Taxation on Interest on Liabilities, etc. Payable by Consolidated Corporations to Foreign Controlling Shareholders, etc.)

Article 39-113 (1) The amount calculated as specified by Cabinet Order as the amount equivalent to the excess part prescribed in Article 68-89, paragraph (1) of the Act shall be the amount specified respectively in the following items for the category of cases listed in the relevant items:

(i) Where the amount that remains after deducting the amount listed in (b) from the amount listed in (a) is equivalent to or less than the amount listed in (c): The amount obtained by calculating the amount of expenses listed in the items of paragraph (14) which the said consolidated corporation pays for the relevant consolidated business year to a foreign controlling shareholder, etc. (meaning a foreign controlling shareholder, etc. prescribed in Article 68-89, paragraph (4), item (i) of the Act; hereinafter the same shall apply in this Article) and a fund provider, etc. (meaning a fund provider, etc. prescribed in item (ii) of the said paragraph; hereinafter the same shall apply in this Article) related to the said consolidated corporation (such expense shall be limited to what is to be paid, in the case prescribed in item (ii) or item (iii) of paragraph (13), when the interest on liabilities pertaining to the funds set forth in those items is included in the taxable income (meaning the taxable income prescribed in Article 68-89, paragraph (4), item (ix) of the Act; the same shall apply in (b)) of the person who is to receive payment of the said interest; such amount of expenses shall be referred to as the "amount of guarantee charge, etc. for the taxable income" in the following item) and then multiplying the said amount of expenses by the ratio obtained by dividing the amount that remains after deducting the amount listed in (c) from the amount listed in (a) (such remaining amount shall be referred to as the "amount exceeding the average balance of liabilities" in the following item and the following paragraph) by the amount listed in (b):

(a) The average balance of liabilities (meaning the average balance of liabilities prescribed in Article 68-89, paragraph (4), item (v) of the Act; hereinafter the same shall apply in this Article) regarding the liabilities owed, for the relevant consolidated business year of the said consolidated corporation, to the said foreign controlling shareholder, etc. and fund provider, etc. (meaning the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in item (iv) of the said paragraph; hereinafter the same shall apply in this Article)

(b) The average balance of liabilities regarding the liabilities specified by Cabinet Order prescribed in Article 68-89, paragraph (4), item (iv) of the Act owed to a fund provider, etc. (limited to the liabilities regarding those whose interest is included in the taxable income of a person who is to receive payment of the said interest)

(c) The amount obtained by multiplying the equity interest held by a foreign controlling shareholder, etc. for the relevant consolidated business year of the said consolidated corporation (meaning the equity interest held by a foreign controlling shareholder, etc. prescribed in Article 68-89, paragraph (4), item (vi) of the Act; the same shall apply in paragraph (4) and paragraph (7)) by three (where the said consolidated corporation receives the application of the provisions of paragraph (3) of the said Article, by the multiple number prescribed in the said paragraph)

(ii) Where the amount that remains after deducting the amount listed in (b) from the amount listed in (a) of the preceding item exceeds the amount listed in (c): The sum of the amounts listed as follows:

(a) The amount obtained by deducting the amount of guarantee charge, etc. for the taxable income from the amount of interest on liabilities, etc. (meaning the interest on liabilities, etc. prescribed in Article 68-89, paragraph (4), item (iii) of the Act; hereinafter the same shall apply in this Article) that the said consolidated corporation pays for the relevant consolidated business year to the said foreign controlling shareholder, etc. and fund provider, etc. and then multiplying the amount that remains after deduction by the ratio obtained by dividing the amount that remains after deducting the amount listed in (b) of the preceding item from the amount exceeding the average balance of liabilities by the amount that remains after deducting the amount listed in (b) of the said item from the amount listed in (a) of the said item

(b) The amount of guarantee charge, etc. for the taxable income.

(2) With respect to the application of the provisions of the preceding paragraph where the amount that remains after deducting the amount obtained by multiplying the amount of equity capital (meaning the amount of equity capital prescribed in Article 68-89, paragraph (4), item (vii) of the Act; hereinafter the same shall apply in this Article) for the relevant consolidated business year of the said consolidated corporation by three from the average balance of liabilities regarding the total liabilities prescribed in Article 68-89, paragraph (1) of the Act for the relevant consolidated business year of the said consolidated corporation is less than the amount exceeding the average balance of liabilities for the relevant consolidated business year of the said consolidated corporation, in item (i) of the preceding paragraph, the term "the amount that remains after deducting the amount listed in (b) from the amount listed in (a) is equivalent to or less than the amount listed in (c)" shall be deemed to be replaced with "the amount that remains after deducting the amount obtained by multiplying the amount of equity capital prescribed in Article 68-89, paragraph (4), item (vii) of the Act for the relevant consolidated business year of the said consolidated corporation by three from the average balance of liabilities regarding the total liabilities prescribed in Article 68-89, paragraph (1) of the Act for the relevant consolidated business year of the said consolidated corporation (hereinafter such remaining amount shall be referred to as "the amount exceeding the average balance of the total liabilities" in this paragraph) is equivalent to or less than the amount listed in (c);" the term "Article 68-89, paragraph (4), item (i) of the Act" shall be deemed to be replaced with "paragraph (4), item (i) of the said Article;" and the term "amount that remains after deducting the amount listed in (c) from the amount listed in (a) (such remaining amount shall be referred to as the "amount exceeding the average balance of liabilities" in the following item and the following paragraph)" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities;" and in item (ii) of the said paragraph, the term "the amount that remains after deducting the amount listed in (b) from the amount listed in (a) of the preceding item exceeds the amount listed in (c)" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities exceeds the amount listed in (c);" and the term "the amount exceeding the average balance of liabilities" shall be deemed to be replaced with "the amount exceeding the average balance of the total liabilities."

(3) Where the provisions of Article 68-89, paragraph (1) of the Act shall apply, the amount of interest on liabilities, etc. to be paid by a consolidated corporation prescribed in the said paragraph to the said foreign controlling shareholder, etc. and fund provider, etc. for the relevant consolidated business year shall be based on the amount posted by the said consolidated corporation as an expense for the relevant consolidated business year.

(4) With respect to the application of the provisions of Article 68-89, paragraph (1) of the Act where there are two or more foreign controlling shareholders, etc. related to the said consolidated corporation, the average balance of liabilities regarding the liabilities owed to foreign controlling shareholders, etc. and fund providers, etc., equity interest held by foreign controlling shareholders, etc. and the amount of interest on liabilities, etc. to be paid to foreign controlling shareholders, etc. and fund providers, etc. shall be based on the sum of the average balance of liabilities regarding the liabilities owed to foreign controlling shareholders, etc. and fund providers, etc., equity interest held by foreign controlling shareholders, etc. and the amount of interest on liabilities, etc. to be paid to foreign controlling shareholders, etc. and fund providers, etc., respectively.

(5) The average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in Article 68-89, paragraph (2) of the Act shall be the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said consolidated corporation which pertain to a specified bond transaction with a repurchase/resale agreement, etc. (meaning a specified bond transaction with a repurchase/resale agreement, etc. prescribed in Article 68-89, paragraph (4), item (viii) of the Act; the same shall apply in the following paragraph and paragraph (8)) (where the said average balance of liabilities exceeds the average balance of assets regarding assets pertaining to a specified bond transaction with a repurchase/resale agreement, etc. (the average balance of assets shall mean the amount calculated by a reasonable method as the average balance of the said assets' book value for the relevant consolidated business year; the same shall apply in the following paragraph), such calculated average balance of liabilities shall be the said average balance of assets; such average balance of assets shall be referred to as the "average balance of liabilities after adjustment" in paragraph (8)).

(6) The average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the average balance of liabilities regarding the total liabilities for the relevant consolidated business year prescribed in Article 68-89, paragraph (2) of the Act shall be the average balance of liabilities regarding the total liabilities for the relevant consolidated business year (limited to those which are to be the cause of payment of interest on liabilities, etc.; the same shall apply in paragraph (10)) which pertain to a specified bond transaction with a repurchase/resale agreement, etc. (where the said average balance of liabilities exceeds the average balance of assets regarding assets pertaining to a specified bond transaction with a repurchase/resale agreement, etc., such calculated average balance of liabilities shall be the said average balance of assets).

(7) The multiple number applicable to the equity interest held by a foreign controlling shareholder, etc. which is calculated as specified by Cabinet Order prescribed in Article 68-89, paragraph (2) of the Act shall be the multiple number obtained by calculating the average balance of liabilities by deducting the average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. calculated as specified by Cabinet Order prescribed in the said paragraph from the average balance of liabilities regarding the liabilities owed to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in the said paragraph and then dividing the calculated average balance of liabilities by the equity interest held by the foreign controlling shareholder, etc. related to the said consolidated corporation; and the multiple number applicable to the amount of equity capital which is calculated as specified by Cabinet Order prescribed in the said paragraph shall be the multiple number obtained by calculating the average balance of liabilities by deducting the average balance of liabilities pertaining to a specified bond transaction with a repurchase/resale agreement, etc. calculated as specified by Cabinet Order prescribed in the said paragraph from the average balance of liabilities regarding the total liabilities for the relevant consolidated business year prescribed in the said paragraph and then dividing the calculated average balance of liabilities by the amount of equity capital of the said consolidated corporation.

(8) The amount of interest on liabilities, etc. pertaining to a specified bond transaction with a repurchase/resale agreement, etc. which is calculated as specified by Cabinet Order and is to be deducted from the amount of interest on liabilities, etc. to be paid to a foreign controlling shareholder, etc. and a fund provider, etc. prescribed in Article 68-89, paragraph (2) of the Act shall be the amount obtained by multiplying the amount of interest on liabilities, etc. to be paid to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said consolidated corporation which pertain to a specified bond transaction with a repurchase/resale agreement, etc. by the ratio obtained by dividing the average balance of liabilities after adjustment by the average balance of liabilities regarding the liabilities pertaining to the said specified bond transaction with a repurchase/resale agreement, etc.

(9) With respect to the application of the provisions of paragraphs (1) to (4) in the case where the provisions of Article 68-89, paragraph (2) of the Act is applied, the term "and then multiplying the said amount of expenses by the ratio" in paragraph (1), item (i) shall be deemed to be replaced with ", then deducting the amount obtained by multiplying the part of the said amount of expenses that pertains to a specified bond transaction with a repurchase/resale agreement, etc. (meaning a specified bond transaction with a repurchase/resale agreement, etc. prescribed in Article 68-89, paragraph (4), item (viii) of the Act; hereinafter the same shall apply in this item) by the ratio obtained by dividing the average balance of liabilities after adjustment (meaning the average balance of liabilities after adjustment prescribed in paragraph (5); hereinafter the same shall apply in this item) regarding the liabilities for the said amount by the average balance of liabilities regarding the liabilities for the said amount which pertains to a specified bond transaction with a repurchase/resale agreement, etc., and then multiplying the amount that remains after deduction by the ratio;" the term "The average balance of liabilities (meaning the average balance of liabilities prescribed in item (v) of the said paragraph; hereinafter the same shall apply in this Article)" in (a) of paragraph (1), item (i) shall be deemed to be replaced with "The amount that remains after deducting the average balance of liabilities after adjustment from the average balance of liabilities;" the term "The average balance of liabilities" in (b) of the said item shall be deemed to be replaced with "The amount that remains after deducting the average balance of liabilities after adjustment regarding the said liabilities from the average balance of liabilities;" the term "three" in (c) of the said item shall be deemed to be replaced with "two;" the term "The amount obtained by deducting the amount of guarantee charge, etc. for the taxable income" in (a) of paragraph (1), item (ii) shall be deemed to be replaced with "The amount obtained by deducting the sum of the amount of interest on liabilities, etc. pertaining to a specified bond transaction with a repurchase/resale agreement, etc. prescribed in paragraph (2) of the said Article and the amount of guarantee charge, etc. for the taxable income;" the term "where the amount that remains after deducting the amount" in paragraph (2) shall be deemed to be replaced with "where the amount that remains after deducting the sum of the average balance of liabilities regarding the average balance of liabilities which pertain to a specified bond transaction with a repurchase/resale agreement, etc. prescribed in paragraph (6) and the amount;" and the term "by three" in the said paragraph shall be deemed to be replaced with "by two."

(10) The percentage specified by Cabinet Order prescribed in Article 68-89, paragraph (3) of the Act shall be the percentage of the amount of the total liabilities of a domestic corporation whose business size set forth in paragraph (3) of the said Article and other details are similar to those of a consolidated corporation which seeks the application of the provisions of the said paragraph (hereinafter referred to as an "applicable corporation" in this paragraph) on the final day of any of the said domestic corporation's relevant business years or consolidated business years that ended within three years until the final day of the applicable corporation's relevant consolidated business year (where the said applicable corporation receives the application of the provisions of paragraph (2) of the said Article, the percentage of the remaining amount of the total liabilities after deducting the amount specified by Ordinance of the Ministry of Finance) against the sum of the amounts of stated capital, statutory reserve, and surplus on the same day. In this case, where there are any fractions after two decimal places, they shall be rounded up.

(11) The special relationship specified by Cabinet Order prescribed in Article 68-89, paragraph (4), item (i) of the Act shall be the relationship listed as follows:

(i) A relationship whereby out of the total number or total amount of issued shares or capital contributions of the said consolidated corporation (excluding its own shares or capital contributions held by the said corporation) (hereinafter referred to as the "issued shares, etc." in this Article), 50 percent or more of shares or capital contributions (hereinafter referred to as the "shares, etc." in this Article) are held directly or indirectly by a foreign controlling shareholder, etc.

(ii) Where 50 percent or more of the issued shares, etc. of the said consolidated corporation and a foreign corporation are respectively held directly or indirectly by the same person (where the said person is an individual, including an individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with the said individual), the relationship between the said consolidated corporation and the said foreign corporation (excluding any relationship falling under that listed in the preceding item)

(iii) A relationship whereby the existence of the facts listed as follows or any other facts equivalent thereto between the said consolidated corporation and a nonresident (meaning a nonresident prescribed in Article 2, paragraph (1), item (i)-2 of the Act) or a foreign corporation (hereinafter such nonresident or foreign corporation shall be referred to as a "nonresident, etc." in this item) enables the said nonresident, etc. to determine substantially the whole or a part of the said consolidated corporation's business policies (excluding any relationship falling under that listed in the preceding two items):

(a) The fact that the said consolidated corporation depends on transactions with the said nonresident, etc. for a considerable part of its business activities

(b) The fact that the said consolidated corporation procures a considerable part of the funds necessary for its business activities by receiving loans from the said nonresident, etc. or by obtaining guarantees from the said nonresident, etc.

(c) The fact that 50 percent or more of the officers of the said consolidated corporation or any officers who have authority to represent the said consolidated corporation are persons who concurrently serve as officers or employees of the said foreign corporation or who used to serve as officers or employees of the said foreign corporation.

(12) The provisions of Article 39-112, paragraph (2) and paragraph (3) shall apply mutatis mutandis to the determination as to whether or not 50 percent or more of the issued shares, etc. set forth in item (i) and item (ii) of the preceding paragraph are held directly or indirectly.

(13) A person who provides a consolidated corporation with funds and a person specified by Cabinet Order as being related to such provision of funds as prescribed in Article 68-89, paragraph (4), item (ii) of the Act shall be any of the following:

(i) Where it is found that a foreign controlling shareholder, etc. related to the said consolidated corporation has provided the said consolidated corporation with funds via a third party: The said third party

(ii) Where it is found that a foreign controlling shareholder, etc. related to the said consolidated corporation has offered guarantees for the said consolidated corporation's liabilities to a third party and thereby the said third party has provided the said consolidated corporation with funds: The said third party

(iii) Where it is found that bonds lent by a foreign controlling shareholder, etc. related to the said consolidated corporation to the said consolidated corporation (including bonds lent by a third party to the said consolidated corporation based on guarantees for the said consolidated corporation's liabilities offered by the said foreign controlling shareholder, etc.) have been provided to any other third party as security and have been transferred in a bond transaction with a repurchase/resale agreement (meaning a bond transaction with a repurchase/resale agreement prescribed in Article 42-2, paragraph (1) of the Act) or lent in a cash-secured bond lending transaction (meaning a cash-secured bond lending transaction prescribed in Article 66-5, paragraph (4), item (viii) of the Act) and thereby the said other third party has provided the said consolidated corporation with funds: The said third party and other third party.

(14) The expense specified by Cabinet Order prescribed in Article 68-89, paragraph (4), item (iii) of the Act shall be the expense listed as follows:

(i) In the case prescribed in item (ii) of the preceding paragraph, the guarantee charge for the liabilities set forth in the said item which a consolidated corporation set forth in the said item pays to a foreign controlling shareholder, etc. related to the said consolidated corporation

(ii) In the case prescribed in item (iii) of the preceding paragraph, the charge for bonds set forth in the said item or guarantee charge for the liabilities set forth in the said item which a consolidated corporation set forth in the said item pays to a foreign controlling shareholder, etc. related to the said consolidated corporation or the charge for bonds set forth in the said item which the said consolidated corporation pays to a third party set forth in the said item.

(15) The liabilities specified by Cabinet Order prescribed in Article 68-89, paragraph (4), item (iv) of the Act shall be the liabilities set forth in the items of paragraph (13) in the cases prescribed in the relevant items.

(16) The amount calculated as specified by Cabinet Order as the average amount of liabilities prescribed in Article 68-89, paragraph (4), item (v) of the Act shall be the amount calculated by a reasonable method as the average balance of the book value of the liabilities for the relevant consolidated business year.

(17) The amount calculated as specified by Cabinet Order as the interest on a consolidated corporation's net assets held by a foreign controlling shareholder, etc. as prescribed in Article 68-89, paragraph (4), item (vi) of the Act shall be the amount obtained by multiplying the amount of equity capital for the relevant consolidated business year of the said consolidated corporation by the ratio of the shares, etc. regarding the said consolidated corporation held directly or indirectly by a foreign controlling shareholder, etc. on the final day of the relevant consolidated business year out of the said consolidated corporation's issued shares, etc.

(18) The shares, etc. held directly or indirectly as prescribed in the preceding paragraph shall be the total number or the sum of the said consolidated corporation's shares, etc. held directly by a foreign controlling shareholder, etc. related to the said consolidated corporation and the said consolidated corporation's shares, etc. held indirectly by the said foreign controlling shareholder, etc. (meaning the shares, etc. calculated by multiplying the said consolidated corporation's issued shares, etc. by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)):

(i) Where the whole or a part of the issued shares, etc. of any other domestic corporation which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this item and paragraph (22)) of the said consolidated corporation are held by a foreign controlling shareholder, etc. related to the said consolidated corporation: The ratio obtained by multiplying the said foreign controlling shareholder, etc.'s ratio of shareholding (meaning the ratio of the shares, etc. held by a shareholder, etc. out of the total issued shares, etc.; hereinafter the same shall apply in this paragraph and paragraph (22)) pertaining to the said other domestic corporation by the said other domestic corporation's ratio of shareholding pertaining to the said consolidated corporation (where there are two or more other domestic corporations, the sum of the ratios calculated for each of them)

(ii) Where a single domestic corporation or two or more domestic corporations intervene(s) between the said consolidated corporation and any other domestic corporation, the whole or a part of whose issued shares, etc. are held by a foreign controlling shareholder, etc. related to the said consolidated corporation (hereinafter such intervening domestic corporation(s) shall be referred to as a "capital contribution-related domestic corporation(s)" in this paragraph) and the said foreign controlling shareholder, etc., the said other domestic corporation, capital contribution-related domestic corporation(s) and the said consolidated corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the said foreign controlling shareholder, etc.'s ratio of shareholding pertaining to the said other domestic corporation sequentially by the said other domestic corporation's ratio of shareholding pertaining to the capital contribution-related domestic corporation(s), by the capital contribution-related domestic corporation's(s') ratio of shareholding pertaining to other capital contribution-related domestic corporation(s), and by the capital contribution-related domestic corporation's(s') ratio of shareholding pertaining to the said consolidated corporation (where there are two or more linkages, the sum of the ratios calculated for each of them).

(19) Where the said consolidated corporation and a foreign controlling shareholder, etc. related to the said consolidated corporation are in a relationship listed in paragraph (11), item (ii), when the same person prescribed in the said item is a resident or any other domestic corporation prescribed in Article 2, paragraph (1), item (i)-2 of the Act, the provisions of the preceding two paragraphs shall be applied by deeming the said same person to be a foreign controlling shareholder, etc. related to the said consolidated corporation.

(20) The amount calculated as specified by Cabinet Order as the amount of net assets prescribed in Article 68-89, paragraph (4), item (vii) of the Act shall be the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) (where the said remaining amount is less than the amount of consolidated individual stated capital, etc. prescribed in Article 2, item (xvii)-2 of the Corporation Tax Act on the final day of the relevant consolidated business year of the said consolidated corporation (where the said amount of consolidated individual stated capital, etc. is less than the amount of stated capital or capital contributions, the said amount of stated capital or capital contributions; hereinafter referred to as the "amount of consolidated individual stated capital, etc." in this paragraph and paragraph (22)), such calculated amount shall be the said amount of consolidated individual stated capital, etc.):

(i) The amount calculated by a reasonable method as the average balance of the book value of the total assets for the relevant consolidated business year of the said consolidated corporation (such book value shall mean the amount that remains after deducting the amount reserved as a reserve fund by the appropriation of surplus and the amount reserved as a reserve for special depreciation pursuant to the provisions of Article 52-3 or Article 68-41 of the Act (limited to the amount reserved as a reserve fund by the appropriation of surplus) in lieu of reducing the book value of fixed assets by reckoning the amount into expenses for accounting purposes)

(ii) The amount calculated by a reasonable method as the average balance of the book value of the total liabilities for the relevant consolidated business year of the said consolidated corporation.

(21) The book value set forth in paragraph (5) and paragraph (16) and the preceding paragraph shall be based on the amount of assets or liabilities that the said domestic corporation entered in its accounting books.

(22) Where any other domestic corporation which is a shareholder, etc. of the said consolidated corporation or a capital contribution-related domestic corporation(s) (meaning a single domestic corporation or two or more domestic corporations which have a linkage with the said consolidated corporation and the said other domestic corporation through holding the shares, etc.; the same shall apply in the following paragraph) intervene(s) between the said consolidated corporation and a foreign controlling shareholder, etc. related to the said consolidated corporation, when the amount obtained by multiplying the amount of consolidated individual stated capital, etc. on the final day of the relevant consolidated business year of the said consolidated corporation by the ratio of shareholding pertaining to the said consolidated corporation of the said other domestic corporation or capital contribution-related domestic corporation(s) exceeds the amount of stated capital, etc. prescribed in Article 39-13, paragraph (22) of the said other domestic corporation or capital contribution-related domestic corporation(s) on the same day (for a corporation falling under the category of a corporation subject to corporation tax on consolidated income prescribed in Article 2, item (xvi) of the Corporation Tax Act, when such amount exceeds the amount of consolidated individual stated capital, etc.), the amount of equity capital pertaining to the said consolidated corporation shall be the amount that remains after deducting from the said amount of equity capital, either of the smaller amount of the said excess amount or the amount of the liabilities owed by the said other domestic corporation or capital contribution-related domestic corporation(s) to a foreign controlling shareholder, etc. and a fund provider, etc. related to the said consolidated corporation on the same day (referred to as the " deductible amount" in the following paragraph).

(23) In the case prescribed in the preceding paragraph, when deeming a capital contribution-related domestic corporation(s) set forth in the said paragraph to be the said consolidated corporation set forth in the said paragraph and if there is any deductible amount pertaining to the said capital contribution-related domestic corporation(s), the amount of stated capital, etc. set forth in the said paragraph of the said capital contribution-related domestic corporation(s) shall be the amount that remains after deducting the said deductible amount from the said amount of stated capital, etc.; and the amount of the liabilities owed by the said capital contribution-related domestic corporation(s) to a foreign controlling shareholder, etc. and a fund provider, etc. set forth in the said paragraph shall be the amount obtained by adding the amount of the liabilities owed to the said foreign controlling shareholder, etc. and fund provider, etc. and the said deductible amount.

(24) With respect to the application of the provisions of Article 155-8 of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-89, paragraph (1) of the Act apply, the term "the sum of the amount of interest on liabilities prescribed in the said paragraph to be paid for the relevant business year" in Article 155-8, paragraph (1) of the said Order shall be deemed to be replaced with "the sum of the amount of interest on liabilities prescribed in the said paragraph to be paid for the relevant business year (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 68-89, paragraph (1) (Special Provisions for Taxation on Interest on Liabilities, etc. Payable by Consolidated Corporations to Foreign Controlling Shareholders, etc.) of the Act on Special Measures Concerning Taxation, such sum shall be the amount that remains after deducting the said amount);" the term "the sum of the amount of interest on liabilities that a domestic corporation set forth in the said paragraph pays for the business year set forth in the said paragraph" in paragraph (2) of the said Article shall be deemed to be replaced with "the sum of the amount of interest on liabilities that a domestic corporation set forth in the said paragraph pays for the business year set forth in the said paragraph (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 68-89, paragraph (1) (Special Provisions for Taxation on Interest on Liabilities, etc. Payable by Consolidated Corporations to Foreign Controlling Shareholders, etc.) of the Act on Special Measures Concerning Taxation, such sum shall be the amount that remains after deducting the said amount);" the term "the amount listed in item (i)" in paragraph (1) and paragraph (2) of the said Article shall be deemed to be replaced with "the amount listed in item (i) (where there is any amount that shall not be included in deductible expenses pursuant to the provisions of Article 68-89, paragraph (1) of the Act on Special Measures Concerning Taxation, such amount shall be the amount that remains after deducting the amount equivalent to the amount exceeding the average balance of liabilities prescribed in Article 39-113, paragraph (1), item (i) (Calculation of the Amount of Interest on Liabilities, etc. Payable by Consolidated Corporations to Foreign Controlling Shareholders, etc. to be Excluded from Deductible Expenses) of the Order for Enforcement of the Act on Special Measures Concerning Taxation (including the cases where it is applied by replacing the terms under the provisions of paragraph (9) of the said Article) (in the case where the provisions of paragraph (1) of the said Article are applied by replacing the terms under the provisions of paragraph (2) of the said Article, after deducting the amount equivalent to the amount exceeding the average balance of the total liabilities prescribed in the said item which is applied by replacing the terms under the provisions of paragraph (2) of the said Article))."

Section 27 Special Provisions for Taxation on Income of Specified Foreign Subsidiary Companies, etc. of Consolidated Corporations

(Scope of Specified Foreign Subsidiary Companies, etc. Related to Consolidated Corporations)

Article 39-114 (1) The affiliated foreign company specified by Cabinet Order prescribed in Article 68-90, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign company that has its head office or principal office in a state or territory where there are no taxes imposed on corporate income (meaning an affiliated foreign company prescribed in Article 68-90, paragraph (2), item (i) of the Act; hereinafter the same shall apply in this Article)

(ii) An affiliated foreign company whose tax imposed on its income for the relevant business year is 25 percent or less of the said income.

(2) Whether or not an affiliated foreign company falls under the category of an affiliated foreign company set forth in item (ii) of the preceding paragraph shall be determined as specified as follows:

(i) The amount of income set forth in item (ii) of the preceding paragraph shall be the amount obtained by adding the amount of income calculated pursuant to the provisions of the laws and regulations concerning foreign corporation taxes (meaning foreign corporation taxes prescribed in Article 69, paragraph (1) of the Corporation Tax Act; hereinafter the same shall apply in this Section) of the state or territory where the said affiliated foreign company's head office or principal office is located (hereinafter referred to as the "state of the head office" in this Section) (where there are two or more laws and regulations concerning the said foreign corporation taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph) with regard to the said affiliated foreign company's income in its settlement of accounts for the relevant business year and the sum of the amounts listed in (a) to (e) pertaining to the said calculated amount of income and then deducting therefrom the amount listed in (f) pertaining to the said calculated amount of income:

(a) The amount of income which shall not be included in the foreign corporation tax base under the laws and regulations of the state of the head office (excluding the amounts listed as follows):

1. The amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act to be received from a corporation located in the state of the head office (including the amount equivalent to the amount of profit reserve to be reduced by reason of the delivery of money or other assets on any of the grounds listed in the items of Article 24, paragraph (1) of the said Act; hereinafter referred to as the "amount of a dividend, etc." in this item and the following Article)

2. The amount of a dividend, etc. to be received from a corporation located in a state or territory other than the state of the head office, which shall not be included in the foreign corporation tax base on condition that the ratio of the shares, etc. (meaning shares or capital contributions; hereinafter the same shall apply in this Section) held by the affiliated foreign company out of the total number or total amount of the said corporation's issued shares or capital contributions (excluding its own shares held by the said corporation) (hereinafter referred to as the "issued shares, etc." in this Section) is not less than the ratio specified by the said laws and regulations of the state of the head office

(b) The amount of a dividend, etc. that the affiliated foreign company shall pay and which is included in deductible expenses

(c) The amount of foreign corporation tax that the affiliated foreign company shall pay and which is included in deductible expenses

(d) The amount equivalent to the amount of reserve belonging to the reserve for casualty set forth in Article 57-5, paragraph (1) or Article 57-6, paragraph (1) of the Act (hereinafter referred to as the "insurance reserve" in this paragraph and paragraph (2) of the following Article) that the affiliated foreign company has saved and which is included in deductible expenses, which shall not be included in deductible expenses when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied

(e) Where the amount of the insurance reserve that has been saved by the affiliated foreign company and has been included in gross profits (limited to the insurance reserve that shall be saved when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied) does not reach the amount to be included in gross profits when these provisions shall be applied, the amount of the said shortfall

(f) The amount of foreign corporation tax that shall be refunded to the affiliated foreign company and which is included in gross profits

(ii) The amount of tax set forth in item (ii) of the preceding paragraph shall be the sum of the amounts listed as follows:

(a) The amount of foreign corporation tax to be imposed on the amount of the affiliated foreign company's income in its settlement of accounts for the relevant business year in the state of the head office or in a state or territory other than the state of the head office (including the amount to be deducted from the foreign corporation tax in the state of the head office by deeming that the said affiliated foreign company has paid the said amount under the laws and regulations of the state of the head office and excluding the amount of foreign corporation tax to be imposed on the amount listed in (a), 2. of the preceding item)

(b) The amount of foreign corporation tax reduced or exempted for the affiliated foreign company for the relevant business year in the state of the head office and which is deemed to have been paid by the said affiliated foreign company pursuant to the provisions of a tax convention prescribed in Article 1-3, paragraph (1), item (ii)

(iii) Where foreign corporation tax rates of the state of the head office increase in accordance with the amount of income, the amount of foreign corporation tax set forth in (a) of the preceding item shall be the amount calculated based on the highest rates out of such tax rates

(iv) Where the amount of income set forth in item (ii) of the preceding paragraph proves to be a loss, the amount of foreign corporation tax shall be determined based on the foreign corporation tax rate to be applied in the state of the head office to any income that arises from revenue pertaining to the affiliated foreign company's principal business (in the case where the said revenue falls under the category of the amount listed in 1. or 2. of item (i), (a), revenue other than the said revenue)

(Calculation of Eligible Income of Specified Foreign Subsidiary Companies, etc. Related to Consolidated Corporations)

Article 39-115 (1) The amount of undistributed income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 68-90, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the sum of the amounts listed in item (iii) and item (iv) pertaining to the income of a specified foreign subsidiary company, etc. prescribed in paragraph (1) of the said Article (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article and paragraph (1) of the following Article) in its settlement of accounts for the relevant business year from the sum of the amounts listed in item (i) and item (ii) pertaining to the said income (where the amount listed in item (i) pertaining to the said income is a loss, the said amount of undistributed income shall be the amount that remains after deducting the sum of the said amount of loss and the sum of the amounts listed in item (iii) and item (iv) pertaining to the said income from the amount listed in item (ii) pertaining to the said income):

(i) The amount of income or loss calculated, with regard to the income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, in accordance with the provisions of Part II, Chapter1, Section 1, Subsection 2 to Subsection 9 (excluding Article 23, Article 23-2, Article 26, paragraphs (1) to (5) , Articles 38 to 41, Article 55, paragraph (3), Article 57, Article 58, Article 59, and Articles 61-11 to 61-13 of the Corporation Tax Act), and Subsection 11 of the said Act, and the provisions of Article 43, Article 45-2, Article 52-2, Article 57-5, Article 57-6, Article 57-8, Article 57-10, Article 61-4, Articles 65-7 to 65-9 (limited to the part pertaining to item (xix) of the table in Article 65-7, paragraph (1) of the Act), Article 66-4, paragraph (3), Article 67-12 and Article 67-13 of the Act (hereinafter referred to as the "provisions of the laws and regulations of Japan" in this item) (where the provisions of Article 68-88, paragraph (1) or Article 66-4, paragraph (1) of the Act is applied to a transaction with a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act (including other consolidated corporations which have the consolidated full controlling interest with the said consolidated corporation) or a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act that is related to the said specified foreign subsidiary company, etc., the amount of income or loss calculated in accordance with the provisions of the laws and regulations of Japan by deeming that the transaction was carried out at the arm's length price prescribed in these provisions)

(ii) The amount of corporate income tax payable in the relevant business year (meaning taxes to be imposed based on the amount of the corporation's income in the state of the head office or in a state or territory other than the state of the head office or by local entities in such state or territory including the state of the head office (including taxes listed in the items of Article 141, paragraph (2) of the Order for Enforcement of the Corporation Tax Act to be imposed in such state or territory or by local entities in such state or territory) and taxes equivalent to incidental taxes to be imposed incidentally as prescribed in Article 2, item (xlv) of the Corporation Tax Act (excluding interest tax) and other taxes similar to the tax equivalent to the said incidental taxes; hereinafter the same shall apply in this Article)

(iii) The amount of corporate income tax to be refunded in the relevant business year.

(iv) The amount of a dividend, etc. to be received in the relevant business year from a subsidiary company (meaning another corporation (excluding any of the corporations listed in the following) in the case where either the percentage of the number or the amount of shares, etc. held by the said specified foreign subsidiary company, etc. in the issued shares, etc. of such other corporation or the percentage of the number or the amount of voting shares, etc. held by the said specified foreign subsidiary company, etc. in the issued shares, etc. of such other corporation is not less than 25 percent, and such shares have been held for six months or more until the day on which the obligation to pay the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from such other corporation is determined (or the day preceding that day in the case where the said amount of a dividend, etc. is the amount of dividend, etc. specified by Ordinance of the Ministry of Finance pertaining to the grounds prescribed in Article 24, paragraph (1) of the Corporation Tax Act; hereinafter the same shall apply in this item) (in the case where such other corporation is a corporation established within six months before the day on which such obligation is determined, during the period from the date of the establishment until the day on which such obligation is determined)):

(a) The special purpose company prescribed in Article 67-14, paragraph (1).

(b) The investment corporation prescribed in Article 67-15, paragraph (2).

(c) The trust corporation prescribed in Article 68-3-2, paragraph (1) or paragraph (9) for a special purpose trust prescribed in paragraph (1) of the said Article.

(d) The trust corporation prescribed in Article 68-3-3, paragraph (1) or paragraph (9) for a special investment trust prescribed in paragraph (1) of the said Article (limited to those that satisfy the requirements listed in item (i)(b) and (c) of paragraph (1) of the said Article)

(2) Notwithstanding the provisions of the preceding paragraph, a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act may deem that the amount obtained by adding the amount of income calculated, with regard to the income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, pursuant to the provisions of the laws and regulations concerning corporate income taxes of the state of the head office of the said specified foreign subsidiary company, etc. (where there are two or more laws and regulations concerning the said corporate income taxes, pursuant to the provisions of the principal ones; hereinafter referred to as the "laws and regulations of the state of the head office" in this paragraph), (where the provisions of Article 68-88, paragraph (1) or Article 66-4, paragraph (1) of the Act is applied to a transaction between the said specified foreign subsidiary company, etc. and the said consolidated corporation (including other consolidated corporations which have the consolidated full controlling interest with the said consolidated corporation) or domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act, the amount of income calculated pursuant to the provisions of the laws and regulations of the state of the head office by deeming that the transaction was carried out at the arm's length price prescribed in Article 68-88, paragraph (1) or Article 66-4, paragraph (1) of the Act), and the sum of the amount listed in items (i) to (xiii) pertaining to the said calculated amount of income and then deducting therefrom the amount listed in items (xiv) to (xvii) pertaining to the said calculated amount of income (where the amount calculated pursuant to the provisions of the laws and regulations of the state of the head office proves to be a loss, the said amount shall be the amount that remains after deducting the sum of the said amount of loss and the amount listed in items (xiv) to (xvii) pertaining to the said calculated amount from the sum of the amounts listed in items (i) to (xiii) pertaining to the said calculated amount) shall be the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 68-90, paragraph (2), item (ii) of the Act; provided, however, that this shall apply only when the said other consolidated corporations are not subject to the provisions of the preceding paragraph with regard to the said calculated amount pertaining to the said specified foreign subsidiary company, etc.:

(i) The amount of income which shall not be included in the corporate income tax base for the relevant business year under the laws and regulations of the state of the head office

(ii) The amount of a dividend, etc. that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year

(iii) The excess amount that exceeds the amount equivalent to that to be included in deductible expenses, when the provisions of Article 31 of the Corporation Tax Act shall be applied, out of the amount included in deductible expenses for the relevant business year as the depreciation allowance for the depreciable assets that the specified foreign subsidiary company, etc. holds (excluding goodwill obtained on or before March 31, 1998) (such inclusive amount shall be limited to the amount calculated, with the acquisition costs of the said depreciable assets (where there is any amount of past depreciation already included in deductible expenses for the relevant business year, the amount after deducting the said amount) as the limit of the amount to be included in deductible expenses for the relevant business year)

(iv) The amount equivalent to that included in deductible expenses for the relevant business year due to changes in the valuation of the assets that the specified foreign subsidiary company, etc. holds, which shall not be included in deductible expenses when the provisions of Article 33 of the Corporation Tax Act shall be applied

(v) The amount equivalent to the amount of remuneration to be paid to the officers (meaning the officers prescribed in Article 2, item (xv) of the Corporation Tax Act; the same shall apply in paragraph (3) of the following Article) of the specified foreign subsidiary company, etc. included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 34 or Article 35 of the said Act shall be applied

(vi) The amount equivalent to the amount of remuneration to be paid to employees of the specified foreign subsidiary company, etc. included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 36 of the Corporation Tax Act shall be applied

(vii) The amount equivalent to the amount of a contribution that the specified foreign subsidiary company, etc. shall make (excluding a contribution to the state of the head office or local entities in such state which is equivalent to that prescribed in Article 37, paragraph (3), item (i) of the Corporation Tax Act) and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of paragraph (1) of the said Article and Article 66-4, paragraph (3) of the Act shall be applicable

(viii) The amount of corporate income tax that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year

(ix) The amount of a loss incurred in business years preceding the said relevant business year, pursuant to the provisions of the laws and regulations of the state of the head office that are equivalent to those of Article 57, Article 58 or Article 59 of the Corporation Tax Act, which is included in deductible expenses for the relevant business year

(x) The amount equivalent to the amount of insurance reserve that the specified foreign subsidiary company, etc. has reserved and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied

(xi) Where the amount that has been included in gross profits for the relevant business year regarding the insurance reserve reserved by the specified foreign subsidiary company, etc. (limited to the insurance reserve that can be reserved when the provisions of Article 57-5 or Article 57-6 of the Act shall be applied) does not reach the amount to be included in gross profits when these provisions shall be applied, the amount of the said shortfall

(xii) The amount equivalent to the amount of expenses equivalent to entertainment and social expenses prescribed in Article 61-4, paragraph (1) of the Act that the specified foreign subsidiary company, etc. shall pay and which is included in deductible expenses for the relevant business year, which shall not be included in deductible expenses when the provisions of the said Article shall be applied

(xiii) The amount equivalent to the amount of a loss of the specified foreign subsidiary company, etc. (meaning the amount of a loss related to a partnership, etc. prescribed in Article 67-12, paragraph (1) of the Act or the amount of a loss prescribed in Article 67-13, paragraph (1) of the Act incurred due to a partnership business prescribed in the said paragraph), which shall not be included in deductible expenses when the provisions of Article 67-12, paragraph (1) or Article 67-13, paragraph (1) of the Act shall be applied

(xiv) The amount equivalent to the amount which shall be included in deductible expenses when the provisions of Article 67-12, paragraph (2) or Article 67-13, paragraph (2) of the Act shall be applied

(xv) The amount of corporate income tax to be refunded to the specified foreign subsidiary company, etc. which is included in gross profits for the relevant business year

(xvi) The amount equivalent to that included in gross profits for the relevant business year due to changes in the valuation of the assets that the specified foreign subsidiary company, etc. holds, which shall not be included in gross profits when the provisions of Article 25 of the Corporation Tax Act shall be applied

(xvii) The amount listed in item (iv) of the preceding paragraph.

(3) Where there is any amount of a deductible dividend, etc. (meaning the amount equivalent to the amount specified respectively in the following items for the category of cases listed in the relevant items; hereinafter the same shall apply in this paragraph) for the relevant business year of a specified foreign subsidiary company, etc. related to a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act, the amount calculated in accordance with the standards specified by Cabinet Order prescribed in Article 68-90, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting the said amount of a deductible dividend, etc. from the amount calculated pursuant to these provisions, notwithstanding the provisions of paragraph (1) or the preceding paragraph:

(i) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said consolidated corporation (including a specified foreign subsidiary company, etc. prescribed in Article 66-6, paragraph (1) of the Act, and excluding the one that falls under the category of subsidiary company prescribed in paragraph (1), item (iv); hereinafter referred to as the "other specified foreign subsidiary company, etc." in this paragraph) in the relevant business year does not exceed the amount of a dividend payable corresponding to the capital contributions by the said specified foreign subsidiary company, etc. out of the total amount of a dividend payable by the said other specified foreign subsidiary company, etc. in the business year containing the base date for paying the said dividend, etc. (hereinafter referred to as the "base business year" in this paragraph) and the said base business year is the business year during which the individually taxable income prescribed in Article 68-90, paragraph (1) of the Act (hereinafter referred to as the "individually taxable income" in this Section) or taxable income prescribed in Article 66-6, paragraph (1) of the Act (referred to as the "taxable income" in the following item) arises: The amount of the said dividend, etc.

(ii) Where the amount of a dividend, etc. that the said specified foreign subsidiary company, etc. receives from any other specified foreign subsidiary company, etc. related to the said consolidated corporation in the relevant business year exceeds the amount of a dividend payable corresponding to the capital contributions for the base business year pertaining to the said amount of a dividend, etc.: Where the amount of a dividend payable corresponding to the capital contributions for the relevant business year preceding the base business year of the said other specified foreign subsidiary company, etc. shall be appropriated to the said amount of a dividend, etc. in reverse chronological order and the said amount of a dividend, etc. has been categorized for the relevant business year in accordance with the said amount of a dividend payable corresponding to the capital contributions for the relevant business year, the sum of the amount of a dividend, etc. to be appropriated with the amount of a dividend payable corresponding to the capital contributions for the business year during which the individually taxable income or taxable income arises.

(4) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) Amount of dividend payable: the amount that remains after deducting the sum of the amounts listed in (e) and (f) pertaining to the eligible income (meaning the eligible income prescribed in Article 68-90, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this item) of a specified foreign subsidiary company, etc. for each business year, from the amount calculated by adding the said eligible income to the sum of the amounts listed in (a) to (d) pertaining to the said eligible income.

(a) The amount listed in paragraph (1), item (iv) to be deducted pursuant to the provisions of paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii)).

(b) The amount of deductible dividend, etc. prescribed in the preceding paragraph to be deducted pursuant to the provisions of the said paragraph.

(c) In the case where the provisions of Article 68-88, paragraph (1) or Article 66-4, paragraph (1) of the Act are applied to a transaction with a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act (including another consolidated corporation that has a consolidated full controlling interest with the said consolidated corporation; the same shall apply in (c)) or a domestic corporation listed in the items of Article 66-6, paragraph (1), which pertains to the said specified foreign subsidiary company, etc., and the amount to be reduced pursuant to the provisions of paragraph (1) or paragraph (2) contains any amount that shall not be paid to the said consolidated corporation or the said domestic corporation, such amount that shall not be paid.

(d) The amount that accounts for ten percent of the amount of expenses specified by Cabinet Order as prescribed in Article 68-90, paragraph (2), item (ii) to be deducted pursuant to the provisions of the said item whose terms are replaced pursuant to the provisions of paragraph (3) of the said Article.

(e) The amount payable due to the appropriation of surplus for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.)

(f) The amount paid as the expenses for the relevant business year (excluding the amount of corporate income tax and the amount of a dividend, etc.) which was included in the amount of eligible income for the relevant business year because the said amount was not included in deductible expenses for calculating the amount of income pursuant to the provisions of paragraph (1) or paragraph (2) or was included in the amount of income pursuant to the provisions of the said paragraph

(ii) The amount of a dividend payable corresponding to the capital contributions: The amount obtained by multiplying the amount of a dividend payable by a specified foreign subsidiary company, etc. by the ratio of the number or the amount of the shares, etc. of the said specified foreign subsidiary company, etc. that any other specified foreign subsidiary company, etc. (hereinafter referred to as the "other specified foreign subsidiary company, etc." in this item) holds out of the total issued shares, etc. of the said specified foreign subsidiary company, etc. (where the said specified foreign subsidiary company, etc. holds the issued shares, etc. in which claims prescribed in Article 66-6, paragraph (1) of the Act (hereinafter referred to as the "claims" in this item and paragraph (2) of the following Article) with different contents are vested, or the shares, etc. in which claims with different contents are deemed to be substantially vested (referred to as the "shares, etc. in which different claims are vested" in paragraph (2) of the following Article), the ratio of the amount of a dividend, etc. that the said other specified foreign subsidiary company, etc. can receive based on the said claims out of the total amount of a dividend of surplus, etc.).

(5) The amount obtained as a result of an adjustment for the amount of loss and base income prescribed in Article 68-90, paragraph (2), item (ii) of the Act shall be the amount that remains after deducting, from the base income amount prescribed in the said item for the relevant business year of a specified foreign subsidiary company, etc. (referred to as the "base income amount" in paragraph (7) and paragraph (8)), the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount equivalent to ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 68-90, paragraph (2), item (ii) of the Act whose terms are replaced under the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in the business years that started within seven years prior to the first day of the relevant business year of the specified foreign subsidiary company, etc. (excluding the business years during which the company did not fall under the category of specified foreign subsidiary companies, etc. (including specified foreign subsidiary companies, etc. prescribed in Article 40-4, paragraph (1) or Article 66-6, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph or Article 39-15, paragraph (5))

(ii) The amount of corporate income tax that the specified foreign subsidiary company, etc. is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(6) A loss prescribed in item (i) of the preceding paragraph shall be a loss calculated where the provisions of paragraph (1), paragraph (2) or paragraph (3) are applied to the amount of income of a specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year.

(7) When making a calculation set forth in paragraph (1), item (i), if there is any amount to be included in deductible expenses in the relevant business year, pursuant to the provisions of Article 33 and Articles 42 to 53 of the Corporation Tax Act, and the provisions of Article 43, Article 45-2, Article 52-2, Article 57-5, Article 57-6, Article 57-8, Articles 65-7 to 65-9 (limited to the part pertaining to item (xix) of the table in Article 65-7, paragraph (1) of the Act), Article 67-12, paragraph (2) and Article 67-13, paragraph (2) of the Act, whose provisions shall be applicable under the provisions of the said item, the said amount shall be included in deductible expenses for calculating the base income amount for the relevant business year, only when detailed statements concerning the inclusion of the said amount in deductible expenses are attached to a consolidated final return form set forth in Article 68-90, paragraph (5) of the Act (hereinafter referred to as a "consolidated final return form" in the following paragraph) for the relevant business year; provided, however, that this shall not apply when the competent district director having jurisdiction over the consolidated parent corporation's place for tax payment finds that there was unavoidable reason for the failure to attach detailed statements and the said detailed statements have been submitted.

(8) When calculating the base income amount pursuant to the provisions of paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii)), if there is any amount to be deducted for the relevant business year pursuant to these provisions, such amount shall be deducted in the calculation of the base income amount of the said business year only where a detailed statement concerning the calculation of such amount is attached to the consolidated final return form pertaining to the said business year; provided, however, that this shall not apply when the competent district director having jurisdiction over the place for tax payment of the consolidated parent corporation finds any unavoidable reason for the failure to attach such detailed statement, and the said detailed statement is submitted.

(9) Where a consolidated corporation, which was subject to the provisions of paragraph (1) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (2) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in consolidated business years following the one to which the provisions of paragraph (1) have been applied; or where a consolidated corporation, which was subject to the provisions of paragraph (2) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year, seeks the application of paragraph (1) for calculating the amount of income of the specified foreign subsidiary company, etc. in its settlement of accounts for the relevant business year in consolidated business years following the one to which the provisions of paragraph (2) have been applied, it shall receive approval from the competent district director having jurisdiction over the consolidated parent corporation's place for tax payment, in advance.

(Calculation, etc. of the Amount of Individually Taxable Income of Specified Foreign Subsidiary Companies, etc. Related to Consolidated Corporations)

Article 39-116 (1) The amount calculated as specified by Cabinet Order prescribed in Article 68-90, paragraph (1) of the Act shall be the amount obtained by multiplying the eligible income prescribed in the said paragraph for the relevant business year of a specified foreign subsidiary company, etc. pertaining to a consolidated corporation listed in the items of the said paragraph by the ratio of the shares, etc. for considering the claims held by the said consolidated corporation out of the issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc.

(2) In the preceding paragraph and this paragraph, the meanings of the terms listed respectively in the following items shall be as specified respectively in the relevant items:

(i) The shares, etc. for considering the claims held: The number or the amount adding together the number or the amount of the shares, etc. of a foreign corporation directly held by a consolidated corporation (where the said foreign corporation holds the issued shares, etc. in which different claims are vested, the number or the amount obtained by multiplying the issued shares, etc. of the said foreign corporation by the ratio of the amount listed in Article 23, paragraph (1), item (i) of the Corporation Tax Act (referred to as the "amount of a dividend of surplus, etc." in (a) of the following item) that the said consolidated corporation can receive based on the said claims out of the total amount) and the shares, etc. for considering the claims indirectly held

(ii) The shares, etc. for considering the claims indirectly held: The number or the amount of the shares, etc. obtained by multiplying the issued shares, etc. of a foreign corporation by the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows):

(a) Where a consolidated corporation holds the whole or a part of the issued shares, etc. of other foreign corporations which are shareholders, etc. (meaning shareholders, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in (a)) of the said foreign corporation (hereinafter such other foreign corporations shall be simply referred to as "other foreign corporations" in (a)): The ratio obtained by multiplying the said consolidated corporation's ratio of shareholding (meaning the ratio of the number or the amount of the shares, etc. held by the shareholders, etc. out of the total issued shares, etc. of the corporation issuing the said shares, etc. (where the said issuing corporation holds the issued shares, etc. in which different claims are vested, the ratio of the amount of a dividend of surplus, etc. that the said shareholder, etc. can receive based on the said claims out of the total amount); hereinafter the same shall apply in this item) pertaining to the said other foreign corporations by the said other foreign corporations' ratio of shareholding pertaining to the said foreign corporation (where there are two or more other foreign corporations, the sum of the ratios calculated for each of them)

(b) Where a single foreign corporation or two or more foreign corporations intervene(s) between the said foreign corporation and any other foreign corporation (limited to any other foreign corporation, the whole or a part of whose issued shares, etc. are held by a consolidated corporation; hereinafter referred to as the "other foreign corporation" in this item) (hereinafter such intervening foreign corporation(s) shall be referred to as a "capital contribution-related foreign corporation(s)" in this item) and the said consolidated corporation, the said other foreign corporation, capital contribution-related foreign corporation(s) and the said foreign corporation have a linkage through holding the shares, etc.: The ratio obtained by multiplying the said consolidated corporation's ratio of shareholding pertaining to the said other foreign corporation sequentially by the said other foreign corporation's ratio of shareholding pertaining to the capital contribution-related foreign corporation(s), by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to other capital contribution-related foreign corporation(s), and by the capital contribution-related foreign corporation's(s') ratio of shareholding pertaining to the said foreign corporation (where there are two or more linkages, the sum of the ratios calculated for each of them)

(3) The amount of expenses specified by Cabinet Order prescribed in Article 68-90, paragraph (2), item (ii) of the Act whose terms are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the sum of personnel expense for officers and employees of a specified foreign subsidiary company, etc. engaged in the business at the said specified foreign subsidiary company, etc. prescribed in paragraph (3) of the said Article (limited to the amount of income calculated in accordance with the provisions of the laws and regulations of Japan prescribed in paragraph (1), item (i) of the preceding Article or pursuant to the provisions of paragraph (2) of the said Article or the amount to be included in deductible expenses for calculating the amount of a loss for the relevant business year of the said specified foreign subsidiary company, etc.).

(Determination, etc. of Business of Specified Foreign Subsidiary Companies, etc. Related to Consolidated Corporations)

Article 39-117 (1) The person specified by Cabinet Order prescribed in Article 68-90, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations which have the consolidated full controlling interest with a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. prescribed in Article 68-90, paragraph (4) of the Act (hereinafter referred to as a "specified foreign subsidiary company, etc." in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph

(ii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act (where the said consolidated corporation is a consolidated subsidiary corporation, a consolidated parent corporation related to the said consolidated corporation) which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding item who is related to the said specified foreign subsidiary company, etc.)

(iii) A person who holds over 50 percent of the total number or total amount of the issued shares, etc. of a domestic corporation listed in the items of Article 66-6, paragraph (1) of the Act which pertains to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding two items who is related to the said specified foreign subsidiary company, etc.)

(iv) Where a person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act holds the shares, etc. indirectly pertaining to the said specified foreign subsidiary company, etc. (such shares, etc. shall mean the number of shares or the amount of capital contributions of a foreign corporation specified by Cabinet Order as being held through indirect ownership as prescribed in Article 66-6, paragraph (2), item (iii) of the Act), the other foreign corporations prescribed in paragraph Article 39-16, paragraph (3), item (i) or the other foreign corporation and capital contribution-related foreign corporation(s) prescribed in item (ii) of the said paragraph which pertain to the said shares, etc. held indirectly

(v) A person who has a special relationship specified by Cabinet Order prescribed in Article 66-6, paragraph (2), item (vi) of the Act with any of the persons listed as follows (excluding a person falling under any of those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act):

(a) A specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act

(b) A person listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1) or items of Article 68-90, paragraph (1) of the Act who is related to a specified foreign subsidiary company, etc. mainly engaged in the business listed in Article 68-90, paragraph (4), item (i) of the Act

(c) A person listed in the preceding items.

(2) The case specified by Cabinet Order prescribed in Article 68-90, paragraph (4), item (i) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Wholesale business: Where, out of the total revenue from selling inventory assets for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets for the relevant business year, such revenues shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of sales transactions" in this item), the ratio of the sum of the amount of sales transactions with a person other than affiliated persons (meaning those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items who are related to the said specified foreign subsidiary company, etc.; hereinafter the same shall apply in this paragraph and the following paragraph) exceeds 50 percent, or out of the sum of the acquisition costs for acquiring inventory assets for the relevant business year (where there are any commissions to be received for agent or intermediary services for the buying or selling of inventory assets for the relevant business year, such acquisition costs shall include the amount from the transactions for which the said commissions were generated; hereinafter referred to as the "amount of purchase transactions" in this item), the ratio of the sum of the amount of purchase transactions with a person other than affiliated persons exceeds 50 percent

(ii) Banking business: Where, out of the sum of the total interest received for the relevant business year, the ratio of the sum of the said interest to be received from a person other than affiliated persons exceeds 50 percent, or out of the sum of the total interest paid for the relevant business year, the ratio of the sum of the said interest to be paid to a person other than affiliated persons exceeds 50 percent

(iii) Trust business: Where, out of the sum of the total trust charge for the relevant business year, the ratio of the sum of the said trust charge to be received from a person other than affiliated persons exceeds 50 percent

(iv) Financial instruments business: Where, out of the sum of the total commissions received (including profits from the buying and selling of securities) for the relevant business year, the ratio of the sum of the said commissions to be received from a person other than affiliated persons exceeds 50 percent

(v) Insurance business: Where, out of the sum of the total premium income for the relevant business year, the ratio of the sum of the said premium income to be received from a person other than affiliated persons (where the said premium income pertains to reinsurance, limited to premium income from insurance for assets held by a person other than affiliated persons or damages incurred by a person other than affiliated persons) exceeds 50 percent

(vi) Water transportation business or air transportation business: Where, out of the total revenue from the operation or rental of vessels or operation or rental of aircraft for the relevant business year, the ratio of the sum of the said revenue to be received from a person other than affiliated persons exceeds 50 percent.

(3) Where transactions prescribed in the preceding paragraph between a specified foreign subsidiary company, etc. and an affiliated person related to the said specified foreign subsidiary company, etc. are conducted indirectly via a person other than an affiliated person related to the said specified foreign subsidiary company, etc. (hereinafter referred to as a "non-affiliated person" in this paragraph), transactions between the said specified foreign subsidiary company, etc. and the said non-affiliated person shall be deemed to have been conducted directly between the said specified foreign subsidiary company, etc. and the said affiliated person and the provisions of the items of the preceding paragraph shall be applied, except in the case where there are reasonable grounds for having the said non-affiliated person intervene in such transactions.

(4) The case specified by Cabinet Order prescribed in Article 68-90, paragraph (4), item (ii) of the Act shall be any of the cases specified respectively in the following items, in accordance with the category of the principal business to be conducted for the relevant business year of a specified foreign subsidiary company, etc. prescribed in the said paragraph:

(i) Real estate business: Where conducting a buying and selling or rental business of real estate (including acts to let others use the said real estate) (real estate shall include the rights thereon; hereinafter the same shall apply in this item) mainly located in the state of the head office, providing agent or intermediary services for the buying and selling or rental business of the said real estate, and managing the said real estate

(ii) Rental and leasing business: Where conducting a rental business for goods to be provided for use mainly in the state of the head office

(iii) Business other than those listed in paragraph (2) and the preceding two items: Where conducting a business mainly in the state of the head office.

(Calculation, etc. of Foreign Corporation Tax on Individually Taxable Income of Specified Foreign Subsidiary Companies, etc.)

Article 39-118 (1) The amount calculated as specified by Cabinet Order prescribed in Article 68-91, paragraph (1) of the Act shall be the amount obtained by multiplying the amount of foreign corporation tax to be imposed on a specified foreign subsidiary company, etc. prescribed in the said paragraph (hereinafter referred to as a "specified foreign subsidiary company, etc." in this Article) on its income for a business year containing eligible income (meaning eligible income prescribed in Article 68-90, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this paragraph, and paragraph (1) and paragraph (2) of the following Article) (hereinafter referred to as a "taxable business year" through to paragraph (4)) by the ratio of the individually taxable income pertaining to a consolidated corporation prescribed in Article 68-91, paragraph (1) of the Act out of the eligible income for the relevant taxable business year (where there is any amount listed in Article 39-115, paragraph (1), item (iv) to be deducted pursuant to the provisions of Article paragraph (1) (limited to the part concerning item (iv)) or paragraph (2) (limited to the part concerning item (xvii)) of the said Article or the amount of a deductible dividend, etc. prescribed in Article 39-115, paragraph (3) to be deducted pursuant to the provisions of the said paragraph, the amount obtained by adding these amounts) (where the said amount exceeds the said individually taxable income, the amount equivalent to the said individually taxable income).

(2) In the case where a specified foreign subsidiary company, etc. has been subject to two or more foreign corporation taxes or to a foreign corporation tax twice or more on its income for a taxable business year, when a consolidated corporation related to the said specified foreign subsidiary company, etc. seeks the application of the provisions of Article 68-91, paragraph (1) (including the cases where it is applied pursuant to the provisions of paragraph (2) of the said Article by deeming the amount to be as specified therein; hereinafter the same shall apply in this Article) or Article 66-7, paragraph (1) (including the cases where it is applied pursuant to the provisions of paragraph (2) of the said Article by deeming the amount to be as specified therein; hereinafter the same shall apply in this Article) of the Act in two or more business years or consolidated business years; with respect to the application of the provisions of Article 68-91, paragraph (1) of the Act for a consolidated business year following the first one of the said two or more consolidated business years or business years, the amount obtained by deducting the amount listed in item (ii) (the amount listed in item (iii), when seeking the application of the provisions of Article 68-91, paragraph (1) of the Act for the first time after receiving the application of the provisions of Article 66-7, paragraph (1) of the Act) from the amount listed in item (i) shall be deemed to be the calculated amount prescribed in the preceding paragraph:

(i) The amount calculated pursuant to the provisions of the preceding paragraph regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the final day of a consolidated business year subject to the provisions of Article 68-91, paragraph (1) of the Act (hereinafter referred to as the "applicable consolidated business year" in this paragraph) (such amount of foreign corporation taxes shall be limited to those to which the provisions of Article 68-91, paragraph (1) or Article 66-7, paragraph (1) of the Act were chosen to apply, pursuant to the provisions of paragraph (4) or Article 39-18, paragraph (4); hereinafter the same shall apply in this paragraph)

(ii) The amount calculated pursuant to the provisions of the preceding paragraph regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the day preceding the first day of the applicable consolidated business year

(iii) The amount calculated pursuant to the provisions of Article 39-18, paragraph (1) regarding the sum of the amount of foreign corporation taxes that were imposed on income for the relevant taxable business year by the day preceding the first day of the applicable consolidated business year

(3) Out of the amount of foreign corporation taxes that were imposed on a specified foreign subsidiary company, etc. on its income for a taxable business year, the amount deemed to be the amount of individually creditable foreign corporation taxes prescribed in Article 68-91, paragraph (1) of the Act that shall be paid by a consolidated corporation related to the said specified foreign subsidiary company, etc., pursuant to the provisions of the said paragraph, (hereinafter referred to as the "amount of individually creditable foreign corporation taxes" in this Article) shall be deemed to be payable by the consolidated corporation in a consolidated business year specified respectively in the following items for the category of foreign corporation taxes listed in the relevant item:

(i) The foreign corporation tax that was imposed on the consolidated corporation on its income for the relevant taxable business year of the said specified foreign subsidiary company, etc. on or prior to the final day of the consolidated business year for which the provisions of Article 68-90, paragraph (1) of the Act are applied regarding the amount equivalent to the individually taxable income for the relevant taxable business year: The consolidated business year subject to the provisions of Article 68-90, paragraph (1) of the Act

(ii) The foreign corporation tax that was imposed on the consolidated corporation on its income for the relevant taxable business year of the said specified foreign subsidiary company, etc. after the final day of the consolidated business year for which the provisions of Article 68-90, paragraph (1) of the Act are applied regarding the amount equivalent to the individually taxable income for the relevant taxable business year (where the provisions of Article 68-91, paragraph (2) of the Act are applied, after the final day of the business year for which the provisions of Article 66-6, paragraph (1) of the Act were applied regarding the amount equivalent to the taxable income prescribed in Article 66-6, paragraph (1) of the Act for the relevant taxable business year): The said consolidated business year involving the day on which the tax was imposed.

(4) Where a specified foreign subsidiary company, etc. has been subject to two or more foreign corporation taxes or to a foreign corporation tax twice or more on its income for a taxable business year, a consolidated corporation to which the provisions of Article 68-90, paragraph (1) of the Act are applied, regarding the amount equivalent to the individually taxable income for the relevant taxable business year of the said specified foreign subsidiary company, etc., shall choose whether or not it will seek the application of the provisions of Article 68-91, paragraph (1) of the Act regarding the amount of respective foreign corporation taxes on the individually taxable income subject to the provisions of Article 68-90, paragraph (1) of the Act.

(5) In the case where a consolidated corporation was subject to the provisions of Article 68-91, paragraph (1) of the Act, regarding the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc. related to the consolidated corporation, when the said amount of foreign corporation tax was reduced in each consolidated business year of the consolidated corporation which starts within seven years following the first day of the consolidated business year subject to the provisions of the said paragraph (hereinafter referred to as the "applicable consolidated business year" in this paragraph), it shall be deemed that the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) has been reduced from the part of the said amount of foreign corporation tax that was deemed to be the amount of individually creditable foreign corporation tax payable by the consolidated corporation, pursuant to the provisions of paragraph (1) of the said Article, as on the day of the reduction of the said foreign corporation tax:

(i) The part of the said amount of foreign corporation tax that was deemed to be the amount of individually creditable foreign corporation tax payable by the consolidated corporation in the applicable consolidated business year

(ii) The part that shall be deemed to be the amount of individually creditable foreign corporation tax payable by the consolidated corporation when the provisions of Article 68-91, paragraph (1) of the Act are applied in the applicable consolidated business year to the said amount of foreign corporation tax after the reduction.

(6) In the case where a consolidated corporation was subject to the provisions of Article 66-7, paragraph (1) of the Act, regarding the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc. related to the consolidated corporation, when the said amount of foreign corporation tax was reduced in each consolidated business year of the consolidated corporation which starts within seven years following the first day of the business year subject to the provisions of the said paragraph (hereinafter referred to as the "applicable business year" in this paragraph), it shall be deemed that the amount that remains after deducting the amount listed in item (ii) from the amount listed in item (i) has been reduced from the part of the said amount of foreign corporation tax that was deemed to be the amount of creditable foreign corporation tax payable by the consolidated corporation, pursuant to the provisions of paragraph (1) of the said Article (hereinafter referred to as the "amount of creditable foreign corporation tax" in this Article), as on the day of the reduction of the said foreign corporation tax:

(i) The part of the said amount of foreign corporation tax that was deemed to be the amount of creditable foreign corporation tax payable by the consolidated corporation in the applicable business year

(ii) The part that shall be deemed to be the amount of creditable foreign corporation tax payable by the consolidated corporation when the provisions of Article 66-7, paragraph (1) of the Act are applied in the applicable business year to the said amount of foreign corporation tax after the reduction.

(7) Where the amount of individually creditable foreign corporation tax or creditable foreign corporation tax has been deemed to have been reduced, pursuant to the provisions of paragraph (5) or the preceding paragraph, the provisions of Article 81-15, paragraph (8) of the Corporation Tax Act shall be applied as specified in Article 155-35 (excluding paragraph (2)) of the Order for Enforcement of the Corporation Tax Act. In this case, in paragraph (1) of the said Article, the term "where the amount of foreign corporation tax to be paid by a consolidated corporation" shall be deemed to be replaced with "where the amount of foreign corporation tax (including any part of the amount of foreign corporation tax to be imposed on the income of a specified foreign subsidiary company, etc. prescribed in Article 68-91, paragraph (1) of the Act on Special Measures Concerning Taxation (Credit for Foreign Tax on Individually Taxable Income of Specified Foreign Subsidiary Companies, etc. of Consolidated Corporations) or Article 66-7, paragraph (1) of the said Act (Credit for Foreign Tax on Taxable Income of Specified Foreign Subsidiary Companies, etc. of Domestic Corporations), which shall be deemed to be payable by the said consolidated corporation pursuant to the provisions of Article 68-91, paragraph (1) or Article 66-7, paragraph (1) of the said Act; hereinafter the same shall apply in this paragraph) to be paid by a consolidated corporation"; the term "the amount of individually creditable foreign corporation tax that the consolidated corporation is to pay in the consolidated business year pertaining to the tax reduction (" shall be deemed to be replaced with "the amount of individually creditable foreign corporation tax that the consolidated corporation is to pay in the consolidated business year pertaining to the tax reduction (including any amount which shall be deemed to be payable by the said consolidated corporation pursuant to the provisions of Article 68-91, paragraph (1) of the Act on Special Measures Concerning Taxation (including cases where applied mutatis mutandis by deeming the amount as prescribed in paragraph (2) of the said Article)"; and the term "the amount of individually reduced creditable foreign corporation tax" shall be deemed to be replaced with "the amount of individually reduced creditable foreign corporation tax (including the amount of individually creditable foreign corporation tax or creditable foreign corporation tax that is deemed to have been reduced pursuant to the provisions of Article 39-118, paragraph (5) or paragraph (6) (Reduction of Foreign Corporation Tax on Individually Taxable Income of Specified Foreign Subsidiary Companies, etc.) of the Order for Enforcement of the Act on Special Measures Concerning Taxation)."

(8) Where there is any amount included in the gross profits pursuant to the provisions of Article 68-90, paragraph (1) of the Act for calculating the amount of consolidated income for the relevant consolidated business year of a consolidated corporation listed in the items of the said paragraph, the said amount included in gross profits shall be included in the consolidated foreign income prescribed in the main clause of Article 155-28, paragraph (3) of the Order for Enforcement of the Corporation Tax Act for calculating the maximum amount of consolidated deduction prescribed in paragraph (1) of the said Article for the relevant consolidated business year of the said consolidated corporation; provided, however, that in the case where the state of the head office of a specified foreign subsidiary company, etc. related to the consolidated corporation is a state or territory that does not impose any foreign corporation taxes prescribed in Article 141, paragraph (1) of the said Order on income of the said specified foreign subsidiary company, etc., the amount to be included in the said consolidated foreign income shall be the amount equivalent to one-third of the said amount included in the gross profits.

(9) The part of the amount of foreign corporation taxes listed in the items of paragraph (3) that are deemed to be the amount of individually creditable foreign corporation tax payable by a consolidated corporation related to a specified foreign subsidiary company, etc., pursuant to the provisions of Article 68-91, paragraph (1) of the Act, shall be included in consolidated foreign income prescribed in the main clause of Article 155-28, paragraph (3) of the Order for Enforcement of the Corporation Tax Act for calculating the maximum amount of consolidated deduction prescribed in paragraph (1) of the said Article for a consolidated business year specified respectively in the relevant items of the consolidated corporation.

(10) Out of the amount deemed to have been reduced from the amount of individually creditable foreign corporation tax or creditable foreign corporation tax, pursuant to the provisions of paragraph (5) or paragraph (6), the amount equivalent to the amount to be appropriated, pursuant to the provisions of paragraph (7), for deduction from the amount of individually creditable foreign corporation tax to be paid prescribed in Article 155-35, paragraph (1) of the Order for Enforcement of the Corporation Tax Act under the provisions of the said paragraph or for deduction from the amount exceeding the maximum amount of individual deduction prescribed in paragraph (3) of the said Article under the provisions of the said paragraph shall be included in deductible expenses for calculating the amount of consolidated income for a consolidated business year of a consolidated corporation prescribed in paragraph (5) or paragraph (6) for making such deduction. In this case, the said amount to be included in deductible expenses shall be allocated as the amount of deductible expenses for calculating the amount of consolidated foreign income prescribed in the main clause of Article 155-28, paragraph (3) of the said Order.

(11) The consolidated business year specified by Cabinet Order prescribed in Article 68-91, paragraph (3) of the Act shall be the consolidated business year specified respectively in the items of paragraph (3), in accordance with the category of the amount of foreign corporation tax imposed on the income of a specified foreign subsidiary company, etc.

(Calculation of the Specified Individually Taxable Income of Specified Foreign Subsidiary Companies, etc.)

Article 39-119 (1) The amount specified by Cabinet Order as prescribed in Article 68-92, paragraph (3), item (i) of the Act shall be the amount obtained by multiplying the eligible income pertaining to a specified foreign subsidiary company, etc. prescribed in the said item (hereinafter referred to as the "specified foreign subsidiary company, etc." in this Article) (limited to the eligible income pertaining to the individually taxable income that is included in gross profits in the calculation of the amount of consolidated income of a consolidated corporation for a consolidated business year prescribed in the said item; hereinafter the same shall apply in this paragraph) by the ratio of the shares, etc. for considering the claims held directly by the said consolidated corporation (meaning the shares, etc. for considering the claims held directly as prescribed in Article 39-19, paragraph (1); hereinafter the same shall apply in this Article) out of the issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc. pertaining to the said eligible income

(2) The amount specified by Cabinet Order as prescribed in Article 68-92, paragraph (3), item (ii) of the Act shall be the total of the amount obtained by multiplying the eligible income for each business year of a specified foreign subsidiary company, etc. (limited to the eligible income pertaining to the individually taxable income that is included in gross profits in the calculation of the amount of consolidated income of a consolidated corporation for each consolidated business year within the preceding ten years prescribed in the said item; hereinafter the same shall apply in this paragraph) by the ratio of the shares, etc. for considering the claims held directly by the said consolidated corporation out of the issued shares, etc. of the specified foreign subsidiary company, etc. at the end of the relevant business year of the specified foreign subsidiary company, etc. pertaining to the said eligible income

(3) With respect to the application of the provisions of Article 68-92, paragraph (3) of the Act in or after the consolidated business year containing the day of a qualified merger prescribed in paragraph (5) of the said Article (referred to as a "qualified merger, etc." in the following paragraph) of a consolidated corporation set forth in the said paragraph, in the case where the provisions of the said paragraph apply, the individually taxed amount of income specified in the items of the said paragraph (meaning the amount listed in paragraph (3), item (ii) of the said Article; hereinafter the same shall apply in this Article) or the taxed amount of income (meaning the amount listed in Article 66-8, paragraph (3), item (ii) of the Act; hereinafter the same shall apply in this Article) shall be deemed to be the individually taxed amount of income for a consolidated business year of the said consolidated corporation specified respectively in the following items for the category of consolidated business years or business years listed in the relevant items of a merged corporation, split corporation, corporation making a capital contribution in kind, or corporation effecting post-formation acquisition of assets and/or liabilities (referred to as a "merged corporation, etc." in the following paragraph):

(i) A business year within ten years prior to the merger prescribed in Article 68-92, paragraph (5),item (i) of the Act (hereinafter referred to as a "business year within ten years prior to the merger" in this paragraph and the following paragraph) of a merged corporation pertaining to a qualified merger or a business year within ten years prior to the company split prescribed in paragraph (5), item (ii) of the said Article (hereinafter referred to as a "business year within ten years prior to the company split" through to paragraph (5)) of a split corporation pertaining to a qualified split-off-type company split (excluding a business year within ten years prior to the merger or business year within ten years prior to the company split listed in the following item): The relevant consolidated business year of the said consolidated corporation including the first day of a business year within ten years prior to the merger of the said merged corporation or the relevant consolidated business year of the said consolidated corporation including the first day of a business year within ten years prior to the company split of the said split corporation

(ii) A business year within ten years prior to the merger of a merged corporation pertaining to a qualified merger that started on or after the first day of the consolidated business year containing the day of the said qualified merger of the consolidated corporation (hereinafter referred to as the "consolidated business year of the merger" in this item) or a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split that started on or after the first day of the consolidated business year containing the day of the said qualified split-off-type company split of the consolidated corporation (hereinafter referred to as the "consolidated business year of the split succession" in this item): The consolidated business year containing the day preceding the first day of the consolidated business year of the merger or consolidated business year of the split succession of the said consolidated corporation

(iii) A business year within ten years prior to the company split, etc. prescribed in Article 68-92, paragraph (5), item (iii) of the Act (hereinafter referred to as a "business year within ten years prior to the company split, etc." in this Article) of a split corporation, etc. (meaning a split corporation, corporation making a capital contribution-in-kind, or corporation effecting post-formation acquisition of assets and/or liabilities; hereinafter the same shall apply in this paragraph and paragraph (6)) pertaining to a qualified spin-off-type company split, etc. (meaning a qualified spin-off-type company split, etc. prescribed in Article 68-92, paragraph (3), item (iii) of the Act; hereinafter the same shall apply in this paragraph and paragraph (6)) (excluding a business year within ten years prior to the company split when falling under the case listed in the following item and a business year within ten years prior to the company split, etc. listed in item (v)): The relevant consolidated business year of the said consolidated corporation including the first day of a business year within ten years prior to the company split, etc. of the said split corporation, etc.

(iv) A consolidated business year of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. that includes the day of the said qualified spin-off-type company split, etc. or a business year within ten years prior to the company split, etc. of the split corporation, etc. where the first day of the business year falls before the first day of the consolidated business year of the said consolidated corporation that includes the day of the said qualified spin-off-type company split, etc.: The relevant consolidated business year of the said consolidated corporation including the final day of a business year within ten years prior to the company split, etc. of the said split corporation, etc.

(v) A business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. that started on or after the first day of a consolidated business year of the said consolidated corporation including the day of the said qualified spin-off-type company split, etc. (hereinafter referred to as the "consolidated business year of the split succession, etc." in this item): The relevant consolidated business year of the said consolidated corporation including the day preceding the first day of the consolidated business year of the split succession, etc.

(4) In the case where the first day of the oldest consolidated business year or business year out of the relevant consolidated business years or business years that started within ten years prior to the first day of the consolidated business year containing the day of a qualified merger, etc. of a consolidated corporation set forth in Article 68-92, paragraph (5) of the Act (hereinafter referred to as the "first day of the business year of the consolidated corporation ten years before" in this paragraph) falls after the first day of the oldest consolidated business year or business year out of a business year within ten years prior to the merger, business year within ten years prior to the company split or business year within ten years prior to the company split, etc. of a merged corporation(s), etc. pertaining to the said qualified merger, etc. (hereinafter referred to as a "business year of the merged corporation(s), etc. within the preceding ten years" in this paragraph) (in the case of a qualified merger, etc. made among two or more merged corporations, etc., after the first day of the relevant consolidated business year or business year of the merged corporations, etc. whichever started the earliest; hereinafter referred to as the "first day of the business year of the merged corporations, etc. ten years before" in this paragraph), the provisions of the preceding paragraph shall apply by deeming respective periods classifying the period between the said first day of the business year of the merged corporations, etc. ten years before and the day preceding the said first day of the business year of the consolidated corporation ten years before (in the case where the said consolidated corporation is to be established through the said qualified merger, etc., the day preceding the first day of the consolidated business year of the consolidated corporation including the day of the qualified merger, etc.; hereinafter the same shall apply in this paragraph) by the corresponding business year of the merged corporation(s), etc. within the preceding ten years pertaining to the said first day of the business year of the merged corporations, etc. ten years before (for the period including the said preceding day, the period between the first day of the consolidated business year or business year of the said merged corporation, etc. including the said preceding day and the day preceding the said first day of the business year of the consolidated corporation ten years before) to be the relevant consolidated business year of the said consolidated corporation.

(5) The amount calculated as specified by Cabinet Order prescribed in Article 68-92, paragraph (5), item (ii) of the Act shall be the amount specified respectively in the following items for the category of the individually taxed amount of income or taxed amount of income listed in the relevant items:

(i) The individually taxed amount of income: The amount obtained by multiplying respectively the individually taxed amount of income for a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which the split corporation held immediately prior to the said qualified split-off-type company split

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation to a consolidated corporation set forth in Article 68-92, paragraph (5) of the Act through the said qualified split-off-type company split

(ii) The taxed amount of income: The amount obtained by multiplying respectively the taxed amount of income for a business year within ten years prior to the company split of a split corporation pertaining to a qualified split-off-type company split by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which the split corporation held immediately prior to the said qualified split-off-type company split

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation to a consolidated corporation set forth in Article 68-92, paragraph (5) of the Act through the said qualified split-off-type company split.

(6) The amount calculated as specified by Cabinet Order prescribed in Article 68-92, paragraph (5), item (iii) of the Act shall be the amount specified respectively in the following items for the category of the individually taxed amount of income or taxed amount of income listed in the relevant items:

(i) The individually taxed amount of income: The amount obtained by multiplying respectively the individually taxed amount of income for a business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which the split corporation, etc. held immediately prior to the said qualified spin-off-type company split, etc.

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation, etc. to a consolidated corporation set forth in Article 68-92, paragraph (5) of the Act through the said qualified spin-off-type company split

(ii) The taxed amount of income: The amount obtained by multiplying respectively the taxed amount of income for a business year within ten years prior to the company split, etc. of a split corporation, etc. pertaining to a qualified spin-off-type company split, etc. by the ratio of the shares, etc. for considering the claims held directly that are listed in (b) out of the shares, etc. for considering the claims held directly that are listed in (a):

(a) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which the split corporation, etc. held immediately prior to the said qualified spin-off-type company split, etc.

(b) The said specified foreign subsidiary company, etc.'s shares, etc. for considering the claims held directly which are to be transferred from the split corporation, etc. to a consolidated corporation set forth in Article 68-92, paragraph (5) of the Act through the said qualified spin-off-type company split.

(7) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-92, paragraph (1) of the Act apply, the phrase "of the Act" in Article 9-2, paragraph (1), item (i), (b) of the said Order shall be deemed to be replaced with "of the Act and Article 68-92 (Exclusion from Gross Profits of Dividend of Surplus, etc. to be Received from Specified Foreign Subsidiary Company, etc.) of the Act on Special Measures Concerning Taxation)."

(8) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of the first sentence of Article 68-92, paragraph (2) of the Act apply, in Article 9-2, paragraph (1), item (i), (b) of the said Order, the phrase "of the Act" shall be deemed to be replaced with "of the Act (including cases where applied by replacing the relevant terms and phrases pursuant to the provisions of the first sentence of Article 66-8, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. to be Received from Specified Foreign Subsidiary Company, etc.) of the Act on Special Measures Concerning Taxation)," and the phrase "the said paragraph" shall be deemed to be replaced with "Article 81-3, paragraph (1) of the Act"; in Article 155-43, paragraph (2), item (ii) of the said Order, the phrase "of the Act" shall be deemed to be replaced with "of the Act (including cases where applied by replacing the relevant terms and phrases pursuant to the provisions of the first sentence of Article 68-92, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. to be Received from Specified Foreign Subsidiary Company, etc.) of the Act on Special Measures Concerning Taxation)."

(Determination, etc. of Affiliated Foreign Companies)

Article 39-120 (1) In the case referred to in Article 68-90, paragraph (1) of the Act, whether or not a foreign company falls under the category of an affiliated foreign company prescribed in paragraph (2), item (i) of the said Article (hereinafter referred to as an "affiliated foreign company" in this paragraph and the following paragraph) shall be determined according to its status at the end of the relevant business year of the said foreign corporation and whether or not a consolidated corporation falls under the category of a consolidated corporation listed in the items of paragraph (1) of the said Article shall be determined according to its status at the end of the relevant business year of an affiliated foreign company related to such consolidated corporation.

(2) Where a consolidated corporation listed in the items of Article 68-90, paragraph (1) of the Act has been dissolved through a merger by the day on which two months have elapsed after the final day of the relevant business year of an affiliated foreign company related to the said consolidated corporation, the number of the shares, etc. of the said affiliated foreign company prescribed in Article 66-6, paragraph (2), item (iii) of the Act which were directly and indirectly held by the consolidated corporation (hereinafter referred to as the "number of the shares, etc. directly and indirectly held" in this paragraph) and which have been succeeded to by the merging corporation pertaining to the merger shall be deemed to be the number of the shares, etc. directly and indirectly held by the merging corporation on the final day of the relevant business year of the said affiliated foreign company.

(3) The amount included in the gross profits of a consolidated corporation subject to the provisions of Article 68-90, paragraph (1) of the Act, pursuant to the provisions of the said paragraph, shall not be included in the amount of consolidated income, etc. prescribed in the provisions of Article 81-13, paragraph (2) and paragraph (4) of the Corporation Tax Act for applying these provisions.

(4) The amount included in the gross profits pursuant to the provisions of Article 68-90, paragraph (1) of the Act shall not be included in the amount of individual income prescribed in Article 9-2, paragraph (1), item (i), (a) of the Order for Enforcement of the Corporation Tax Act for calculating the amount of consolidated profit reserve of a consolidated corporation subject to the provisions of Article 68-90, paragraph (1) of the Act.

(5) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 68-90, paragraph (7) of the Act shall apply under the provisions of the said Article (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 68-93 of the Act, Articles 39-114 to 39-116 (excluding paragraph (3)), and Article 39-118 to this Article.

(6) With regard to a trust corporation or a beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 68-90 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 68-93 of the Act, or the provisions of Articles 39-114 to 39-116 (excluding paragraph (3)), or Article 39-118 to this Article shall be specified by Ordinance of the Ministry of Finance.

Section 28 Special Provisions for Taxation on Income of Specified Foreign Corporations Related to Consolidated Corporations that are Specially-related Shareholders, etc.

(Scope, etc. of Specially-related Shareholders, etc.)

Article 39-120-2 (1) An individual who has a special relationship specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be any of the following:

(i) An individual who has a special relationship prescribed in Article 4, paragraph (1) of the Order for Enforcement of the Corporation Tax Act with an individual falling under the category of a specified shareholder, etc. (meaning a specified shareholder, etc. prescribed in Article 68-93-2, paragraph (2), item (i) of the Act; hereinafter the same shall apply in the following item and item (i) of the following paragraph)

(ii) An officer (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; hereinafter the same shall apply in this paragraph and Article 39-120-4, paragraph (2)) of a corporation falling under the category of a specified shareholder, etc. and a person listed in the items of Article 72-3 of the Order for Enforcement of the Corporation Tax Act who is related to the said officer (referred to as a "specially-related person" in the following item)

(iii) An officer of a specially-related domestic corporation (meaning a specially-related domestic corporation prescribed in Article 68-93-2, paragraph (2), item (ii) of the Act; hereinafter the same shall apply in this Section) and a specially-related person who is related to the said officer

(2) A corporation which has a special relationship specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be any of the following:

(i) Where a specified shareholder, etc. (including an individual who has a special relationship with the said specified shareholder, etc. as prescribed in item (i) or item (ii) of the preceding paragraph) or an individual who has a special relationship with a specially-related domestic corporation as prescribed in item (iii) of the said paragraph (hereinafter referred to as a "determined shareholder, etc." in this paragraph) controls any other corporation, the said other corporation

(ii) Where a determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding item control any other corporation, the said other corporation

(iii) Where a determined shareholders, etc. and a corporation which has a special relationship with him/her as prescribed in the preceding two items control any other corporation, the said other corporation.

(3) The provisions of Article 4, paragraph (3) and paragraph (4) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of the preceding paragraph shall apply.

(4) The relationship specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be the relevant relationship in the case where a specially-related shareholder, etc. prescribed in the said paragraph (hereinafter referred to as a "specially-related shareholder, etc." in this Section) and a specially-related domestic corporation have a relationship where the ratio of the shares, etc. indirectly held by the specially-related shareholder, etc. pertaining to the specially-related domestic corporation (meaning the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)) is 80 percent or more:

(i) Where out of the total number or total amount of shares or capital contributions issued by a foreign corporation (excluding that falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this item) which is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) of the Corporation Tax Act; hereinafter the same shall apply in this Article) of a specially-related domestic corporation (such issued shares or capital contributions shall exclude those held on their own by the said foreign corporation and the total number or total amount of such issued shares or capital contributions shall be referred to as the "issued shares, etc." in this Section), a specially-related shareholder, etc. holds 80 percent or more of the number or the amount of such shares, etc. (meaning shares or capital contributions; hereinafter the same shall apply in this Section): The ratio of the number or the amount of shares, etc. of a specially-related domestic corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single corporation or two or more corporations intervene(s) between a corporation which is a shareholder, etc. of a specially-related domestic corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item and a corporation falling under the category of a specially-related shareholder, etc.) and a specially-related shareholder, etc. and has(have) a linkage with them through holding the shares, etc. (where the said corporation which is a shareholder, etc. is a domestic corporation and the said intervening corporation(s) is a (are all) domestic corporation(s), excluding the said domestic corporation(s) and the corporation falling under the category of a specially-related shareholder, etc.; hereinafter referred to as a "capital contribution-related corporation(s)" in this item) (limited to the case where 80 percent or more of the number or the amount of the issued shares, etc. of each of a capital contribution-related corporation(s) and the said corporation which is a shareholder, etc. are held by a specially-related shareholder, etc. or a capital contribution-related corporation(s) (such specially-related shareholder, etc. or capital contribution-related corporation(s) shall be limited to those 80 percent or more of the number or the amount of whose issued shares, etc. are held by a specially-related shareholder, etc. or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of a specially-related domestic corporation held by the said corporation which is a shareholder, etc. out of the total issued shares, etc. of the said specially-related domestic corporation (where there are two or more such corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(5) A foreign corporation specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be any of the following:

(i) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (i) of the preceding paragraph, where the ratio of the shares, etc. held indirectly as prescribed in the said paragraph is 80 percent or more

(ii) A foreign corporation falling under the category of a foreign corporation which is a shareholder, etc. prescribed in item (ii) of the preceding paragraph where the ratio of the shares, etc. held indirectly as prescribed in the preceding paragraph is 80 percent or more and a foreign corporation falling under the category of a capital contribution-related corporation prescribed in the said item

(iii) A foreign corporation, over 50 percent of the number or the amount of whose issued shares, etc. are held directly or indirectly by a foreign corporation listed in the preceding two items (excluding a foreign corporation falling under the category of a foreign corporation listed in the preceding two items and a foreign corporation falling under the category of a specially-related shareholder, etc.).

(6) In item (iii) of the preceding paragraph, whether or not a foreign corporation directly or indirectly holds over 50 percent of the issued shares, etc. shall be determined based on the sum of the ratio of the shares, etc. held directly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to any other foreign corporation (excluding a foreign corporation falling under the category of a foreign corporation listed in item (i) or item (ii) of the said paragraph and a foreign corporation falling under the category of a specially-related shareholder, etc.; hereinafter the same shall apply in this paragraph) (such ratio of the shares, etc. held directly shall mean the ratio of the number or the amount of the shares, etc. of any other foreign corporation held by a foreign corporation listed in item (i) and item (ii) of the preceding paragraph out of the total issued shares, etc. of the said other foreign corporation) and the ratio of the shares, etc. held indirectly by a foreign corporation listed in item (i) and item (ii) of the said paragraph pertaining to the said other foreign corporation (such ratio of the shares, etc. held indirectly shall mean the ratio specified respectively in the following items for the category of cases listed in the relevant items (where falling under both of the following cases, the sum of the ratios specified respectively as follows)):

(i) Where a foreign corporation listed in item (i) and item (ii) of the preceding paragraph holds over 50 percent of the number or the amount of the issued shares, etc. of a foreign corporation which is a shareholder, etc. of the said other foreign corporation: The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them)

(ii) Where a single foreign corporation or two or more foreign corporations intervene(s) between a foreign corporation which is a shareholder, etc. of the said other foreign corporation (excluding a foreign corporation which is a shareholder, etc. set forth in the preceding item falling under the case listed in the said item) and a foreign corporation listed in item (i) and item (ii) of the preceding paragraph and has(have) a linkage with them through holding the shares, etc. (hereinafter referred to as a "capital contribution-related foreign corporation(s)" in this item) (limited to the case where over 50 percent of the number or the amount of the issued shares, etc. of each of a capital contribution-related foreign corporation(s) and the said foreign corporation which is a shareholder, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or a capital contribution-related foreign corporation(s) (such foreign corporation or capital contribution-related foreign corporation(s) shall be limited to those over 50 percent of the number or the amount of whose issued shares, etc. are held by a foreign corporation listed in item (i) and item (ii) of the said paragraph or other capital contribution-related corporation(s))): The ratio of the number or the amount of the shares, etc. of the said other foreign corporation held by the said foreign corporation which is a shareholder, etc. out of the total issued shares, etc. of the said other foreign corporation (where there are two or more such foreign corporations which are shareholders, etc., the sum of the ratios calculated for each of them).

(7) An affiliated foreign corporation specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be any of the following:

(i) An affiliated foreign corporation (meaning an affiliated foreign corporation prescribed in Article 68-93-2, paragraph (1) of the Act; hereinafter the same shall apply in this Section) which has its head office or principal office in a state or territory where there are no taxes imposed on corporate income

(ii) An affiliated foreign corporation whose tax to be imposed on its income for the relevant business year is 25 percent or less of the said income.

(8) The provisions of Article 39-114, paragraph (2) shall apply mutatis mutandis to the determination as to whether or not an affiliated foreign corporation falls under the category of an affiliated foreign corporation set forth in item (ii) of the preceding paragraph.

(Calculation of Eligible Income of Specified Foreign Corporations)

Article 39-120-3 (1) The amount of undistributed income calculated in accordance with the standards specified by Cabinet Order prescribed in Article 68-93-2, paragraph (2), item (iii) of the Act shall be the amount calculated, pursuant to the provisions of Article 39-115, paragraph (1) or paragraph (2), or paragraph (3) of the said Article with regard to the income of a specified foreign corporation prescribed in Article 68-93-6, paragraph (1) of the Act (hereinafter referred to as a "specified foreign corporation" in this Article and paragraph (1) of the following Article) in its settlement of accounts for the relevant business year.

(2) The amount obtained as a result of an adjustment for the amount of loss and base income prescribed in Article 68-93-2, paragraph (2), item (iii) of the Act shall be the amount that remains after deducting, from the base income amount prescribed in the said item for the relevant business year of a specified foreign corporation., the sum of the amounts listed as follows (where the provisions of paragraph (3) of the said Article are applied, the amount obtained by adding the amount equivalent to ten percent of the amount of expenses specified by Cabinet Order prescribed in Article 68-93-2, paragraph (2), item (iii) of the Act whose terms are replaced under the provisions of paragraph (3) of the said Article):

(i) The amount equivalent to the sum of the loss incurred in the business years that started within seven years prior to the first day of the relevant business year of the specified foreign corporation (excluding the business years that started before October 1, 2007 and the business years during which the corporation did not fall under the category of specified foreign corporation (including specified foreign corporation prescribed in Article 40-7, paragraph (1) or Article 66-9-2, paragraph (1) of the Act)) (such loss shall exclude the amount deducted in the business years preceding the said relevant business year pursuant to the provisions of this paragraph or Article 39-20-3 paragraph (2)).

(ii) The amount of corporate income tax prescribed in Article 39-115, paragraph (1), item (ii) (hereinafter referred to as "corporate income tax" in this item) that the specified foreign corporation is to pay in the relevant business year (where there is any amount of corporate income tax to be refunded in the relevant business year, the amount that remains after deducting the said amount of corporate income tax to be refunded)

(3) A loss prescribed in item (i) of the preceding paragraph shall be a loss calculated with regard to the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year, where the calculation has been made pursuant to the provisions of paragraph (1).

(4) The provisions of Article 39-115, paragraphs (7) to (9) shall apply mutatis mutandis where the amount of income of a specified foreign corporation in its settlement of accounts for the relevant business year is calculated pursuant to the provisions of paragraph (1) or paragraph (2) of the said Article.

(Calculation, etc. of the Amount of Individually Taxable Income of Specified Foreign Corporations)

Article 39-120-4 (1) The amount calculated as specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act shall be the amount calculated with regard to the eligible income (meaning the eligible income prescribed in the said paragraph; hereinafter the same shall apply in this Section) for the relevant business year of a specified foreign corporation related to a consolidated corporation which is a specially-related shareholder, etc., pursuant to the provisions of Article 39-116, paragraph (1) and paragraph (2).

(2) The amount of expenses specified by Cabinet Order set forth in Article 68-93-2, paragraph (2), item (iii) of the Act whose terms are replaced pursuant to the provisions of paragraph (3) of the said Article shall be the amount calculated with regard to the sum of personnel expenses for officers and employees of a specified foreign corporation engaged in the business of the said specified foreign corporation prescribed in paragraph (3) of the said Article, pursuant to the provisions of Article 39-116, paragraph (3).

(Determination, etc. of Business of Specified Foreign Corporations)

Article 39-120-5 (1) The person specified by Cabinet Order prescribed in Article 68-93-2, paragraph (4), item (i) of the Act shall be any of the following:

(i) Other consolidated corporations which have the consolidated full controlling interest with a consolidated corporation falling under the category of a specially-related shareholder, etc. which pertains to a specified foreign corporation prescribed in Article 68-93-2, paragraph (4), item (i) of the Act (hereinafter referred to as a "specified foreign corporation" in this paragraph) mainly engaged in the business listed in item (i) of the said paragraph (such other consolidated corporations shall exclude those falling under the category of specially-related shareholders, etc. pertaining to the said specified foreign corporation)

(ii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding item)

(iii) A person who holds over 50 percent of the number or the amount of the total issued shares, etc. of a consolidated corporation falling under the category of a specially-related shareholder, etc. (where the said consolidated corporation is a consolidated subsidiary corporation, a consolidated parent corporation related to the said consolidated corporation) which pertains to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of a specially-related shareholder, etc. pertaining to the said specified foreign corporation and a person falling under the category of persons listed in the preceding two items)

(iv) An affiliated foreign corporation related to a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act

(v) A corporation which is a shareholder, etc. prescribed in Article 39-120-2, paragraph (4), item (ii) or capital contribution-related corporation(s) which intervene(s) between a specially-related domestic corporation and a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act (excluding a person falling under the category of persons listed in item (i) or the preceding item)

(vi) A person who has a special relationship specified by Cabinet Order prescribed in Article 68-93-2, paragraph (1) of the Act with those listed as follows (excluding a person falling under the category of a specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in paragraph (4), item (i) of the said Article, a person falling under the category of a specially-related shareholder, etc. and a person falling under the category of persons listed in the preceding items):

(a) A specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act

(b) A specially-related domestic corporation pertaining to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act

(c) An individual or corporation falling under the category of a specially-related shareholder, etc. pertaining to a specified foreign corporation mainly engaged in the business listed in Article 68-93-2, paragraph (4), item (i) of the Act

(d) Those listed in the preceding items.

(2) The provisions of Article 39-117, paragraph (2) and paragraph (3) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 68-93-2, paragraph (4), item (i) of the Act. In this case, the term "those listed in the items of Article 40-4, paragraph (1), items of Article 66-6, paragraph (1), items of Article 68-90, paragraph (1) of the Act and the preceding items" in Article 39-117, paragraph (2), item (i) shall be deemed to be replaced with "a specially-related domestic corporation prescribed in Article 68-93-2, paragraph (2), item (ii) of the Act, specially-related shareholder, etc. prescribed in paragraph (1) of the said Article and those listed in the items of Article 39-120-5, paragraph (1)."

(3) The provisions of Article 39-117, paragraph (4) shall apply mutatis mutandis to the case specified by Cabinet Order prescribed in Article 68-93-2, paragraph (4), item (ii) of the Act.

(Calculation, etc. of Foreign Corporation Tax on Individually Taxable Income of Specified Foreign Corporations)

Article 39-120-6 (1) The amount calculated as specified by Cabinet Order prescribed in Article 68-93-3, paragraph (1) of the Act shall be the amount calculated, pursuant to the provisions of Article 39-118, paragraph (1), with regard to the amount of foreign corporation tax (meaning foreign corporation tax prescribed in Article 69, paragraph (1) of the Corporation Tax Act; the same shall apply in paragraph (3)) to be imposed on a specified foreign corporation prescribed in Article 68-93-3, paragraph (1) of the Act (referred to as a "specified foreign corporation" in paragraph (3)) on its income for a business year containing eligible income.

(2) In the case where the provisions of Article 81-15, paragraphs (1) to (11) of the Corporation Tax Act are applied by deeming the calculated amount to be the amount of individually creditable foreign corporation tax prescribed in paragraph (1) of the said Article payable by a consolidated corporation that is a specially-related shareholder, etc. pursuant to the provisions of Article 68-93-3, paragraph (1) of the Act, the matters concerning the application of these provisions shall be as prescribed in the provisions of Article 39-118, paragraphs (2) to (10).

(3) The consolidated business year specified by Cabinet Order prescribed in Article 68-93-3, paragraph (3) of the Act shall be the consolidated business year specified respectively in the items of Article 39-118, paragraph (3), in accordance with the category of the amount of foreign corporation tax imposed on the income of a specified foreign corporation.

(Calculation, etc. of Specified Individual Taxable Amount of Specified Foreign Corporation)

Article 39-120-7 (1) The amount specified by Cabinet Order as prescribed in Article 68-93-4, paragraph (3), item (i) of the Act shall be the amount calculated in accordance with the provisions of Article 39-119, paragraph (1) with regard to eligible income (limited to that which pertains to individually taxable income prescribed in the said item that is included in gross profits in the calculation of the amount of consolidated income for a consolidated business year, prescribed in the said item, of a consolidated corporation which is a specially-related shareholder, etc.) pertaining to a specified foreign corporation prescribed in the said item (referred to as a "specified foreign corporation" in the following paragraph).

(2) The amount specified by Cabinet Order as prescribed in Article 68-93-4, paragraph (3), item (ii) of the Act shall be the amount calculated in accordance with the provisions of Article 39-119, paragraph (2) with regard to eligible income (limited to that which pertains to individually taxable income prescribed in the said item that is included in gross profits in the calculation of the amount of consolidated income for each consolidated business year within the preceding ten years, prescribed in the said item, of a consolidated corporation which is a specially-related shareholder, etc.) for each business year of a specified foreign corporation.

(3) The matters concerning the application of the provisions of Article 68-92, paragraphs (5) through (8) of the Act as applied mutatis mutandis pursuant to Article 68-93-4, paragraph (5) of the Act shall be as prescribed in the provisions of Article 39-119, paragraphs (3) through (6).

(4) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of Article 68-93-4, paragraph (1) of the Act apply, the phrase "(Inclusion in Deductible Expenses...)" in Article 9-2, paragraph (1), item (i), (b) and Article 155-43, paragraph (2), item (ii) of the said Order shall be deemed to be replaced with "(Inclusion in Deductible Expenses ...) of the Act or Article 68-93-4 (Exclusion from Gross Profits of Dividend of Surplus, etc. Received from Specified Foreign Corporation) of the Act on Special Measures Concerning Taxation)."

(5) With regard to the application of the provisions of the Order for Enforcement of the Corporation Tax Act in the case where the provisions of the first sentence of Article 68-93-4, paragraph (2) of the Act apply, the phrase "(Exclusion of Gross Profit...) of the Act" in Article 9-2, paragraph (1), item (i), (b) of the said Order shall be deemed to be replaced with "(Exclusion of Gross Profit ...) of the Act (including the case where it is applied by replacing the term and phrase pursuant to the provisions of the first sentence of Article 68-93-4, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. Received from Specified Foreign Corporation) of the Act on Special Measures Concerning Taxation)"; and the phrase "said paragraph" in the said item (b) shall be deemed to be replaced with "Article 81-3, paragraph (1) of the Act"; and the phrase "(Exclusion of Gross Profit...) of the Act" in Article 155-43, paragraph (2), item (ii) of the said Order shall be deemed to be replaced with "(Exclusion of Gross Profit ...) of the Act (including the case where it is applied by replacing the term and phrase pursuant to the provisions of the first sentence of Article 68-93-4, paragraph (2) (Exclusion from Gross Profits of Dividend of Surplus, etc. Received from Specified Foreign Corporation) of the Act on Special Measures Concerning Taxation)."

(Determination, etc. of Specified Relationship)

Article 39-120-8 (1) The provisions of Article 39-20-8, paragraph (1) and paragraph (2) shall apply mutatis mutandis where the provisions of Article 68-93-2, paragraph (1) of the Act shall apply.

(2) Where a consolidated corporation which is a specially-related shareholder, etc. pertaining to a specially-related domestic corporation has been dissolved through a merger by the day on which two months have elapsed after the final day of the relevant business year of an affiliated foreign corporation related to the said consolidated corporation, the number of the shares, etc. of the said affiliated foreign corporation prescribed in Article 66-9-2, paragraph (2), item (iv) of the Act which were directly and indirectly held by the consolidated corporation (hereinafter referred to as the "number of the shares, etc. directly and indirectly held" in this paragraph) and which have been transferred to the merging corporation pertaining to the merger (such merging corporation shall be limited to one falling under the category of a specially-related shareholder, etc. related to the said specially-related domestic corporation and one that proves to fall under the category of a specially-related shareholder, etc. related to the said specially-related domestic corporation by receiving the transfer of the number of the shares, etc. of the said affiliated foreign corporation directly and indirectly held by the said consolidated corporation through the merger; hereinafter the same shall apply in this paragraph) shall be deemed to be the number of the shares, etc. directly and indirectly held by the merging corporation on the final day of the relevant business year of the said affiliated foreign corporation.

(3) The provisions of Article 39-120, paragraph (3) and paragraph (4) shall apply mutatis mutandis to the application of the provisions of Article 81-13, paragraph (2) and paragraph (4) of the Corporation Tax Act and the calculation of the amount of consolidated profit reserve of a consolidated corporation which is a specially-related shareholder, etc., where there is any amount included in gross profits of the said consolidated corporation pursuant to the provisions of Article 68-93-2, paragraph (1) of the Act.

(4) The provisions of Article 14-10, paragraphs (1) to (5) and paragraphs (7) to (11) of the Order for Enforcement of the Corporation Tax Act shall apply mutatis mutandis where the provisions of Article 68-93-2, paragraph (8) of the Act shall apply under the provisions of the said Article (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 68-93-5 of the Act, Articles 39-120-2 to 39-120-4 (excluding paragraph (2)), and Article 39-120-6 to this Article.

(5) With regard to a trust corporation or a beneficiary of a trust subject to corporation taxation prescribed in Article 4-7 of the Corporation Tax Act, in addition to what is specified in the preceding paragraph, other necessary matters concerning the application of the provisions of Article 68-93-2 (excluding paragraph (3), paragraph (4) and paragraph (6)) to Article 68-93-5 of the Act, Articles 39-120-2 to 39-120-4 (excluding paragraph (2)), or Article 39-120-6 to this Article shall be specified by Ordinance of the Ministry of Finance.

Section 29 Other Special Provisions for Consolidated Corporations

(Special Provisions for Taxation on Shareholders, etc. in Case of Specified Merger, etc.)

Article 39-128 (1) The provisions of Article 119-7-2, paragraph (1) of the Order for Enforcement of the Corporation Tax shall apply mutatis mutandis to the relationship specified by Cabinet Order as prescribed in Article 68-109-2, paragraph (1) of the Act, and the provisions of Article 119-7-2, paragraph (3) of the said Order shall apply mutatis mutandis to the relationship specified by Cabinet Order as prescribed in Article 68-109-2, paragraph (3) of the Act respectively.

(2) Where a consolidated parent corporation or a consolidated subsidiary corporation in which the said consolidated parent corporation has a consolidated full controlling interest, has received, as a result of a merger (limited to a merger that does not fall under the category of qualified merger) of a domestic corporation which issued old shares (meaning shares (including capital contributions; hereinafter the same shall apply in this Article) that were held by those corporations), the delivery of shares of a foreign corporation which has a relationship specified by Cabinet Order as prescribed in Article 68-109-2, paragraph (1) of the Act, when the said shares of the foreign corporation fall under the category of shares of a specified foreign corporation with less tax burden (meaning a specified foreign corporation with less tax burden prescribed in Article 68-2-3, paragraph (5), item (i) of the Act; the same shall apply in paragraph (4)), with regard to the acquisition cost of such shares thus delivered, the provisions of Article 119, paragraph (1), item (v) of the Order for Enforcement of the Corporation Tax Act in the case of calculating the amount of individual gross profits or amount of individual deductible expenses prescribed in Article 81-3, paragraph (1) of the Corporation Tax Act pursuant to the provisions of the said paragraph shall not apply.

(3) Where a consolidated parent corporation or a consolidated subsidiary corporation, in which the said consolidated parent corporation has a consolidated full controlling interest, has received, as a result of a specified split-off-type company split prescribed in Article 68-109-2, paragraph (2) of the Act which is effected by a domestic corporation that issued old shares (meaning shares that were held by those corporations), the delivery of shares of a specified foreign parent corporation prescribed in the said paragraph pertaining to a succeeding corporation in a company split, with regard to the acquisition cost of such shares thus delivered, the provisions of Article 119, paragraph (1), item (vi) of the Order for Enforcement of the Corporation Tax Act in the case of calculating the amount of individual gross profits or amount of individual deductible expenses prescribed in Article 81-3, paragraph (1) of the Corporation Tax Act pursuant to the provisions of the said paragraph shall not apply.

(4) Where a consolidated parent corporation or a consolidated subsidiary corporation, in which the said consolidated parent corporation has a consolidated full controlling interest, has received, as a result of a share exchange (limited to the share exchange that does not fall under category of qualified share exchange) which is effected by a domestic corporation that issued old shares (meaning shares that were held by those corporations), the delivery of shares of a foreign parent corporation which has a relationship specified by Cabinet Order as prescribed in Article 68-109-2, paragraph (3) of the Act, and where the said shares of the foreign corporation fall under the category of shares of a specified foreign corporation with less tax burden, with regard to the acquisition cost of such shares thus delivered, the provisions of Article 119, paragraph (1), item (viii) of the Order for Enforcement of the Corporation Tax Act in the case of calculating the amount of individual gross profits or amount of individual deductible expenses prescribed in Article 81-3, paragraph (1) of the Corporation Tax Act pursuant to the provisions of the said paragraph shall not apply.

(Special Provisions for Taxation on Distribution of Profit from Special Purpose Trust to Be Received by Consolidated Corporation)

Article 39-129 The amount specified by Cabinet Order as prescribed in Article 68-110, paragraph (2) of the Act shall be the amount of the distribution of profit from a foreign special purpose trust prescribed in Article 68-3-2, paragraph (10) of the Act (limited to the amount up to the specified individual taxable income prescribed in Article 68-92, paragraph (3) of the Act or the amount up to the specified individual taxable income prescribed in Article 68-93-4, paragraph (3) of the Act) to be received from a specified foreign subsidiary company, etc. prescribed in Article 68-90, paragraph (1) of the Act (limited to those falling under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 68-93-2, paragraph (1) of the Act (limited to those falling under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act).

(Special Provisions for Taxation on Distribution of Proceeds from Special Investment Trust to Be Received by Consolidated Corporation)

Article 39-130 The amount specified by Cabinet Order as prescribed in Article 68-111, paragraph (2) of the Act shall be the amount of the distribution of proceeds from a foreign special investment trust prescribed in Article 68-3-3, paragraph (10) of the Act (limited to the amount up to the specified individual taxable income prescribed in Article 68-92, paragraph (3) of the Act or the amount up to the specified individual taxable income prescribed in Article 68-93-4, paragraph (3) of the Act) to be received from a specified foreign subsidiary company, etc. prescribed in Article 68-90, paragraph (1) of the Act (limited to those falling under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act) or a specified foreign corporation prescribed in Article 68-93-2, paragraph (1) of the Act (limited to those falling under the category of foreign subsidiary company prescribed in Article 23-2, paragraph (1) of the Corporation Tax Act).