Article 57-2Non-application of a Carryover of Losses for a Corporation Showing a Loss. That Is Controlled by Specified Shareholders

①In the case where a domestic corporation that has become subject to a specified controlling interest of a second person (meaning a relationship whereby the second person holds directly or indirectly shares or capital contributions exceeding 50 percent of the total number or the total amount of the issued shares of or capital contributions to the domestic corporation (excluding the shares that the domestic corporation holds in itself and the capital contributions made thereby) or any other relationship as specified by Cabinet Order and excluding a relationship that occurred on any grounds specified by Cabinet Order; hereinafter the same applies in this paragraph) and that holds, in the business year containing the day on which the domestic corporation became subject to the specified controlling interest (hereinafter such day is referred to as the "date of control" in this paragraph and item (i) of the following paragraph, and such business year is referred to as a "business year under specified controlling interest" in this paragraph), the net operating loss that arose in each business year prior to the business year under specified controlling interest (such net operating loss includes the amount which was deemed to be the net operating loss of the domestic corporation under paragraph (2) of the preceding Article and is limited to the amount to which the provisions of paragraph (1) of that Article apply; hereinafter the same applies in this Article) or assets with a valuation loss (meaning assets held by the domestic corporation as of the first day of the business year under specified controlling interest which are specified by Cabinet Order as those whose value as of that day does not reach their book value) (hereinafter such domestic corporation is referred to as a "corporation showing a loss, etc." in this Article) falls under any of the following circumstances, up to the day preceding the day on which five years have elapsed from the date of control (in the case where the corporation showing a loss, etc. falls under the case specified by Cabinet Order as a case where it has ceased to be subject to the specified controlling interest, a release from an obligation as specified by Cabinet Order or other acts (referred to as a "release from an obligation, etc." in item (iii)) have been made for obligations of the corporation showing a loss, etc., or any other events as specified by Cabinet Order have occurred, up to the day on which those events occurred), the provisions of paragraph (1) of the preceding Article do not apply to the net operating loss that arose in each business year prior to the business year containing the day on which the corporation showing a loss, etc. came to fall under any of the following circumstances (in the case where the corporation showing a loss, etc. falls under the circumstances listed in item (iv) (limited to the part pertaining to the qualified merger prescribed in that item), the day preceding the date of the qualified merger; such day is referred to as the "relevant day" in the following paragraph and paragraph (3)) (hereinafter such business year is referred to as the "applicable business year" in this Article) in each business year on or after the applicable business year:

②In the case where a merger, company split, capital contribution in kind or distribution in kind prescribed in Article 2, item (xii)-5-2 (Definitions) is effected between a corporation showing a loss, etc. and another corporation on or after the relevant day of the corporation showing a loss, etc., the provisions specified in the following items do not apply to the net operating loss listed in the respective items:

③In the case where the residual assets of a domestic corporation that has a full controlling interest prescribed in paragraph (2) of the preceding Article with a corporation showing a loss, etc. and of which the corporation showing a loss, etc. holds the whole or a part of the issued shares or capital contributions are determined on or after the relevant day of the corporation showing a loss, etc., the provisions of that paragraph and paragraph (3) of that Article do not apply, with regard to the corporation showing a loss, etc., to the net operating loss that arose in each business year on or before the business year of the domestic corporation containing the date of determination of residual assets (in the case where the date of determination of residual assets is on or after the day on which three years have elapsed for the corporation showing a loss, etc., limited to the portion of the net operating loss which arose in a business year starting prior to the first day of the applicable business year of the corporation showing a loss, etc.).

④In the case where a qualified merger with a domestic corporation as the acquiring corporation is effected between the domestic corporation and a corporation showing a loss, etc., or in the case where the residual assets of a corporation showing a loss, etc. that is another domestic corporation having a full controlling interest prescribed in paragraph (2) of the preceding Article with a domestic corporation are determined, the provisions of that paragraph and paragraph (3) of that Article do not apply to the net operating loss that arose in each business year prior to the applicable business year of that corporation showing a loss, etc.

⑤Necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.