Article 62-7Exclusion of Losses on the Transfer of Specified Assets from Deductible Expenses

①In the case where a specified qualified organizational restructuring, etc. (meaning a qualified merger, or a merger that does not fall under a qualified merger and to which the provisions of Article 61-11, paragraph (1) (Profit or Loss from Transactions between Corporations with a Full Controlling Interest) apply, a qualified company split, a qualified capital contribution in kind or a qualified in-kind distribution, that does not fall under the category specified by Cabinet Order as a qualified organizational restructuring, etc. for the purpose of conducting business jointly as prescribed in Article 57, paragraph (4) (Carryover of Losses); hereinafter the same applies in this Article) has been effected between a domestic corporation and a corporation in a controlling interest (meaning a corporation that has a controlling interest with the domestic corporation), with the domestic corporation as an acquiring corporation, succeeding corporation in a company split, corporation receiving a capital contribution in kind or corporation receiving a distribution in kind (excluding the case specified by Cabinet Order as a case where a controlling interest has continuously existed between the domestic corporation and the corporation in a controlling interest since the latest of the day five years prior to the first day of the business year containing the date of the domestic corporation's specified qualified organizational restructuring, etc. (or, in the case where the specified qualified organizational restructuring, etc. is a distribution of all residual assets, the day following the date of determination of residual assets) (hereinafter referred to as the "business year of a specified organizational restructuring" in this paragraph), the date of establishment of the domestic corporation, or the date of establishment of the corporation in a controlling interest), the net operating loss on the transfer of specified assets that arises during the period from the first day of the business year of a specified organizational restructuring of the domestic corporation up to the day on which three years have elapsed from that first day (where the day on which three years have elapsed is after the day on which five years have elapsed from the day on which the domestic corporation last came to have a controlling interest with the corporation in a controlling interest, up to the day on which those five years have elapsed) (in the case where, in any business year ending during that period, the domestic corporation is subject to the provisions of Article 62-9, paragraph (1) (Gains or Losses on the Fair Valuation of Assets Held by Wholly Owned Subsidiary Corporations in a share exchange Involved in Non-qualified Share Exchange), Article 64-11, paragraph (1) (Gains or Losses on the Fair Valuation of Assets Accompanying the Commencement of the Group Tax Sharing System), Article 64-12, paragraph (1) (Gains or Losses on the Fair Valuation of Assets Accompanying Participation in the Group Tax Sharing System) or Article 64-13, paragraph (1) (limited to the part pertaining to item (i)) (Gains or Losses on the Fair Valuation of Assets Accompanying Withdrawal from the Group Tax Sharing System, etc.), the period from the first day of the business year of a specified organizational restructuring up to the last day of the business year for which it is subject to those provisions; referred to as the "covered period" in paragraph (6)) is excluded from deductible expenses, when calculating the amount of income of the domestic corporation for each business year.

②The net operating loss on the transfer of specified assets as prescribed in the preceding paragraph means the sum of the amounts listed as follows:

④When a corporation in a controlling interest as prescribed in paragraph (1) or an acquired corporation, etc. as prescribed in the preceding paragraph is a corporation showing a loss, etc. as prescribed in Article 60-3, paragraph (1) (Amount of Loss from Transfer, etc. of Assets of a Corporation Showing a Loss, etc. That Is Controlled by Specified Shareholders, etc.) (referred to as a "corporation showing a loss, etc." in the following paragraph and paragraph (6)) as of immediately prior to a specified qualified organizational restructuring, etc., and when the specified qualified organizational restructuring, etc. is effected during the application period prescribed in paragraph (1) of that Article, the provisions of paragraph (1) pertaining to the specified qualified organizational restructuring, etc. (including the case where they are applied mutatis mutandis pursuant to the preceding paragraph; the same applies in paragraph (6)) do not apply to the assets that the domestic corporation set forth in paragraph (1) has received from the corporation in a controlling interest or acquired corporation, etc., as a result of the specified qualified organizational restructuring, etc.

⑤When the domestic corporation set forth in paragraph (1) is a corporation showing a loss, etc., and when a specified qualified organizational restructuring, etc. is effected during the application period prescribed in Article 60-3, paragraph (1), the provisions of paragraph (1) pertaining to the specified qualified organizational restructuring, etc. do not apply to the assets that the domestic corporation owns.

⑥When the domestic corporation set forth in paragraph (1) becomes a corporation showing a loss, etc. after a specified qualified organizational restructuring, etc., and when the application period prescribed in Article 60-3, paragraph (1) has started, the covered period is to end on the day preceding the day on which the application period prescribed in that paragraph starts.

⑦When, after a specified qualified organizational restructuring, etc., the approval under the provisions of Article 64-9, paragraph (1) (Group Tax Sharing Approval) has become effective with regard to the domestic corporation set forth in paragraph (1) and the application period prescribed in Article 64-14, paragraph (1) (Exclusion of Losses on the Transfer of Specified Assets from Deductible Expenses) has started, the amount listed in paragraph (2), item (ii) pertaining to the specified qualified organizational restructuring, etc. is deemed not to exist in any business year starting on or after the first day of that application period.

⑧The amount that may be deducted from the net operating loss on the transfer of specified assets prescribed in paragraph (1) and other necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.