①In the case where, in each business year of a foreign corporation that is a foreign bank prescribed in Article 10, paragraph (2), item (viii) (Scope of Business) of the Banking Act pertaining to a branch of a foreign bank prescribed in Article 47, paragraph (2) (License of Foreign Banks, etc.) of that Act, or a financial instruments business operator prescribed in Article 2, paragraph (9) (Definitions) of the Financial Instruments and Exchange Act (limited to a foreign corporation that conducts the type I financial instruments business prescribed in Article 28, paragraph (1) (General Rules) of that Act), there is interest on liabilities (including anything specified by Cabinet Order as being equivalent thereto) paid on liabilities pertaining to what is equivalent to the capital that it holds, the amount calculated, as specified by Cabinet Order, as corresponding to the amount calculated, as specified by Cabinet Order, as the amount that should be attributed to the permanent establishment prescribed in paragraph (1) of the preceding Article of the foreign corporation, out of the amount of the interest, is included in deductible expenses, when calculating the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for the business year.

②The provisions of the preceding paragraph apply only in the case where a Final Return, amended return or written request for reassessment is attached with a document stating the amount to be included in deductible expenses pursuant to the provisions of that paragraph and the details of its calculation, and documents concerning the calculation are retained. In this case, the amount to be included in deductible expenses pursuant to the provisions of that paragraph is limited to the amount stated as that amount.

③Even in the case where the documents set forth in the preceding paragraph have not been retained with regard to the whole or a part of the amount to be included in deductible expenses pursuant to the provisions of paragraph (1), the district director may, when finding that there are unavoidable circumstances for the failure to retain those documents, apply the provisions of paragraph (1) to the amount for which those documents were not retained, only in the case where those documents are submitted.

④The scope of liabilities pertaining to what is equivalent to capital prescribed in paragraph (1) and other necessary matters concerning the application of the provisions of that paragraph are specified by Cabinet Order.

In the case where a foreign corporation receives the application of the provisions of Article 144-2, or Article 144-11, paragraph (1) (Refund of Income Tax) or Article 147-3, paragraph (1) (Refund of Income Tax upon a reassessment or Similar Decision), with regard to the creditable amount of the foreign country's corporate tax prescribed in Article 144-2, paragraph (1) (Foreign Tax Credit for Foreign Corporations), that creditable amount of the foreign country's corporate tax is excluded from deductible expenses, when calculating the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for each business year.

In the case where a foreign corporation having a permanent establishment receives the application of the provisions of Article 144-2-2, paragraph (1) (Credit for the Amount Equivalent to Foreign Tax Adjusted at the Time of Distribution for Foreign Corporations) with regard to the amount equivalent to foreign tax adjusted at the time of distribution prescribed in that paragraph pertaining to the amount of income tax on distributions of proceeds from a group investment trust that it receives, that amount equivalent to foreign tax adjusted at the time of distribution pertaining to the amount of income tax on the distributions of proceeds that it receives is excluded from deductible expenses, when calculating the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for each business year.

①In the case where a foreign corporation receives the application of the provisions of Article 142, paragraph (3), item (ii) (Calculation of the Amount of Income Categorized as Income Attributable to a Permanent Establishment), when documents serving as the basis for the calculation concerning the allocation and other documents specified by Ministry of Finance Order are not retained with regard to the amount allocated as specified by Cabinet Order prescribed in that item (hereinafter referred to as "allocated head office expenses" in this Article), the allocated head office expenses for which those documents were not retained are excluded from deductible expenses, when calculating the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for each business year.

②Even in the case where the documents set forth in the preceding paragraph have not been retained with regard to the whole or a part of the allocated head office expenses, the district director may, when finding that there are unavoidable circumstances for the failure to retain them, refrain from applying the provisions of that paragraph to the allocated head office expenses for which those documents were not retained, only in the case where those documents are submitted.

①In the case where a foreign corporation having a permanent establishment has ceased to have a permanent establishment (excluding the case where it has ceased to have a permanent establishment due to the transfer of the permanent establishment to another person or any other grounds specified by Cabinet Order), with regard to assets attributed to the permanent establishment as of the end of the business year in which a permanent establishment is closed (meaning the business year containing the day on which it became a foreign corporation not having a permanent establishment; hereinafter the same applies in this paragraph) (excluding securities for buying and selling prescribed in Article 61-3, paragraph (1), item (i) (Inclusion of Valuation Gains or Losses on Securities for Buying and Selling in Gross Profits or Deductible Expenses) and other assets specified by Cabinet Order), their valuation gain (meaning, in the case where their value as of that end exceeds their book value as of that time, the amount of the excess) or valuation loss (meaning, in the case where their book value as of that end exceeds their value as of that time, the amount of the excess) is included in the amount of gross profit or the amount of deductible expenses, when calculating the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for the business year in which a permanent establishment is closed.

②The book value of assets whose valuation gain or valuation loss prescribed in the preceding paragraph has been included in the amount of gross profit or the amount of deductible expenses pursuant to the provisions of that paragraph, and other necessary matters concerning the application of the provisions of that paragraph, are specified by Cabinet Order.

①In the case where, between the permanent establishment of a foreign corporation and the head office, etc. prescribed in Article 138, paragraph (1), item (i) (Domestic Source Income), there has been an internal dealing (meaning an internal dealing prescribed in item (i) of that paragraph; hereinafter the same applies in this paragraph) equivalent to the acquisition or transfer by the permanent establishment of assets that would generate domestic source income listed in item (iii) or item (v) of that paragraph, the amount of income pertaining to income attributable to a permanent establishment of the foreign corporation for each business year is calculated by deeming that the internal dealing was carried out at the amount specified by Cabinet Order as being equivalent to the book value of the assets immediately prior to the internal dealing.

②The acquisition cost of assets at the permanent establishment of a foreign corporation in the case where the provisions of the preceding paragraph apply and other necessary matters concerning the application of the provisions of that paragraph are specified by Cabinet Order.

The amount of income pertaining to domestic source income specified in Article 141, item (i), (b) and item (ii) (Tax Base) for each business year of a foreign corporation is to be the amount calculated, as specified by Cabinet Order, with regard to the domestic source income prescribed in those provisions in accordance with the provisions of Article 142 through Article 142-2-2 (Calculation of the Amount of Income Categorized as Income Attributable to a Permanent Establishment).

①The amount of corporation tax imposed on a foreign corporation for income for each business year is to be the amount calculated by multiplying the amount of income categorized as domestic source income by a tax rate of 23.2 percent, for each category of the following domestic source income:

②In the case referred to in the preceding paragraph, with regard to the part of the amount that is eight million yen per annum or less out of the amount of income categorized as domestic source income of an ordinary corporation whose amount of stated capital or amount of capital contributions is 100 million yen or less at the end of each business year or which has no capital or investment at the end of each business year, or of an association or foundation without juridical personality, for each category of domestic source income listed in the items of that paragraph, the applicable tax rate is 19 percent, notwithstanding the provisions of the paragraph.

③With regard to the application of the preceding paragraph to a foreign corporation whose business year is less than one year, the phrase "amount that is eight million yen per annum" in the paragraph is deemed to be replaced with "amount that is calculated by dividing eight million yen by 12 and then multiplying the result by the number of months of the relevant business year."

④The number of months set forth in the preceding paragraph is calculated according to the calendar; a division of less than one month is counted as one month.

⑤The provisions of paragraph (2) do not apply to an ordinary corporation which is a foreign corporation and which falls under any of the following corporations as of the end of each business year:

The provisions of Article 68 (Income Tax Credit) apply mutatis mutandis in the case where a foreign corporation receives, in each business year, payment of domestic source income specified in each item of Article 141 (Tax Base) in accordance with the category of foreign corporation listed in the relevant item (for a foreign corporation listed in item (i) of that Article, the category of domestic source income listed in (a) or (b) of that item) (for the domestic source income specified in item (i) of that Article, the domestic source income listed in (a) or (b) of that item), on which income tax is to be imposed pursuant to the provisions of the Income Tax Act. In this case, the phrase "Article 69-2, paragraph (1) (Credit for the Amount Equivalent to Foreign Tax Adjusted at the Time of Distribution)" in Article 68, paragraph (1) is deemed to be replaced with "Article 144-2-2, paragraph (1) (Credit for the Amount Equivalent to Foreign Tax Adjusted at the Time of Distribution for Foreign Corporations)", and the term "excluding" in that paragraph is deemed to be replaced with "excluding the amount of specified income tax (meaning the portion of the amount of income tax collected pursuant to the provisions of Article 212, paragraph (1) (Withholding Obligation) of that Act with respect to the consideration listed in Article 161, paragraph (1), item (vi) (Domestic Source Income) of that Act that corresponds to the salary or remuneration listed in Article 161, paragraph (1), item (xii), (a) or (c) of that Act that is deemed, pursuant to the provisions of Article 215 (Special Provisions on Withholding at the Source on Earnings from the Provision of Personal Services by Nonresidents) of that Act, to have been collected pursuant to the provisions of that paragraph) and"; the phrase "interest and dividends, etc." in paragraph (2) of that Article is deemed to be replaced with "domestic source income prescribed in Article 144 (Income Tax Credit for Foreign Corporations)"; and the phrase "the items of Article 72, paragraph (1)" in paragraph (3) of that Article is deemed to be replaced with "the items of Article 144-4, paragraph (1) or the items of paragraph (2) of that Article", the phrase "Article 78, paragraph (1)" with "Article 144-11, paragraph (1)", and the phrase "Article 133, paragraph (1)" with "Article 147-3, paragraph (1)".