Order for Enforcement of the Income Tax Act

Where a split has been carried out in which only a part of the assets as a consideration for a split prescribed in Article 2, item (xii)-9, (a) of the Corporation Tax Act (hereinafter in this Article referred to as the "assets as a consideration for a split") that a splitting corporation (meaning a splitting corporation prescribed in Article 2, item (xii)-2 (Definitions) of the Corporation Tax Act; the same applies hereinafter in this Article) receives through a split is delivered to the Shareholders, Members, or Other Investors of that splitting corporation (excluding a split in which two or more corporations are splitting corporations and a corporation is established), the provisions of the Act apply to the assets as a consideration for a split that those Shareholders, Members, or Other Investors received through that split, deeming a company split by split-off (meaning a company split by split-off prescribed in Article 2, item (xii)-9 of the Corporation Tax Act; the same applies in the following paragraph) to have been carried out.

Where a split has been carried out in which two or more corporations are splitting corporations and a corporation is established, if any of the splitting corporations has delivered all or part of the assets as a consideration for a split received through that split to its Shareholders, Members, or Other Investors, the provisions of the Act apply, deeming a company split by split-off in which that corporation is the splitting corporation to have been carried out.

Where the provisions of the preceding two paragraphs apply, the amounts of the assets and liabilities of the splitting corporation that were transferred to a succeeding corporation in a company split (meaning a succeeding corporation in a company split prescribed in Article 2, item (xii)-3 of the Corporation Tax Act; the same applies hereinafter in this paragraph) through the company split by split-off under the preceding two paragraphs pertaining to the assets as a consideration for a split that the Shareholders, Members, or Other Investors under the preceding two paragraphs received are, out of the amounts of the assets and liabilities of that splitting corporation transferred to the succeeding corporation in a company split through the split under the preceding two paragraphs, the amounts of the assets and liabilities pertaining to that company split by split-off calculated pursuant to the provisions of Article 123-7 (Apportionment of Transferred Assets, etc. in a Split in Which Shares, etc. Are Delivered to Both the Splitting Corporation and Its Shareholders, etc.) of the Order for the Enforcement of the Corporation Tax Act.

Where a fraction of less than one arises in the number (in the case of a capital contribution, the amount; the same applies hereinafter through paragraph (3)) of shares of the parent corporation of the acquiring corporation prescribed in Article 112, paragraph (1) (Acquisition Price of Shares, etc. Acquired Through a Merger) (hereinafter in this paragraph referred to as "shares of the parent corporation of the acquiring corporation") that the acquiring corporation pertaining to a merger is to deliver through that merger to the Shareholders, Members, or Other Investors of the acquired corporation pertaining to that merger, and money is delivered in accordance with that fraction, the portion equivalent to that fraction is deemed to be included in those shares of the parent corporation of the acquiring corporation in calculating the amount of business income, the amount of capital gains, or the amount of miscellaneous income of those Shareholders, Members, or Other Investors for each year.

Where a fraction of less than one arises in the number of shares (including capital contributions) in the succeeding corporation in a company split pertaining to a company split by split-off, or shares in the succeeding parent corporation in a company split prescribed in Article 113, paragraph (1) (Acquisition Price of Shares, etc. Acquired Through a Company Split by Split-Off) (hereinafter in this paragraph referred to as "shares in the succeeding corporation in a company split, etc."), that the splitting corporation pertaining to that company split by split-off is to deliver through that company split by split-off to its Shareholders, Members, or Other Investors, and money is delivered in accordance with that fraction, the portion equivalent to that fraction is deemed to be included in those shares in the succeeding corporation in a company split, etc. in calculating the amount of business income, the amount of capital gains, or the amount of miscellaneous income of those Shareholders, Members, or Other Investors for each year.

Where a fraction of less than one arises in the number of wholly owned subsidiary shares prescribed in Article 113-2, paragraph (1) (Acquisition Price of Shares, etc. Acquired Through a Share Distribution) pertaining to a share distribution (hereinafter in this paragraph referred to as "wholly owned subsidiary shares") that the corporation making a distribution in kind pertaining to that share distribution is to deliver through that share distribution to its Shareholders, Members, or Other Investors, and money is delivered in accordance with that fraction, the portion equivalent to that fraction is deemed to be included in those wholly owned subsidiary shares in calculating the amount of business income, the amount of capital gains, or the amount of miscellaneous income of those Shareholders, Members, or Other Investors for each year.

Where a fraction of less than one arises in the number of shares of a corporation having the relationship specified by Cabinet Order prescribed in Article 57-4, paragraph (1) (Special Provisions on Capital Gains Due to Share Exchange) of the Act (hereinafter in this paragraph referred to as "shares of the wholly controlling parent corporation in a share exchange") that the wholly owning parent corporation in a share exchange pertaining to a share exchange is to deliver through that share exchange to the shareholders of the wholly owned subsidiary corporation in a share exchange pertaining to that share exchange, and money is delivered in accordance with that fraction, the portion equivalent to that fraction is deemed to be included in those shares of the wholly controlling parent corporation in a share exchange in calculating the amount of business income, the amount of capital gains, or the amount of miscellaneous income of those shareholders for each year.

In this Article, the meanings of the terms set forth in the following items are as prescribed in those items:

acquiring corporation: means an acquiring corporation prescribed in Article 2, item (xii) (Definitions) of the Corporation Tax Act;

acquired corporation: means an acquired corporation prescribed in Article 2, item (xi) of the Corporation Tax Act;

company split by split-off: means a company split by split-off prescribed in Article 2, item (xii)-9 of the Corporation Tax Act;

splitting corporation: means a splitting corporation prescribed in Article 2, item (xii)-2 of the Corporation Tax Act;

succeeding corporation in a company split: means a succeeding corporation in a company split prescribed in Article 2, item (xii)-3 of the Corporation Tax Act;

share distribution: means a share distribution prescribed in Article 2, item (xii)-15-2 of the Corporation Tax Act;

corporation making a distribution in kind: means a corporation making a distribution in kind prescribed in Article 2, item (xii)-5-2 of the Corporation Tax Act;

wholly owning parent corporation in a share exchange: means a wholly owning parent corporation in a share exchange prescribed in Article 2, item (xii)-6-3 of the Corporation Tax Act;

wholly owned subsidiary corporation in a share exchange: means a wholly owned subsidiary corporation in a share exchange prescribed in Article 2, item (xii)-6 of the Corporation Tax Act.

In the case where an individual has provided services to a corporation, if restricted shares that satisfy the following requirements (hereinafter in this paragraph referred to as "specified restricted shares") are delivered to that individual as consideration for the provision of those services (including the case where, upon a merger or a company split by split-off prescribed in paragraph (5), item (iii) of the preceding Article, restricted shares of the acquiring corporation prescribed in paragraph (5), item (i) of the preceding Article or of the succeeding corporation in a company split prescribed in paragraph (5), item (v) of the preceding Article, pertaining to that merger or company split by split-off, or other restricted shares specified by Ministry of Finance Order, that are delivered to a person holding those specified restricted shares of the acquired corporation prescribed in paragraph (5), item (ii) of the preceding Article or the splitting corporation prescribed in paragraph (5), item (iv) of the preceding Article, pertaining to that merger or company split by split-off (hereinafter in this paragraph referred to as "succeeding restricted shares") are delivered to that individual), the value under Article 36, paragraph (2) (Amount of Revenue) of the Act pertaining to those specified restricted shares or succeeding restricted shares is the value on the day on which the restriction on the transfer (including the creation of a security interest and other disposition; the same applies in item (i) of the following paragraph) of those specified restricted shares or succeeding restricted shares was lifted (where that individual died before that day, for those specified restricted shares or succeeding restricted shares that, at the time of the death of that individual, have been determined not to fall under the grounds prescribed in item (ii) of the following paragraph, the day of the death of that individual):

that the restricted shares are delivered to the individual in exchange for the delivery of the claims arising on the individual as the consideration for the provision of the services; or

beyond what is listed in the preceding item, that the restricted shares are found to be substantially the consideration for the provision of the services.

The restricted shares prescribed in the preceding paragraph means shares (including capital contributions, investment units prescribed in Article 2, paragraph (14) (Definitions) of the Act on Investment Trusts and Investment Corporations, and other things equivalent to these; the same applies hereinafter in this Article) that satisfy the following requirements.

that restrictions on transfer are imposed, and a period pertaining to those restrictions on transfer (referred to as the "transfer restriction period" in the following item) is provided;

that grounds are provided on which the corporation receiving services from the individual in the preceding paragraph, or the corporation that issued the shares or delivered them to the individual in that paragraph, is to acquire the shares without compensation (limited to grounds based on the circumstances of that individual's service, such as the individual in that paragraph who received delivery of the shares not continuing to work for a prescribed period within the transfer restriction period or that individual's work performance not being good, or grounds based on the circumstances of the performance or other indicators of those corporations, such as the performance of those corporations not reaching a predetermined standard).

Where rights listed in the following items, to which restrictions on their transfer or other special conditions are attached, are granted by an issuing corporation (excluding where they are granted as a Shareholder, Member, or Other Investor (limited to where it is found that there is no risk of harm to other Shareholders, Members, or Other Investors of that issuing corporation)), the value under Article 36, paragraph (2) of the Act pertaining to those rights is the amount obtained by deducting, from the value of the shares acquired through the exercise of those rights on the day of that exercise (for the rights listed in item (iii), the due date for payment or delivery under those rights (where a period for payment or delivery is provided, the day on which that payment or delivery was made)), the amount specified in each of the following items for the category of rights listed in that item.

share options prescribed in Article 280-21, paragraph (1) (Resolution on Issuance of Share Options on Favorable Terms) of the Commercial Code (Act No. 48 of 1899) prior to its amendment by the provisions of Article 64 (Partial Amendment of the Commercial Code) of the Act on Arrangement of Relevant Acts Incidental to Enforcement of the Companies Act (Act No. 87 of 2005) that were issued based on a resolution under that paragraph: the amount obtained by adding the amount to be paid in upon the exercise of those share options to the acquisition price of those share options pertaining to that exercise;

share options issued based on a resolution under Article 238, paragraph (2) (Determination of Subscription Requirements) of the Companies Act (including the determination of the subscription requirements prescribed in Article 239, paragraph (1) (Delegation of Determination of Subscription Requirements) of that Act made based on delegation by a resolution under that paragraph, and a resolution of the board of directors under the provisions of Article 240, paragraph (1) (Special Provisions on Determination of Subscription Requirements for Public Company) of that Act) (limited to those specified as being on terms or in an amount particularly favorable to the persons who subscribe for those share options, or as being the whole or part of consideration for the provision of services or other acts): the amount obtained by adding the amount to be paid in upon the exercise of those share options to the acquisition price of those share options pertaining to that exercise;

a right to acquire shares where the amount to be paid in exchange for the shares is a favorable amount (excluding those listed in the preceding two items): the amount obtained by adding the amount to be paid in upon the exercise of that right to the acquisition price of that right pertaining to that exercise.

The amount of the economic benefit that an individual receives by exclusively using assets used for the business of a corporation or an individual is the amount equivalent to the royalty normally payable for the use of those assets or other consideration for that use (where the user expends an amount as consideration for that use, the amount obtained by deducting it).

The amount of the decline in value of an asset prescribed in Article 38, paragraph (2) (Amount of Decline in Value of Assets That Give Rise to Capital Gains) of the Act for the period listed in item (ii) of that paragraph is the amount calculated by multiplying the amount calculated, in respect of the total of the amount required to acquire that asset and the amounts of equipment expenses and improvement expenses, pursuant to the former straight-line method prescribed in Article 120, paragraph (1), item (i), (a), (1) (Methods of Depreciation of Depreciable Assets) on the basis of the number of years calculated by multiplying the useful life prescribed in Article 129 (Useful Life, etc. of Depreciable Assets) for a Depreciable Asset of the same kind as that asset by 1.5, by the number of years of that asset pertaining to that period. In this case, where a Depreciable Asset of the same kind as that asset falls under a Depreciable Asset listed in Article 134, paragraph (1), item (i), (a) or (c) (Special Provisions on Depreciation Allowance Based on Cumulative Amount of Depreciation), the amount so calculated is limited to the amount specified in (a) or (c) of that item according to the category listed in (a) or (c) of that item for that Depreciable Asset of the same kind.

In the case referred to in the preceding paragraph, the treatment where there is a fraction of less than one year in the number of years listed in each of the following items is as provided in that item.

the number of years calculated by multiplying by 1.5 as prescribed in the preceding paragraph: a fraction of less than one year is to be discarded;

the number of years pertaining to the period prescribed in the preceding paragraph: a fraction of six months or more is to be treated as one year, and a fraction of less than six months is to be discarded.