Order for Enforcement of the Income Tax Act

The depreciation method for Depreciable Assets prescribed in Article 120, paragraph (1) or Article 120-2, paragraph (1) (Depreciation Methods for Depreciable Assets) must be chosen for each Depreciable Asset set out in the items of Article 120, paragraph (1) or the items of Article 120-2, paragraph (1), and, for the Depreciable Assets set out in Article 120, paragraph (1), item (i), (a), and items (ii), (iii), and (v), and Article 120-2, paragraph (1), item (i), (a), item (ii), item (iii), (a), item (iii), (b), and item (v), for each category such as type of facilities specified by Ministry of Finance Order. In this case, a Resident who has two or more offices or vessels may choose a depreciation method for each office or vessel.

A Resident must, by the Filing Deadline for income tax for the year that includes the date specified in each of the following items for the category of persons set out in that item, notify in writing the competent district director with jurisdiction over the place for tax payment, for each category, of the method to be used among the depreciation methods prescribed in Article 120, paragraph (1) or Article 120-2, paragraph (1), with respect to Depreciable Assets belonging to the same category as the Depreciable Assets the Resident holds (meaning the category prescribed in the preceding paragraph; for a Resident who has two or more offices or vessels and intends to choose a depreciation method for each office or vessel, meaning that category for each office or vessel); provided, however, that this does not apply to the Depreciable Assets set out in Article 120, paragraph (1), item (i), (b), and items (iv) and (vi), and Article 120-2, paragraph (1), item (i), (b), and items (iv) and (vi).

A Resident who has newly commenced operations that give rise to real property income, business income, timber income, or miscellaneous income: the date on which the Resident commenced those operations;

A Resident who has acquired a Depreciable Asset other than a Depreciable Asset for which the Resident has already chosen the depreciation method to be used after commencing the operations referred to in the preceding item (including one for which the method prescribed in Article 125 (Statutory Depreciation Methods for Depreciable Assets) is to be used because the Resident did not notify the depreciation method): the date on which the Resident acquired that asset;

A Resident who has newly established an office and who intends to choose, for a Depreciable Asset belonging to that office, a depreciation method different from the method already chosen for assets belonging to the same category as that Depreciable Asset (meaning the category prescribed in the preceding paragraph), or who has already chosen different depreciation methods for each office: the date on which the Resident newly established the office;

A Resident who has newly acquired a vessel and who intends to choose, for that vessel, a depreciation method different from the method already chosen for vessels other than that vessel, or who has already chosen different depreciation methods for each vessel: the date on which the Resident newly acquired the vessel.

In the case where, for Depreciable Assets acquired on or before March 31, 2007 (hereinafter in this paragraph referred to as "assets subject to the former depreciation methods"), a Resident has already chosen the former straight-line method, the former declining-balance method, or the former units-of-production method as the method to be used (including the case where the method prescribed in Article 125 is to be used because the Resident did not notify the method, and excluding the case where, the Resident having two or more offices or vessels, the Resident has already chosen different methods for each office or vessel), if the Resident has not made the notification under the preceding paragraph for a Depreciable Asset acquired on or after April 1 of that year (hereinafter in this paragraph referred to as "assets subject to the new depreciation methods") that would, if it had been acquired on or before March 31 of that year, belong to the same category (meaning the category prescribed in paragraph (1)) as those assets subject to the former depreciation methods, the Resident is deemed to have chosen, for those assets subject to the new depreciation methods, the depreciation method specified in each of the following items for the category of depreciation method set out in that item that was chosen for those assets subject to the former depreciation methods (for an asset subject to the new depreciation methods that falls under a Depreciable Asset set out in Article 120-2, paragraph (1), item (iii), (a), the method specified in item (i) or item (iii), respectively, according to whether the method chosen for those assets subject to the former depreciation methods is the one set out in item (i) or item (iii)); provided, however, that this does not apply where approval under paragraph (1) of the following Article has been obtained for another asset subject to the new depreciation methods belonging to the same category (meaning the category prescribed in paragraph (1)) as that asset subject to the new depreciation methods.

The former straight-line method: the straight-line method;

The former Declining-balance Method: the Declining-balance Method;

The former Units-of-production Method: the Units-of-production Method (for an asset subject to the new depreciation methods that falls under a Depreciable Asset set out in Article 120-2, paragraph (1), item (v), the Units-of-production Method, etc.).

In the case where, for Depreciable Assets set out in Article 120-2, paragraph (1), item (iii) that were acquired on or before March 31, 2016 (hereinafter in this paragraph referred to as "former assets subject to the choice of method"), a Resident has already chosen the straight-line method as the method to be used (excluding the case where, the Resident having two or more offices or vessels, the Resident has already chosen different methods for each office or vessel), if the Resident has not made the notification under paragraph (2) for a Depreciable Asset set out in (a) of that item (hereinafter in this paragraph referred to as "new assets subject to the choice of method") that would, if it had been acquired on or before that date, belong to the same category (meaning the category prescribed in paragraph (1); the same applies hereinafter in this paragraph) as those former assets subject to the choice of method, the Resident is deemed to have chosen the straight-line method for those new assets subject to the choice of method; provided, however, that this does not apply where approval under paragraph (1) of the following Article has been obtained for another new asset subject to the choice of method belonging to the same category as that new asset subject to the choice of method.

For a Depreciable Asset prescribed in the proviso to paragraph (2), the Resident is deemed to have chosen, on the date on which the Resident acquired that asset, the method specified in Article 120, paragraph (1), item (i), (b), item (iv), or item (vi), or Article 120-2, paragraph (1), item (i), (b), item (iv), or item (vi).

When a Resident intends to change the depreciation method chosen for a Depreciable Asset (including the method prescribed in the following Article that a person who did not notify the depreciation method is to use) (including when a Resident who has two or more offices or vessels and has not chosen depreciation methods for each office or vessel intends to choose them for each office or vessel), the Resident must obtain the approval of the competent district director with jurisdiction over the place for tax payment.

A Resident who intends to obtain the approval referred to in the preceding paragraph must submit to the competent district director with jurisdiction over the place for tax payment, by March 15 of the year in which the Resident intends to adopt the new depreciation method, a written application stating that fact, the reason for the change, and other particulars specified by Ministry of Finance Order.

Where a written application referred to in the preceding paragraph is submitted, the district director may reject the application if a reasonable period has not elapsed since the Resident who submitted the application adopted the depreciation method currently in use, or if the district director finds that it would be difficult to calculate that Resident's amount of real property income, amount of business income, amount of timber income, or amount of miscellaneous income for each year properly under the depreciation method that the Resident intends to change to.

Where the written application referred to in paragraph (2) is submitted, and the district director makes a disposition of approval or rejection of the application, the district director is to notify the Resident who made the application to that effect in writing.

Where a written application referred to in paragraph (2) is submitted, if no disposition of approval or rejection has been made on the application by December 31 of the year prescribed in that paragraph (where the Resident who submitted the application died or made an Absence From Japan in the course of that year, by the time of that death or Absence From Japan), the approval is deemed to have been given on that date or at that time.

The method specified by Cabinet Order in the case where the depreciation method prescribed in Article 49, paragraph (1) (Calculating Depreciation Allowances for Depreciable Assets; Depreciation Methods) of the Act has not been chosen is the method specified in each of the following items for the category of assets set out in that item.

Depreciable Assets acquired on or before March 31, 2007: the method specified in each of the following sub-items for the respective category of assets set out in that sub-item:

Depreciable Assets set out in Article 120, paragraph (1), item (i), (a) and item (ii) (Depreciation Methods for Depreciable Assets): the former straight-line method;

Depreciable Assets set out in Article 120, paragraph (1), items (iii) and (v): the former units-of-production method;

Depreciable Assets acquired on or after April 1, 2007: the methods specified in the following for the respective categories of assets set forth below:

Depreciable Assets set forth in Article 120-2, paragraph (1), item (i), (a) and item (ii) (Depreciation Methods for Depreciable Assets): the straight-line method;

Depreciable Assets set forth in Article 120-2, paragraph (1), item (iii): the Units-of-production Method;

Depreciable Assets set forth in Article 120-2, paragraph (1), item (v): the units-of-production method, etc.

Except as otherwise provided, the acquisition price of Depreciable Assets prescribed in Articles 120 through 122 (Depreciation Methods for Depreciable Assets) is, according to the category of assets set forth in each of the following items, the amount set forth in that item.

Purchased Depreciable Assets: the sum of the following amounts:

The purchase price of that asset (if there are freight charges for taking delivery, cargo handling charges, transport insurance premiums, purchase commissions, customs duties (excluding the accessory taxes prescribed in Article 2, paragraph (1), item (iv)-2 (Definitions) of the Customs Act), or other expenses required for the purchase of that asset, the amount obtained by adding the amount of those expenses);

The amount of expenses directly required for putting that asset into business use;

Depreciable Assets pertaining to the Resident's own construction, manufacture, or production (hereinafter in this Article referred to as "construction, etc."): the sum of the following amounts:

The amount of raw material costs, labor costs, and expenses required for the construction, etc. of that asset;

The amount of expenses directly required for putting that asset into business use;

Living organisms set forth in Article 6, item (ix), (a) (Living Organisms) that the Resident has raised (hereinafter in this item referred to as "cattle, horses, etc."): the sum of the following amounts:

The amount set forth in item (i), (a) or item (v), (a) pertaining to the cattle, horses, etc. acquired for raising, or the amount of breeding fees and birthing costs, and the amount of feed costs, labor costs, and expenses required for the raising of the acquired cattle, horses, etc.;

The amount of expenses directly required for putting the raised cattle, horses, etc. into business use;

Living organisms set forth in Article 6, item (ix), (b) and (c) that the Resident has matured (hereinafter in this item referred to as "fruit trees, etc."): the sum of the following amounts:

The amount set forth in item (i), (a) or (a) of the following item pertaining to the fruit trees, etc. acquired for maturing, or the amount of seed and seedling costs, and the amount of fertilizer costs, labor costs, and expenses required for the maturing of the acquired fruit trees, etc.;

The amount of expenses directly required for putting the matured fruit trees, etc. into business use;

Depreciable Assets acquired by a method other than the methods prescribed in the preceding items: the sum of the following amounts:

The amount normally required for acquiring that asset at the time of its acquisition;

The amount of expenses directly required for putting that asset into business use.

The acquisition price, prescribed in the preceding paragraph, of a Depreciable Asset acquired for a reason set forth in the items of Article 60, paragraph (1) (Acquisition Costs of Assets Acquired as Gifts) of the Act (excluding those to which Article 40, paragraph (1), item (i) (Inclusion of Gifts of Inventory in Gross Revenue) of the Act has applied) is the amount equivalent to the acquisition price of that Depreciable Asset under this Article and paragraph (2) of the following Article, on the assumption that the person who acquired that Depreciable Asset had continued to own it.