Order for Enforcement of the Income Tax Act

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 is, in the case where, immediately before a share exchange, there is between the wholly owning parent corporation in a share exchange prescribed in that paragraph pertaining to that share exchange (referred to in paragraphs (4) and (5) as the "wholly owning parent corporation in a share exchange") and a corporation other than that wholly owning parent corporation in a share exchange a full controlling interest held by that corporation (meaning a full controlling interest prescribed in Article 2, item (xii)-7-6 (Definitions) of the Corporation Tax Act; the same applies hereinafter in this paragraph), that full controlling interest.

The share exchange specified by Cabinet Order prescribed in Article 57-4, paragraph (1) of the Act is a share exchange that has a relationship of holding by shareholders in equal proportions prescribed in Article 4-3, paragraph (18), item (ii) (Shareholding Relationships, etc. in Qualified Reorganizations) of the Order for the Enforcement of the Corporation Tax Act.

The share options specified by Cabinet Order prescribed in Article 57-4, paragraph (3), item (v) of the Act are the following share options.

a share option issued on terms or for an amount especially favorable to the person who takes up that share option;

a share option issued as all or part of consideration for the provision of services or other acts (excluding those falling under the preceding item).

With regard to the calculation of the amount of business income, amount of capital gains, or amount of miscellaneous income pertaining to shares in the wholly owning parent corporation in a share exchange (including contributions; the same applies hereinafter in this paragraph and the following paragraph) or shares in a corporation that has the relationship prescribed in paragraph (1) with the wholly owning parent corporation in a share exchange (hereinafter in this paragraph referred to as "parent corporation") that were acquired by a Resident to whom the provisions of Article 57-4, paragraph (1) of the Act have applied through a share exchange prescribed in that paragraph, the acquisition price of the old shares prescribed in Article 57-4, paragraph (1) of the Act that were transferred to that wholly owning parent corporation in a share exchange through that share exchange (where there are expenses required for the acquisition of those shares in the wholly owning parent corporation in a share exchange or shares in the parent corporation, the amount obtained by adding the amount of those expenses) is the acquisition price of those acquired shares in the wholly owning parent corporation in a share exchange or shares in the parent corporation.

With regard to the calculation of the amount of business income, amount of capital gains, or amount of miscellaneous income after a specified share exchange without consideration, pertaining to shares held (meaning shares in the wholly owning parent corporation in a share exchange pertaining to that specified share exchange without consideration that the Resident holds immediately after that specified share exchange without consideration; the same applies hereinafter in this paragraph) in the case where a Resident to whom the provisions of Article 57-4, paragraph (1) of the Act have applied has come to hold no old shares prescribed in that paragraph due to a specified share exchange without consideration prescribed in that paragraph, the amount obtained by adding the acquisition price of those old shares immediately before that specified share exchange without consideration to the acquisition price of those shares held immediately before that specified share exchange without consideration is the acquisition price of those shares held.

With regard to the calculation of the amount of business income, amount of capital gains, or amount of miscellaneous income pertaining to shares in the wholly owning parent corporation resulting from a share transfer prescribed in Article 57-4, paragraph (2) of the Act that were acquired by a Resident to whom the provisions of that paragraph have applied through a share transfer prescribed in that paragraph, the acquisition price of the old shares prescribed in that paragraph that were transferred to that wholly owning parent corporation resulting from a share transfer through that share transfer (where there are expenses required for the acquisition of shares in that wholly owning parent corporation resulting from a share transfer, the amount obtained by adding the amount of those expenses) is the acquisition price of those acquired shares in the wholly owning parent corporation resulting from a share transfer.

With regard to the calculation of the amount of business income, amount of capital gains, or amount of miscellaneous income pertaining to shares (including contributions and investment units prescribed in Article 2, paragraph (14) (Definitions) of the Act on Investment Trusts and Investment Corporations; the same applies hereinafter in this Article) specified in each item of Article 57-4, paragraph (3) of the Act, or to share options, that a Resident to whom the provisions of that paragraph have applied acquired due to the grounds prescribed in each item of that paragraph, the amount specified in each of the following items for the category of those acquired shares or share options set out in that item is the acquisition price of those acquired shares or share options.

Shares in the corporation making the acquisition that were delivered as consideration for the acquisition of shares with a put option prescribed in Article 57-4, paragraph (3), item (i) of the Act through the exercise of the put option specified in that item (limited to shares in the corporation making the acquisition in the case where the provisions of that paragraph apply): the acquisition price of those shares with a put option (where there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

Shares in the corporation making the acquisition that were delivered as consideration for the acquisition of shares subject to call prescribed in Article 57-4, paragraph (3), item (ii) of the Act due to the occurrence of the grounds to acquire specified in that item (limited to the case where only shares in the corporation making the acquisition are delivered, as consideration for that acquisition, to the Shareholder, Member, or Other Investor prescribed in that item whose shares are acquired) (limited to shares in the corporation making the acquisition in the case where the provisions of that paragraph apply): the acquisition price of those shares subject to call (where there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

the following shares and share options of the corporation making the acquisition that are received as consideration for the acquisition of the shares subject to call prescribed in Article 57-4, paragraph (3), item (ii) of the Act due to the occurrence of the grounds to acquire pertaining to those shares provided for in that item (limited to the case where all of the shares of the class of shares subject to that acquisition have been acquired and only shares and share options of the corporation making the acquisition have been delivered, as consideration for that acquisition, to the Shareholder, Member, or Other Investor prescribed in that item who is subject to that acquisition) (limited to those shares and share options of the corporation making the acquisition where the provisions of that paragraph apply): the amount specified respectively below according to the category of those shares and share options;

shares of the corporation making the acquisition: the acquisition price of the shares subject to call (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

share options of the corporation making the acquisition: zero;

shares of the corporation making the acquisition that are received as consideration for the acquisition of the shares subject to class-wide call prescribed in Article 57-4, paragraph (3), item (iii) of the Act by the resolution to acquire pertaining to those shares provided for in that item (limited to the case where no assets other than shares of the corporation making the acquisition (excluding money or other assets delivered based on a petition for determination of the price of that acquisition) have been delivered, as consideration for that acquisition, to the Shareholder, Member, or Other Investor prescribed in that item who is subject to that acquisition) (limited to those shares of the corporation making the acquisition where the provisions of that paragraph apply): the acquisition price of the shares subject to class-wide call (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

the following shares and share options of the corporation making the acquisition that are received as consideration for the acquisition of the shares subject to class-wide call prescribed in Article 57-4, paragraph (3), item (iii) of the Act by the resolution to acquire pertaining to those shares provided for in that item (limited to the case where shares and share options of the corporation making the acquisition have been delivered, as consideration for that acquisition, to the Shareholder, Member, or Other Investor prescribed in that item who is subject to that acquisition, and no assets other than these (excluding money or other assets delivered based on a petition for determination of the price of that acquisition) have been delivered) (limited to those shares and share options of the corporation making the acquisition where the provisions of that paragraph apply): the amount specified respectively below according to the category of those shares and share options;

shares of the corporation making the acquisition: the acquisition price of the shares subject to class-wide call (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

share options of the corporation making the acquisition: zero;

shares of the corporation making the acquisition that are received as consideration for the acquisition of the corporate bond pertaining to the bond with share options prescribed in Article 57-4, paragraph (3), item (iv) of the Act, by the exercise of the share options provided for in that item pertaining to that corporate bond (limited to those shares of the corporation making the acquisition where the provisions of that paragraph apply): the acquisition price of the bond with share options (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

shares of the corporation making the acquisition that are received as consideration for the acquisition of the share options subject to call prescribed in Article 57-4, paragraph (3), item (v) of the Act due to the occurrence of the grounds to acquire pertaining to those share options provided for in that item (limited to those shares of the corporation making the acquisition where the provisions of that paragraph apply): the acquisition price of the share options subject to call (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses);

shares of the corporation making the acquisition that are received as consideration for the acquisition of the bond with share options to which the share options subject to call prescribed in Article 57-4, paragraph (3), item (vi) of the Act are attached, due to the occurrence of the grounds to acquire pertaining to that bond provided for in that item (limited to those shares of the corporation making the acquisition where the provisions of that paragraph apply): the acquisition price of the bond with share options (if there are expenses required for the acquisition of the shares to be acquired, the amount obtained by adding the amount of those expenses).

The portion equivalent to a fraction of less than one share (including what is equivalent thereto) prescribed in Article 167, paragraph (3) (Effectuation) or Article 283 (Treatment of Fractional Shares) of the Companies Act is to be included in the shares of the corporation making the acquisition prescribed in Article 57-4, paragraph (3), item (i) or item (iv) of the Act.

For the calculation of the amount of the depreciation allowance prescribed in Article 49, paragraph (1) (Calculating Depreciation Allowances for Depreciable Assets; Depreciation Methods) of the Act that a Resident to whom the provisions of Article 58, paragraph (1) (Special Provisions on Capital Gains if the Resident Exchanges Fixed Assets) of the Act have applied is to make with regard to the acquired asset prescribed in that paragraph (hereinafter in this Article referred to as the "acquired asset"), and for the calculation of the amount of capital gains in the case where that person transfers the acquired asset, that person is deemed to have acquired the acquired asset for the amount listed in each of the following items according to the category of cases set out in those items. In this case, for the determination of which of the income listed in the items of Article 33, paragraph (3) (Amount of Capital Gains) of the Act the income from that transfer falls under, that person is deemed to have owned the acquired asset continuously since the time of acquiring the transferred asset prescribed in Article 58, paragraph (1) of the Act (hereinafter in this Article referred to as the "transferred asset").

in the case of acquiring an exchange balancing payment, etc. (meaning money or other assets delivered to make up the difference where the value of the acquired asset and the value of the transferred asset at the time of the exchange prescribed in Article 58, paragraph (1) of the Act are not equal; the same applies hereinafter in this Article) together with the acquired asset: the amount calculated by multiplying the acquisition cost of the transferred asset under Article 38, paragraph (1) or (2) (Acquisition Costs Deducted to Calculate Capital Gains) of the Act (where the transferred asset falls under Article 61, paragraph (2) or (3) (Acquisition Costs of Assets Acquired Prior to December 31, 1952) of the Act, the acquisition cost under those provisions, and where there are expenses required for the transfer of the transferred asset, the amount obtained by adding the amount of those expenses to that acquisition cost; hereinafter in this Article referred to as the "acquisition cost") by the proportion that the value of the acquired asset accounts for in the sum of the value of the acquired asset and the amount of the exchange balancing payment, etc.;

in the case of acquiring the acquired asset by delivering an exchange balancing payment, etc. together with the transferred asset: the amount obtained by adding the amount of the exchange balancing payment, etc. to the acquisition cost of the transferred asset;

in the case where there are expenses required for acquiring the acquired asset: the amount obtained by adding the amount of those expenses to the acquisition cost of the transferred asset (where the provisions of the preceding two items apply, the amount listed in those items).

The amount specified by Cabinet Order prescribed in Article 59, paragraph (1), item (ii) (Special Provisions on Capital Gains and Gifts) of the Act is an amount less than one-half of the value, at the time of the transfer of the forest land or the transfer of assets that give rise to capital gains prescribed in that paragraph, of that forest land or those assets.