Order for Enforcement of the Income Tax Act

Where the amount that is to be included in necessary expenses prescribed in Article 63 (Special Provisions on Necessary Expenses In the Event of a Business Closure) of the Act pursuant to the provisions of that Article is included in necessary expenses in calculating the amount of real property income, amount of business income, or amount of timber income for the year that includes the day of closure prescribed in that Article or for the year preceding that year, the following apply to the calculation of that amount of real property income, amount of business income, or amount of timber income.

Where the amount that is to be included in those necessary expenses is the lower of the following amounts or less, the whole of the amount that is to be included in those necessary expenses is included in necessary expenses in calculating the amount of real property income, amount of business income, or amount of timber income for the year that includes that day of closure:

the sum of the gross income, amount of timber income, and amount of retirement income for the year that includes that day of closure that were finalized immediately before the time when the amount that is to be included in those necessary expenses arose;

the amount of real property income, amount of business income, or amount of timber income serving as the basis for calculating the amount set out in (a);

Where the amount that is to be included in those necessary expenses exceeds the lower of the amounts set out in the preceding item, the portion of the amount to be included in those necessary expenses that is equivalent to that lower amount is included in necessary expenses in calculating the amount of real property income, amount of business income, or amount of timber income for the year that includes that day of closure, and the amount equivalent to the portion exceeding it is included in necessary expenses in calculating the amount of real property income, amount of business income, or amount of timber income for the year preceding that year, up to the lower of the following amounts:

the sum of the gross income, amount of timber income, and amount of retirement income for that preceding year that were finalized immediately before the time when the amount that is to be included in those necessary expenses arose;

the amount of real property income, amount of business income, or amount of timber income serving as the basis for calculating the amount set out in (a).

The grounds specified by Cabinet Order prescribed in Article 64, paragraph (1) (Special Provisions on Calculation of Income If Payment for Transferred Assets Becomes Uncollectible) of the Act are that a person who has received payment of the general retirement allowance prescribed in Article 2-3, paragraph (2) (Payment of Retirement Allowance) of the Act on National Public Officers' Retirement Allowance (Act No. 182 of 1953) has been subject to a disposition under Article 15, paragraph (1) (Return of Retirement Allowance by a Person Who Has Retired) of that Act, and other grounds similar to this.

Of the amount of revenue or gross revenue prescribed in Article 64, paragraph (1) of the Act that has become uncollectible (including that deemed to have become uncollectible pursuant to the provisions of paragraph (2) of that Article) or that is to be returned (hereinafter in this paragraph referred to as "uncollectible amount, etc."), the amount up to the lower of the following amounts is deemed not to have existed in calculating Income in Each Class prescribed in paragraph (1) of that Article.

the sum of the gross income, amount of retirement income, and amount of timber income for the year prescribed in Article 64, paragraph (1) of the Act that were finalized immediately before the time when the uncollectible amount, etc. arose;

the remainder obtained by deducting, from the amount of Income in Each Class that serves as the basis for calculating the amount set out in the preceding item and that pertains to that uncollectible amount, etc., the amount of that Income in Each Class that would be calculated if there had been no revenue or gross revenue equivalent to that uncollectible amount, etc.

Where a Resident who carries on business that gives rise to real property income, business income, timber income, or miscellaneous income expends an amount on a Fixed Asset used for that business, whatever the name under which the expenditure is made, whether repair, improvement, or otherwise, and that amount falls under one of the amounts listed below (if it falls under both, the larger of the amounts), that amount is not included in necessary expenses in the calculation of the amount of real property income, amount of business income, amount of timber income, or amount of miscellaneous income of that person for the year that includes the day of the expenditure:

Of the amount expended, the amount corresponding to the portion that, by that expenditure, extends the usable period of the asset that would have been expected at the time of its acquisition if ordinary management or repair of the asset were carried out;

Of the amount expended, the amount corresponding to the portion that, by that expenditure, increases the value of the asset at the time of the expenditure that would have been expected at the time of its acquisition if ordinary management or repair of the asset were carried out.

Where a Resident, in renewing the term of a land leasehold right (meaning a superficies, a right of lease of land, or a right pertaining to the sublease of land pertaining to these rights) or servitude used for business that gives rise to real property income, business income, timber income, or miscellaneous income, pays consideration for the renewal (hereinafter in this Article referred to as the "renewal fee"), the amount equivalent to the amount calculated by multiplying the acquisition cost of that land leasehold right or servitude by the proportion that the amount of the renewal fee accounts for in the value of that land leasehold right or servitude at the time of the renewal is included in necessary expenses in the calculation of the amount of real property income, amount of business income, amount of timber income, or amount of miscellaneous income for the year that includes the day of the renewal.

The acquisition cost referred to in the preceding paragraph includes, in addition to the amount required for the acquisition of the land leasehold right or servitude referred to in that paragraph, the amounts of improvement expenses and renewal fees expended before the renewal prescribed in that paragraph, and where there is an amount that was included in necessary expenses under the provisions of that paragraph before the renewal, it is the amount obtained by deducting that amount.

Where non-deductible consumption tax amounts, etc. pertaining to assets arise in a year in which a Resident carries on business that gives rise to real property income, business income, timber income, or miscellaneous income (hereinafter in this Article referred to as "business income, etc.") (limited to a year in which the ratio calculated as specified by Ministry of Finance Order as a ratio equivalent to the taxable sales ratio prescribed in Article 30, paragraph (2) (Deduction of Consumption Tax on Purchases) of the Consumption Tax Act (Act No. 108 of 1988) is 80 percent or more), the sum of the non-deductible consumption tax amounts, etc. pertaining to the assets that have arisen is included in necessary expenses in the calculation of the amount of real property income, amount of business income, amount of timber income, or amount of miscellaneous income (hereinafter in this Article referred to as the "amount of business income, etc.") for that year.

Where the non-deductible consumption tax amounts, etc. pertaining to assets that arose in a year in which a Resident carries on business that gives rise to business income, etc. (excluding a year prescribed in the preceding paragraph) fall under any of the following cases, the sum of the non-deductible consumption tax amounts, etc. pertaining to the assets falling under that case is included in necessary expenses in the calculation of the amount of business income, etc. for that year:

Where they pertain to Inventory;

Where they pertain to a specified taxable purchase prescribed in Article 5, paragraph (1) (Taxpayers) of the Consumption Tax Act; or

Where the amount is less than 200,000 yen.

The amount to be included in necessary expenses in the calculation of the amount of business income, etc. for that year with regard to the sum of the non-deductible consumption tax amounts, etc. pertaining to assets that arose in a year in which a Resident carries on business that gives rise to business income, etc. (excluding the amount included in necessary expenses under the provisions of the preceding two paragraphs; hereinafter in this paragraph and the following paragraph referred to as "deferred consumption tax, etc.") is the amount equivalent to one-half of the amount calculated by dividing that deferred consumption tax, etc. by 60 and multiplying the result by the number of months in the period in that year during which that business was carried on.

The amount to be included in necessary expenses in the calculation of the amount of business income, etc. for that year with regard to the deferred consumption tax, etc. that arose in each of the year preceding that year and earlier years in which a Resident carried on business that gives rise to business income, etc. is the amount calculated by dividing that deferred consumption tax, etc. by 60 and multiplying the result by the number of months in the period in that year during which that business was carried on (where the amount so calculated exceeds the portion of that deferred consumption tax, etc. other than the amount already included in necessary expenses in the calculation of the amount of business income, etc. under the provisions of the preceding paragraph and this paragraph, that portion).

The non-deductible consumption tax amounts, etc. pertaining to assets referred to in paragraphs (1) through (3) means, where a Resident is subject to the application of Article 30, paragraph (1) of the Consumption Tax Act for the taxable period prescribed in Article 19, paragraph (1) (Taxable Period) of that Act and treats the amount equivalent to the amount of consumption tax to be imposed on the taxable transfers, etc. of assets prescribed in Article 2, paragraph (1), item (ix) (Definitions) of that Act made during that taxable period and the amount of local consumption tax to be imposed with that amount of consumption tax as the tax base, and the amount of tax on taxable purchases, etc. prescribed in Article 30, paragraph (2) of that Act and the amount equivalent to the local consumption tax pertaining to that amount of tax on taxable purchases, etc., separately from the consideration for the transactions pertaining to them, the sum, pertaining to the respective assets, of the amount that cannot be deducted under paragraph (1) of that Article and the amount equivalent to the local consumption tax pertaining to that amount that cannot be deducted, out of the sum of that amount of tax on taxable purchases, etc. and the amount equivalent to the local consumption tax pertaining to that amount of tax on taxable purchases, etc.

The amount equivalent to the local consumption tax pertaining to the amount of tax on taxable purchases, etc. referred to in the preceding paragraph and the amount equivalent to the local consumption tax pertaining to the amount that cannot be deducted mean, respectively, the amount equivalent to the amount of tax on taxable purchases, etc. prescribed in Article 30, paragraph (2) of the Consumption Tax Act or the amount equivalent to the amount that cannot be deducted under Article 30, paragraph (1) of that Act, in the case calculated in accordance with the provisions of laws and regulations concerning consumption tax on the assumption that the local consumption tax is consumption tax at a rate of 2.2 percent (1.76 percent where the taxable purchase prescribed in Article 2, paragraph (1), item (xii) of that Act pertaining to that amount of tax on taxable purchases, etc. pertains to a taxable transfer, etc. of assets subject to the reduced rate prescribed in item (ix)-2 of that paragraph received from another person, and where the taxable goods prescribed in item (xi) of that paragraph pertaining to that amount of tax on taxable purchases, etc. fall under taxable goods subject to the reduced rate prescribed in item (xi)-2 of that paragraph).

The number of months referred to in paragraphs (3) and (4) is calculated according to the calendar, and where a fraction of less than one month arises, it is treated as one month.

In addition to what is provided for in the preceding three paragraphs, matters necessary for the application of the provisions of paragraphs (1) through (4) are specified by Ministry of Finance Order.

A Resident who has an amount included in necessary expenses in that year with regard to the sum of the non-deductible consumption tax amounts, etc. pertaining to assets prescribed in paragraphs (1) through (3) or the deferred consumption tax, etc. prescribed in paragraph (3) or paragraph (4) must attach to the Tax Return for that year a detailed statement on the calculation of the amounts included in necessary expenses under these provisions.