Order for Enforcement of the Income Tax Act

Where a Resident to whom Article 66, paragraph (1) (Periods to Which Revenue and Expenses Associated with Contracts for Construction Work Are Attributed) of the Act has been applied with regard to the revenue and expenses pertaining to a contract for long-term large-scale construction dies, of the revenue and expenses pertaining to the contract for that long-term large-scale construction, the revenue and expenses calculated by the method of construction progress criteria prescribed in that paragraph as the revenue and expenses, for each year from the year that includes the date of death to the year preceding the year that includes the date of delivery of the subject matter of that long-term large-scale construction, of the heir who succeeded to that Resident's business pertaining to the contract for that long-term large-scale construction, are to be included in gross revenue and necessary expenses in calculating the amount of business income for each of those years. In this case, with regard to the application of Article 192, paragraph (3) (Method of Construction Progress Criteria) and the preceding Article to that heir, the amount of the expenses that that Resident incurred before death for that long-term large-scale construction, and the amounts treated as the revenue and expenses pertaining to the contract for that long-term large-scale construction for that Resident before death, are deemed to be, respectively, the amount of the expenses that that heir incurred for that long-term large-scale construction, and the amounts treated as the revenue and expenses pertaining to the contract for that long-term large-scale construction for that heir.

Where a Resident to whom Article 66, paragraph (2) of the Act has been applied with regard to the revenue and expenses pertaining to a contract for construction work referred to in that paragraph dies, and the heir who succeeded to that Resident's business pertaining to the contract for construction work has, with regard to that revenue and expenses, accounted by the method of construction progress criteria prescribed in that paragraph in each year from the year that includes the date of death to the year preceding the year that includes the date of delivery of the subject matter of that construction work, the revenue and expenses so accounted are to be included in gross revenue and necessary expenses in calculating the amount of business income for each of those years. In this case, with regard to the application of Article 192, paragraph (3) and the preceding Article to that heir, the amount of the expenses that that Resident incurred before death for that construction work, and the amounts treated as the revenue and expenses pertaining to the contract for construction work for that Resident before death, are deemed to be, respectively, the amount of the expenses that that heir incurred for that construction work, and the amounts treated as the revenue and expenses pertaining to the contract for construction work for that heir.

The requirements specified by Cabinet Order prescribed in Article 67, paragraph (1) (Periods to Which Revenue and Expenses of Small Enterprises and Similar Businesses Are Attributed) of the Act are the following requirements:

That the sum of the amount of real property income and the amount of business income for the year before the year preceding that year (calculated without applying Article 57 (Special Provisions on Necessary Expenses If Relatives Work Exclusively for a Resident) of the Act) is 3,000,000 yen or less;

In the case of a person who has already had Article 67, paragraph (1) of the Act applied and who has thereafter ceased to have that paragraph applied, that the person has obtained, as provided by Ministry of Finance Order, approval from the competent district director with jurisdiction over the place for tax payment to have that paragraph applied again.

The amount to be included in gross revenue in calculating the amount of real property income and the amount of business income (excluding those pertaining to the felling of trees in forested land or the transfer of forested land) for that year (excluding the year that includes the date on which the person transferred or discontinued all of the operations that give rise to real property income and the operations that give rise to business income, or died) of a Resident prescribed in Article 67, paragraph (1) (Periods to Which Revenue and Expenses of Small Enterprises and Similar Businesses Are Attributed) of the Act who falls under the requirements set out in the items of the preceding Article may, at the option of that person, except for that to which the provisions of Part II, Chapter II, Section 2, Subsection 3 (Calculation of Revenue) of the Act (excluding Article 41 (Inclusion of Crop Harvests in Gross Revenue)) apply, be the amount received in that year in respect of those operations (where received in the form of property other than money, rights or other economic benefits, the value of that property other than money, rights or other economic benefits).

The amount to be included in necessary expenses in calculating the amount of real property income and the amount of business income prescribed in paragraph (1) for that year of a Resident to whom the provisions of that paragraph apply is, except for depreciation allowances and those to which Article 51, paragraphs (1) and (4) (Inclusion of Losses on Assets in Necessary Expenses) of the Act apply, the amount of expenses directly expended in that year to obtain the gross revenue of those incomes and the amount of expenses expended in that year for the operations that give rise to those incomes.

In addition to what is provided in the preceding two paragraphs, special provisions on gross revenue and necessary expenses pertaining to real property income or business income where a Resident to whom the provisions of paragraph (1) apply comes to cease to have them applied, and other matters necessary for the application of the preceding two paragraphs, are specified by Ministry of Finance Order.

The requirements specified by Cabinet Order prescribed in Article 67, paragraph (2) (Periods to Which Revenue and Expenses of Small Enterprises and Similar Businesses Are Attributed) of the Act are that the amount of revenue pertaining to the operations that give rise to miscellaneous income for the year before the year preceding that year is 3,000,000 yen or less.

The amount to be included in gross revenue in calculating the amount of miscellaneous income (excluding that pertaining to the felling of trees in forested land or the transfer thereof) pertaining to a business that generates miscellaneous income, for the year (excluding the year that includes the day on which the Resident transfers or discontinues the whole of the business generating miscellaneous income, or dies) of a Resident prescribed in Article 67, paragraph (2) (Periods to Which Revenue and Expenses of Small Enterprises and Similar Businesses Are Attributed) of the Act who satisfies the requirements prescribed in the preceding Article, may, at the election of that person and except for an amount that is subject to the provisions of Part II, Chapter II, Section 2, Subsection 3 (Calculation of Revenue) of the Act, be the amount received in that year in connection with that business (where received in the form of things other than money, or rights or other economic benefits, the value of those things, rights or other economic benefits).

The amount to be included in necessary expenses in calculating the amount of miscellaneous income pertaining to the business that generates miscellaneous income prescribed in the preceding paragraph for that year, of a Resident subject to the application of that paragraph, is, except for the depreciation allowance and an amount subject to the application of Article 51, paragraph (4) (Inclusion of Losses on Assets in Necessary Expenses) of the Act, to be the amount of expenses directly paid in that year to obtain the gross revenue from miscellaneous income pertaining to that business and the amount of expenses paid in that year for that business.

In addition to what is provided for in the preceding two paragraphs, special provisions on gross revenue and necessary expenses pertaining to miscellaneous income in the case where a Resident subject to the application of paragraph (1) ceases to be subject to its application, and other matters necessary for the application of the preceding two paragraphs, are to be specified by Ministry of Finance Order.

A Resident who makes the election under Article 196, paragraph (1) (Periods to Which Revenue and Expenses of Small Enterprises Are Attributed) with regard to income tax for that year and each subsequent year must, by March 15 of that year (or, where the Resident newly starts the business prescribed in that paragraph on or after January 16 of that year, within two months after the day on which the Resident started that business), submit to the competent district director with jurisdiction over the place for tax payment a written notice stating that the Resident intends to receive the application of that paragraph and other matters specified by Ministry of Finance Order.

A Resident subject to the application of Article 196, paragraph (1) who intends to cease to be subject to the application of that paragraph with regard to income tax for that year and each subsequent year must, by March 15 of that year, submit to the competent district director with jurisdiction over the place for tax payment a written notice stating that the Resident will cease to be subject to its application and other matters specified by Ministry of Finance Order.

A Resident who makes the election under paragraph (1) of the preceding Article must, when submitting the Tax Return for the year for which the Resident intends to receive the application of that paragraph, state on that return form that the Resident is subject to its application.