Order for Enforcement of the Income Tax Act

The amount specified by Cabinet Order prescribed in Article 93, paragraph (1) (Credit for the Amount Equivalent to the Foreign Tax Adjusted at Distribution) of the Act is to be the sum of the following amounts pertaining to distributions of proceeds of a group investment trust (meaning a group investment trust prescribed in Article 176, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) of the Act; the same applies hereinafter in this Article) for which a Resident receives payment:

the amount calculated by multiplying the amount of foreign income tax (meaning foreign income tax prescribed in Article 300, paragraph (1) (Special Provisions on Taxation of Interest and Similar Income from Trust Property); the same applies in the following item) that is to be deducted from the amount of income tax pertaining to the distribution of proceeds pursuant to Article 176, paragraph (3) of the Act, by the ratio of the amount of the distribution of proceeds for which the Resident receives payment to the total amount of that distribution of proceeds (limited to the portion on which income tax is to be collected pursuant to Article 181 (Obligation to Withhold Taxes) or Article 212 (Obligation to Withhold Taxes) of the Act (excluding the portion corresponding only to what is listed in Article 9, paragraph (1), item (xi) (Nontaxable Income) of the Act); the same applies hereinafter in this item) (or, if that amount exceeds the amount calculated by multiplying the amount of income tax pertaining to the distribution of proceeds, calculated without the deduction under Article 176, paragraph (3) of the Act, by the foreign currency asset ratio prescribed in Article 300, paragraph (9), for the group investment trust pertaining to the distribution of proceeds, calculated as of the last day of the calculation period of the distribution of proceeds, the amount calculated by multiplying by that foreign currency asset ratio);

the amount calculated by multiplying the amount of foreign income tax that is to be deducted from the amount of income tax pertaining to the distribution of proceeds pursuant to Article 180-2, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) of the Act, by the ratio of the amount of the distribution of proceeds for which the Resident receives payment to the total amount of that distribution of proceeds (limited to the portion on which income tax is to be collected pursuant to Article 181 or Article 212 of the Act (excluding the portion corresponding only to what is listed in Article 9, paragraph (1), item (xi) of the Act); the same applies hereinafter in this item) (or, if that amount exceeds the amount calculated by multiplying the amount of income tax pertaining to the distribution of proceeds, calculated without the deduction under Article 180-2, paragraph (3) of the Act, by the foreign currency asset ratio prescribed in Article 306-2, paragraph (7) (Special Provisions on Taxation of Interest and Similar Income from Trust Property), for the group investment trust pertaining to the distribution of proceeds, calculated as of the last day of the calculation period of the distribution of proceeds, the amount calculated by multiplying by that foreign currency asset ratio).

The tax specified by Cabinet Order that is equivalent to the income tax imposed under the laws and regulations of a foreign country prescribed in Article 95, paragraph (1) (Foreign Tax Credit) of the Act is to be a tax imposed by a foreign country or its local government, based on the laws and regulations of a foreign country, with an individual's income as the tax base (hereinafter in this Chapter referred to as "foreign income tax").

The following taxes imposed by a foreign country or its local government are to be included in foreign income tax.

an excess income tax or other tax imposed with a specific portion of an individual's income as the tax base;

a surtax on a tax imposed with an individual's income or a specific portion thereof as the tax base;

a tax belonging to the same tax category as a tax imposed with an individual's income as the tax base, which is imposed on specific income of an individual, for the convenience of tax collection, with revenue or something equivalent thereto as the tax base in place of income;

a tax imposed on specific income of an individual with the individual's revenue or something equivalent thereto as the tax base, in place of a tax with income as the tax base.

The following taxes imposed by a foreign country or its local government are not to be included in foreign income tax.

a tax for which the person who pays the tax may, voluntarily after payment of the tax, claim a refund of all or part of the amount;

a tax for which the person who is to pay the tax may voluntarily determine the period during which payment of the tax is deferred;

a tax whose rate is determined, from among multiple tax rates, by agreement between the person who is to pay the tax and a foreign country or its local government or a person granted by them the authority to agree on tax rates (limited to the portion exceeding the lowest of those multiple tax rates (or, if that lowest tax rate exceeds the tax rate that would be applicable in the absence of that agreement, that applicable tax rate));

a tax equivalent to an accessory tax imposed in addition to foreign income tax, and any other similar tax.

The amount specified by Cabinet Order prescribed in Article 95, paragraph (1) (Foreign Tax Credit) of the Act is to be the sum of the amounts of income pertaining to the following foreign source income (meaning foreign source income prescribed in that paragraph; the same applies hereinafter in this Chapter) of a Resident for each year (or zero, if that sum is less than zero):

foreign source income listed in Article 95, paragraph (4), item (i) of the Act;

foreign source income listed in Article 95, paragraph (4), items (ii) through (xvii) of the Act (for foreign source income listed in items (ii) through (xiv), (xvi) and (xvii) of that paragraph, excluding that which falls under foreign source income listed in item (i) of that paragraph).

The amount of income pertaining to the foreign source income listed in item (i) of the preceding Article for a Resident for each year (hereinafter in this Article through Article 221-5 (Calculation of the Amount of Income Pertaining to Income Attributable to a Foreign Office or Similar Establishment Pertaining to Specific Internal Dealings) referred to as "income attributable to a foreign office or similar establishment") is to be the amount that would be the tax base if income tax were imposed only on income pertaining to business that the Resident carries on through the Resident's foreign office or similar establishment (meaning a foreign office or similar establishment prescribed in Article 95, paragraph (4), item (i) (Foreign Tax Credit) of the Act; the same applies hereinafter through Article 221-5) for that year.

The amount that is to be the tax base for a year in calculating the amount of income pertaining to income attributable to a foreign office or similar establishment of a Resident for each year is, except as otherwise provided, to be the amount that would be the gross income, the amount of retirement income and the amount of timber income for that year if calculated for business that the Resident carries on through the Resident's foreign office or similar establishment, in accordance with the provisions of laws and regulations relating to income tax concerning the calculation of the amount of income of a Resident for each year.

Where the amount of income pertaining to income attributable to a foreign office or similar establishment of a Resident for each year is calculated pursuant to the preceding paragraph in accordance with Article 37 (Necessary Expenses) of the Act, the selling expenses, general administrative expenses and other expenses prescribed in paragraph (1) of that Article arising in connection with the business generating the income prescribed in that paragraph, and the costs of afforestation of forested land, the expenses required for acquisition, management expenses, felling expenses and other expenses required for growing or transferring that forested land prescribed in paragraph (2) of that Article, are to include, for those pertaining to internal dealings (meaning internal dealings prescribed in Article 95, paragraph (4), item (i) of the Act; the same applies hereinafter in this Article, paragraph (2) of the following Article and Article 221-5), those for which the obligation has not been finalized.

Where the amount of income pertaining to income attributable to a foreign office or similar establishment of a Resident for each year is calculated pursuant to paragraph (2) in accordance with Article 52 (Bad Debt Reserves) of the Act, the monetary claims prescribed in paragraphs (1) and (2) of that Article are not to include those corresponding to a monetary claim pertaining to an internal dealing between the Resident's foreign office or similar establishment and a place of business or similar place (meaning a place of business or similar place prescribed in Article 95, paragraph (4), item (i) of the Act; the same applies in the following paragraph, paragraph (2) of the following Article and Article 221-5).

Where there is an internal dealing, between a Resident's foreign office or similar establishment and a place of business or similar place, that corresponds to the purchase or other acquisition of an asset at that foreign office or similar establishment, the provisions of laws and regulations relating to income tax concerning the calculation of the amount of income of the Resident for each year that are to be applied by analogy in the calculation pursuant to paragraph (2) are to be applied on the basis that the asset pertaining to that internal dealing was acquired at the time of that internal dealing.

Where, in applying the provisions of paragraph (1), among the amounts included in necessary expenses in calculating a Resident's amount of real property income, amount of business income or amount of miscellaneous income for that year (excluding, from the amount of business income and the amount of miscellaneous income, those pertaining to the felling of trees in forested land or the transfer of forested land) there is an amount of selling expenses, general administrative expenses or other expenses prescribed in Article 37, paragraph (1) of the Act that arose in connection with both the business generating income pertaining to income attributable to a foreign office or similar establishment and other business (hereinafter in this paragraph and the following paragraph referred to as the "amount of common expenses"), that amount of common expenses is to be allocated as necessary expenses in calculating the amount of income pertaining to income attributable to a foreign office or similar establishment, on the basis of whichever of revenue pertaining to those businesses, the value of assets, the number of employees or other criteria is found to be reasonable in light of the content of those businesses and the nature of the expenses.

A Resident who has made the allocation of the amount of common expenses pursuant to the preceding paragraph must prepare documents specified by Ministry of Finance Order, such as a document stating the matters forming the basis of the calculation of that allocation.

A Resident who receives the application of Article 95, paragraphs (1) through (3) of the Act must attach to the Tax Return, Amended Return or written request for Reassessment a document stating the particulars of the calculation of the amount of income pertaining to income attributable to a foreign office or similar establishment for that year.