Order for Enforcement of the Income Tax Act

When calculating the tax base and tax amount of the income taxes imposed on aggregate income prescribed in Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) of the Act imposed on a Nonresident (limited to the portion pertaining to the domestic source income listed in Article 164, paragraph (1), item (i), (a) (How Nonresidents Are Taxed) of the Act (referred to as "income attributable to a permanent establishment" in the following paragraph and paragraph (4))) in accordance with the provisions of the Act listed in the following items pursuant to Article 165, paragraph (1) of the Act, the provisions of those respective items are applicable:

Article 26 (Real Property Income) and Article 33 (Capital Gains) of the Act: The other person prescribed in Article 26, paragraph (1) and Article 33, paragraph (1) of the Act is to include the place of business or similar place prescribed in Article 161, paragraph (1), item (i) (Domestic Source Income) of the Act (hereinafter referred to as the "place of business or similar place" in this paragraph and paragraph (4));

Article 45 (Exclusion of Household-Related Expenses from Necessary Expenses) of the Act: The amounts of the taxes or delinquent charges or penalties prescribed in paragraph (1), items (ii) to (vi) of the same Article (hereinafter referred to as "income tax, etc." in this item) are to include the amounts equivalent to income tax, etc. imposed by a foreign country or a local government thereof (excluding the amount of credit-eligible foreign income tax prescribed in Article 165-6, paragraph (1) (Foreign Tax Credit for Nonresidents) of the Act);

Article 47 (Calculation of Costs of Inventory Sold and Valuation Methods) of the Act: The Inventory prescribed in paragraph (1) of the same Article is to be limited to the Nonresident's Inventory pertaining to a business conducted through a permanent establishment;

Article 49 (Calculating Depreciation Allowances for Depreciable Assets; Depreciation Methods) of the Act: The Depreciable Assets prescribed in paragraph (1) of the same Article are to be limited to the Nonresident's Depreciable Assets pertaining to a business conducted through a permanent establishment;

Article 50 (Calculating Depreciation Allowances for Deferred Assets; Depreciation Methods) of the Act: The Deferred Assets prescribed in paragraph (1) of the same Article are to be limited to the Nonresident's Deferred Assets pertaining to a business that the Nonresident conducts through a permanent establishment;

Article 51 (Inclusion of Losses on Assets in Necessary Expenses) of the Act: The assets prescribed in paragraph (1) and paragraph (4) of the same Article and the forests prescribed in paragraph (3) of the same Article are to be limited to those of such assets and forests held by a Nonresident that pertain to a business conducted through a permanent establishment, and the accounts receivable, loans, advance payments or any other claims equivalent thereto prescribed in paragraph (2) of the same Article (hereinafter referred to as "accounts receivable, etc." in this item) are to be limited to accounts receivable, etc. pertaining to a business prescribed in the same paragraph which a Nonresident conducts through a permanent establishment;

Article 52 (Bad Debt Reserves) of the Act: The monetary claims prescribed in paragraph (1) and paragraph (2) of the same Article are to be limited to such monetary claims pertaining to a business prescribed in those provisions which a Nonresident conducts through a permanent establishment, and what is equivalent to monetary claims pertaining to an internal dealing between a permanent establishment and a place of business or similar place (meaning an internal dealing prescribed in Article 161, paragraph (1), item (i) of the Act; the same applies in paragraph (4)) is not to be included in such monetary claims;

Article 54 (Reserves for Severance Packages) of the Act: The employees prescribed in paragraph (1) of the same Article are to be limited to the Nonresident's employees who work full time in Japan for a business prescribed in the same paragraph which the Nonresident conducts through a permanent establishment;

Article 58 (Special Provisions on Capital Gains if the Resident Exchanges Fixed Assets) of the Act: The following provisions apply:

The acquired assets prescribed in Article 58, paragraph (1) of the Act are to be limited to Fixed Assets that exist in Japan at the time of the exchange prescribed in the same paragraph, and such acquired assets are to include Fixed Assets deemed to have been acquired from a place of business or similar place by that exchange;

The transferred assets prescribed in Article 58, paragraph (1) of the Act are to be limited to Fixed Assets (limited to those pertaining to a business conducted through a permanent establishment) that exist in Japan at the time of the exchange prescribed in the same paragraph;

Article 62 (Loss of Assets Not Ordinarily Necessary in Everyday Life, Due to Disaster) of the Act: The assets not necessary for maintenance of an ordinary livelihood prescribed in paragraph (1) of the same Article are to be limited to such assets held by a Nonresident listed in Article 164, paragraph (1), item (i) of the Act that pertain to a business conducted through a permanent establishment;

Article 67-2 (Calculating Amounts of Income from Lease Arrangements) of the Act: The lease transaction prescribed in paragraph (1) of the same Article is to be limited to the lease transaction pertaining to a business conducted by a Nonresident through a permanent establishment;

Article 72 (Casualty Loss Deduction) of the Act: The losses from a disaster or theft or embezzlement prescribed in paragraph (1) of the same Article are to be limited to the losses that occurred to assets held by a nonresident that are located in Japan.

The amount allocated as specified by Cabinet Order prescribed in Article 165, paragraph (2), item (ii) of the Act is the amount that, with respect to a Nonresident's selling and other expenses, growing expenses, etc. and amounts expended for the year, as prescribed in that item, is allocated to the business that the Nonresident conducts through a permanent establishment, using whichever of the criteria, such as revenue pertaining to the business that the Nonresident conducts through a permanent establishment and to other businesses, the value of assets and the number of employees, is found to be reasonable in light of the content of those businesses and the nature of the expenses concerned.

If there is, between a Nonresident's place of business or similar place and a permanent establishment, an internal dealing equivalent to a purchase or other acquisition of assets at that permanent establishment, the provisions of laws and regulations concerning income tax relating to the calculation of the amount of income pertaining to the Nonresident's income attributable to a permanent establishment are to be applied on the assumption that the assets pertaining to that internal dealing were acquired at the time of that internal dealing.

The amount specified by Cabinet Order prescribed in Article 165-2 (Exclusion of Reduced Foreign Income Taxes from Gross Revenue) of the Act is the amount equivalent to the portion of the amount by which the amount of foreign income tax prescribed in that Article was reduced that is to be applied, in the year that includes the day on which it came to be reduced, to the deduction under Article 292-14, paragraph (1) (Special Provisions if Foreign Income Tax Is Reduced) from the credit-eligible foreign income tax to be paid prescribed in that paragraph, or to the deduction under paragraph (3) of that Article from the amount exceeding the credit limit prescribed in that paragraph.