Order for Enforcement of the Income Tax Act

The domestic source income specified by Cabinet Order prescribed in Article 165-5-2, paragraph (1) (Calculation of Income Related to Income Attributable to a Permanent Establishment Arising from Specified Internal Dealings) of the Act is to be the income listed in Article 281, paragraph (1), item (viii) (Income Arising from the Transfer of Assets Located in Japan).

The amount specified by Cabinet Order prescribed in Article 165-5-2, paragraph (1) of the Act is to be the amount specified in each of the following items according to which of the internal dealings listed in those items an internal dealing (meaning an internal dealing prescribed in paragraph (1) of that Article; the same applies hereinafter in this Article) between the permanent establishment of a Nonresident and a place of business or similar place (meaning a place of business or similar place prescribed in that paragraph; the same applies in the following paragraph) falls under.

an internal dealing equivalent to the acquisition of assets (limited to assets prescribed in Article 165-5-2, paragraph (1) of the Act; the same applies hereinafter in this Article) by a permanent establishment: the amount equivalent to the amount that would be regarded as the cost of a transfer of assets if, deeming that the assets pertaining to that internal dealing had been transferred to another person at the time of that internal dealing, the amount of business income, the amount of timber income, the amount of capital gains, or the amount of miscellaneous income were calculated, for the domestic source income listed in Article 164, paragraph (1), item (i), (b) (How Nonresidents Are Taxed) of the Act of that Nonresident for each year that should arise from that transfer of assets, in accordance with the provisions of Part II, Chapters I and II (Calculation of the Tax Base of Income Taxes on Residents, etc.) of the Act pursuant to Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) of the Act;

an internal dealing equivalent to the transfer of assets by a permanent establishment: the amount equivalent to the amount that would be regarded as the cost of the transfer of those assets if, deeming that the assets pertaining to that internal dealing had been transferred to another person at the time of that internal dealing, the amount of business income, the amount of timber income, the amount of capital gains, or the amount of miscellaneous income were calculated, for the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Act of that Nonresident for each year that should arise from the transfer of those assets, in accordance with the provisions of Part II, Chapters I and II of the Act pursuant to Article 165, paragraph (1) of the Act.

In the case where Article 165-5-2, paragraph (1) of the Act applies, the acquisition price at the permanent establishment of the assets pertaining to an internal dealing between the permanent establishment of a Nonresident and a place of business or similar place (limited to an internal dealing equivalent to the acquisition of the assets by that permanent establishment; the same applies hereinafter in this paragraph) is to be the amount specified in item (i) of the preceding paragraph (where there are expenses required for the acquisition by that internal dealing, the amount to which the amount of those expenses is added).

In the case of 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), (b) and item (ii) (How Nonresidents Are Taxed) of the Act (referred to as "other domestic source income" in the following Article)) in accordance with the provisions of the Act prescribed in Article 165, paragraph (1) of the Act, the provisions of Article 292 (Calculation of the Tax Base, etc. of Income Taxes Imposed on Aggregate Income on Income Attributable to a Permanent Establishment) are followed.

In the case where a Nonresident having a permanent establishment has income attributable to a permanent establishment (meaning income attributable to a permanent establishment prescribed in Article 292, paragraph (1) (Calculation of the Tax Base, etc. of Income Taxes Imposed on Aggregate Income on Income Attributable to a Permanent Establishment); the same applies hereinafter in this Article) and other domestic source income, with respect to that Nonresident's tax base 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, the income pertaining to income attributable to a permanent establishment and the income pertaining to other domestic source income are to be classified into Each Class of Income pursuant to Article 165, paragraph (1) of the Act in accordance with the provisions of Part II, Chapter II, Section 2 (Calculation of Income in Each Class) of the Act, and gross income, the amount of retirement income, and the amount of timber income are to be calculated, on the basis of the amount of income calculated for each of them (where, among the Each Class of Income so classified, there are Each Class of Income of the same kind pertaining to income attributable to a permanent establishment and to other domestic source income, the sum of the amounts of income pertaining to the respective Each Class of Income), pursuant to Article 165, paragraph (1) of the Act in accordance with the provisions of Sections 1 and 3 (Tax Base, Aggregation of Profits and Losses, and Deduction for Carryover of Losses) of that Chapter.

The amount specified by Cabinet Order as the amount of the portion corresponding to a distribution of proceeds received by a Nonresident having a permanent establishment prescribed in Article 165-5-3, paragraph (1) (Credit for Amount Equivalent to Foreign Tax Adjusted at Distribution for Nonresidents) of the Act is to be the sum of the following amounts pertaining to the distribution 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 paragraph) received by that Nonresident (limited to those that fall under the domestic source income listed in Article 164, paragraph (1), item (i), (a) (How Nonresidents Are Taxed) of the Act):

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 pursuant to Article 176, paragraph (3) of the Act from the amount of income tax pertaining to the distribution of proceeds of that group investment trust by the ratio of the amount of the distribution of proceeds received by that Nonresident to the total amount of that distribution of proceeds (limited to the portion for 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) (where that amount exceeds the amount calculated by multiplying the amount of income tax pertaining to that 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), of the group investment trust pertaining to that distribution of proceeds, calculated on the last day of the calculation period of that 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 pursuant to Article 180-2, paragraph (3) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) of the Act from the amount of income tax pertaining to the distribution of proceeds of that group investment trust by the ratio of the amount of the distribution of proceeds received by that Nonresident to the total amount of that distribution of proceeds (limited to the portion for 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) (where that amount exceeds the amount calculated by multiplying the amount of income tax pertaining to that 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), of the group investment trust pertaining to that distribution of proceeds, calculated on the last day of the calculation period of that distribution of proceeds, the amount calculated by multiplying by that foreign currency asset ratio).

The amount specified by Cabinet Order as the amount equivalent to the amount of income tax prescribed in Article 165-5-3, paragraph (1) of the Act is to be the amount of income tax calculated, with respect to the income of the Nonresident referred to in that paragraph for that year pertaining to the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Act, pursuant to Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) of the Act in accordance with the provisions of Part II, Chapters I to IV (Calculation of the Tax Base, Tax Amount, etc. of Income Taxes on Residents) of the Act (meaning the amount of income tax calculated without applying Article 165-5-3 and Article 165-6 (Foreign Tax Credit for Nonresidents) of the Act, and excluding the amount of accessory tax).

The amount specified by Cabinet Order prescribed in Article 165-6, paragraph (1) (Foreign Tax Credit for Nonresidents) of the Act is to be, out of the amount of income 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), the amount of income pertaining to foreign source income (meaning foreign source income prescribed in Article 165-6, paragraph (1) of the Act; the same applies in the following paragraph).

In applying the provisions of the preceding paragraph, where, among the amounts included in necessary expenses in the calculation of the amount of real property income, the amount of business income, or the amount of miscellaneous income (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 that land) calculated for the income attributable to a permanent establishment of the Nonresident for that year pursuant to Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) of the Act in accordance with the provisions of Part II, Chapters I and II (Calculation of the Tax Base of Income Taxes on Residents, etc.) of the Act, there is an amount of selling expenses, general administrative expenses, or other expenses incurred in the operations that should generate those incomes, prescribed in Article 37, paragraph (1) (Necessary Expenses) of the Act, that were incurred in relation to both the operations that should generate income pertaining to foreign source income and the operations that should generate income pertaining to income attributable to a permanent establishment other than that (hereinafter referred to as the "amount of common expenses" in this paragraph and the following paragraph), that amount of common expenses is to be allocated as necessary expenses in the calculation of the amount of income pertaining to foreign source income and the amount of income pertaining to income attributable to a permanent establishment other than that, on the basis found to be reasonable in light of the content of those operations and the nature of the expenses, out of the revenue pertaining to those operations, the value of assets, the number of employees, and other bases.

A Nonresident who has allocated the amount of common expenses pursuant to the provisions of the preceding paragraph must prepare documents stating the matters forming the basis of the calculation of that allocation and other documents specified by Ministry of Finance Order.

A Nonresident to whom the provisions of Article 165-6, paragraphs (1) to (3) of the Act apply must attach to the Tax Return, Amended Return, or written request for Reassessment a document stating the details of the calculation of the amount of foreign-source income prescribed in paragraph (1) of that Article for that year.