Regulation for Enforcement of the Income Tax Act

Shares to be specified by Ministry of Finance Order as being similar to shares or capital contributions listed on a financial instruments exchange, as prescribed in Article 281, paragraph (9), item (i) (Income Arising from the Transfer of Assets Located in Japan) of the Order, are as follows:

shares registered as issues registered for over-the-counter trading (meaning shares (including capital contributions and units of investment prescribed in Article 2, paragraph (14) (Definitions) of the Act on Investment Trusts and Investment Corporations; hereinafter the same applies in this Article) that an authorized financial instruments firms association as prescribed in Article 2, paragraph (13) (Definitions) of the Financial Instruments and Exchange Act (referred to as an "authorized financial instruments firms association" in the following item) has registered, in accordance with the rules it has defined, as shares whose sales prices for over-the-counter trading are to be publicized and for which materials concerning the issuing corporation thereof are to be open to the public);

shares of over-the-counter controlled issues (meaning shares which have been delisted from a financial instruments exchange as prescribed in Article 2, paragraph (16) of the Financial Instruments and Exchange Act or whose registration as issues registered for over-the-counter trading as prescribed in the preceding item has been canceled, and which have been designated by an authorized financial instruments firms association in accordance with the rules it has defined);

shares traded on a foreign financial instruments market as prescribed in Article 2, paragraph (8), item (iii), (b) of the Financial Instruments and Exchange Act.

The risks that may arise for the reasons specified by Ministry of Finance Order as prescribed in Article 292-3, paragraph (2), item (i), (c) (Non-Inclusion in Necessary Expenses of Interest on Liabilities Corresponding to Net Assets to Be Attributed to a Permanent Establishment) of the Order are the following:

the risk that may arise from non-performance of a contract by the other party to a transaction;

the risk that may arise from fluctuations in the price of Securities, etc. held (meaning Securities and other assets and transactions);

the risk that may arise from errors in processing clerical work or otherwise in carrying out routine business;

risks similar to those listed in the preceding three items.

The cases specified by Ministry of Finance Order as prescribed in Article 292-3, paragraph (2), item (ii), (a) (Non-Inclusion in Necessary Expenses of Interest on Liabilities Corresponding to Net Assets to Be Attributed to a Permanent Establishment) of the Order are cases where the ratio listed in item (i) is less than approximately one half of the ratio listed in item (ii).

the ratio of the amount listed in (a) to the amount listed in (b):

the amount of net assets recorded on the balance sheet as of December 31 of the relevant year of the comparable individual relating to the Nonresident prescribed in Article 292-3, paragraph (2), item (ii) of the Order (meaning the comparable individual prescribed in (a) of that item; the same applies hereinafter in this item) (where that comparable individual is a Nonresident, the amount of net assets relating to the permanent establishment of the Nonresident who is that comparable individual);

the amount of total assets recorded on the balance sheet as of December 31 of the relevant year of the comparable individual referred to in (a) (where that comparable individual is a Nonresident, the amount of assets relating to the permanent establishment of the Nonresident who is that comparable individual);

the ratio of the average amount of net assets to the average amount of total assets of individuals who carry on in Japan the same kind of business as the principal business conducted through the permanent establishment of the Nonresident prescribed in Article 292-3, paragraph (2), item (ii) of the Order.

The ratio of the average amount of net assets to the average amount of total assets referred to in item (ii) of the preceding paragraph is to be calculated by a reasonable method based on the balance sheets of the individuals who carry on in Japan the same kind of business prescribed in that item (limited to those relating to each of the three years leading up to and including the year prior to the relevant year of the Nonresident referred to in that item).

The matters specified by Ministry of Finance Order as prescribed in Article 292-3, paragraph (5) (Non-Inclusion in Necessary Expenses of Interest on Liabilities Corresponding to Net Assets to Be Attributed to a Permanent Establishment) of the Order are the following:

the name and residence of the Nonresident who wishes to receive application of Article 292-3, paragraph (4) of the Order;

the name of the responsible person for the management of the business conducted through a permanent establishment;

the first year in which the person wishes to receive application of Article 292-3, paragraph (4) of the Order;

the fixed date prescribed in Article 292-3, paragraph (4) of the Order;

the reason it is difficult to calculate the amount of risk-weighted assets prescribed in Article 292-3, paragraph (4) of the Order by the deadline for the Tax Return prescribed in Article 292-3, paragraph (4) of the Order;

any other matters for reference.

The cases specified by Ministry of Finance Order as prescribed in Article 292-3, paragraph (6), item (ii) (Non-Inclusion in Necessary Expenses of Interest on Liabilities Corresponding to Net Assets Attributable to a Permanent Establishment) of the Order are cases where the ratio listed in item (i) is less than approximately one-half of the ratio listed in item (ii).

the ratio of the amount listed in (a) to the amount listed in (b):

the amount of net assets recorded in the balance sheet as of December 31 of that year of the Nonresident prescribed in Article 292-3, paragraph (2), item (i) of the Order;

the amount of total assets recorded in the balance sheet as of December 31 of that year of the Nonresident in (a);

the ratio of the average amount of net assets to the average amount of total assets of an individual who conducts in Japan the same kind of business as the principal business conducted through the permanent establishment of the Nonresident prescribed in Article 292-3, paragraph (2), item (i) of the Order.

The ratio of the average amount of net assets to the average amount of total assets in item (ii) of the preceding paragraph is to be calculated by a reasonable method based on the balance sheets of individuals who conduct in Japan the same kind of business prescribed in that item (limited to those for each year within the three years on or before the year preceding that year of the Nonresident in that item).

The documents specified by Ministry of Finance Order as prescribed in Article 165-5, paragraph (1) (Exclusion of Allocated Expenses from Necessary Expenses If Documents on Allocated Expenses Are Not Retained) of the Act are the following documents:

a document stating an explanation that the expenses that form the basis for the allocation of the allocated expenses prescribed in Article 165-5, paragraph (1) of the Act are common to the business conducted through the permanent establishment of the Nonresident in that paragraph and other businesses, and the details and content thereof;

a document stating the details of the calculation method for allocation by the standard recognized as reasonable prescribed in Article 292, paragraph (3) (Calculation of the Tax Base, etc. of Income Tax on Comprehensive Taxation of Income Attributable to a Permanent Establishment) of the Order;

a document stating the reasons why the calculation method in the preceding item is reasonable.

The provisions of Article 40-10 (Documents to Be Attached for Receiving the Credit for the Amount Equivalent to the Foreign Tax Adjusted at Distribution) apply mutatis mutandis to the documents specified by Ministry of Finance Order as prescribed in Article 93, paragraph (2) (Credit for the Amount Equivalent to the Foreign Tax Adjusted at Distribution) of the Act as applied mutatis mutandis in Article 165-5-3, paragraph (2) (Credit for Amount Equivalent to Foreign Tax Adjusted at Distribution for Nonresidents) of the Act.

The documents specified by Ministry of Finance Order as prescribed in Article 292-7, paragraph (3) (Amount of Income from Sources Outside Japan) of the Order are the following documents:

a document stating the details and content of the expenses that form the basis for the allocation of the amount of common expenses prescribed in Article 292-7, paragraph (2) of the Order;

a document stating the details of the calculation method for allocation by the standard recognized as reasonable prescribed in Article 292-7, paragraph (2) of the Order;

a document stating the reasons why the calculation method in the preceding item is reasonable.

The provisions of Article 41 (Documents, etc. for Receiving Foreign Tax Credit) apply mutatis mutandis to the case where the provisions of Article 95, paragraph (10) (Foreign Tax Credit) of the Act are applied mutatis mutandis pursuant to Article 165-6, paragraph (7) (Foreign Tax Credit for Nonresidents) of the Act, and the provisions of Article 42 (Documents, etc. for Receiving Foreign Tax Credit through Carryover or Carryback) apply mutatis mutandis to the case where the provisions of Article 95, paragraph (11) of the Act are applied mutatis mutandis pursuant to Article 165-6, paragraph (7) of the Act, respectively.