Regulation for Enforcement of the Income Tax Act

Pursuant to the provisions of the Income Tax Act and the Order for Enforcement of the Income Tax Act, and in order to implement that Act and that Order, the Ministerial Order revising the whole of the Regulation for Enforcement of the Income Tax Act (Ministry of Finance Order No. 29 of 1947) is established as follows.

In this Ministerial Order, the terms "in Japan", "outside Japan", "Resident", "Nonresident", "Domestic Corporation", "Foreign Corporation", "Association or Foundation without Legal Personality", "Trust Subject to Corporate Taxation", "permanent establishment", "public and corporate bond", "Deposits and Savings", "Jointly Managed Trust", "Loan Trust", "Investment Trust", "Securities Investment Trust", "Open-Ended Securities Investment Trust", "Bond Investment Trust", "Bond-Based Investment Trust", "Bond-Based Investment Trust Under Public Offering", "specified-purpose trust", "Specified Trust That Issues Beneficiary Certificates", "Inventory", "Securities", "Fixed Asset", "Depreciable Asset", "Deferred Asset", "Each Class of Income", "Income in Each Class", "Fluctuating Income", "Ad Hoc Income", "Net Loss", "Casualty Loss", "Disaster", "Person with a Disability", "Person with a Particular Disability", "Widow", "Single Parent", "Working Student", "spouse in the same household", "Claimable Spouse", "spouse for Withholding deduction", "Claimable Elderly Spouse", "Dependent", "Claimable Dependent", "Specified Dependent", "Elderly Dependent", "relative for Withholding deduction", "Special Farming Income Earner", "Tax Prepayment", "Tax Return", "Amended Return", "Blue Return", "Absence From Japan", "Reassessment", "Determination" or "Withholding" mean, respectively, the in Japan, outside Japan, Resident, Nonresident, Domestic Corporation, Foreign Corporation, Association or Foundation without Legal Personality, Trust Subject to Corporate Taxation, permanent establishment, public and corporate bond, Deposits and Savings, Jointly Managed Trust, Loan Trust, Investment Trust, Securities Investment Trust, Open-Ended Securities Investment Trust, Bond Investment Trust, Bond-Based Investment Trust, Bond-Based Investment Trust Under Public Offering, specified-purpose trust, Specified Trust That Issues Beneficiary Certificates, Inventory, Securities, Fixed Asset, Depreciable Asset, Deferred Asset, Each Class of Income, Income in Each Class, Fluctuating Income, Ad Hoc Income, Net Loss, Casualty Loss, Disaster, Person with a Disability, Person with a Particular Disability, Widow, Single Parent, Working Student, spouse in the same household, Claimable Spouse, spouse for Withholding deduction, Claimable Elderly Spouse, Dependent, Claimable Dependent, Specified Dependent, Elderly Dependent, relative for Withholding deduction, Special Farming Income Earner, Tax Prepayment, Tax Return, Amended Return, Blue Return, Absence From Japan, Reassessment, Determination or Withholding prescribed in Article 2, paragraph (1) (Definitions) of the Income Tax Act (Act No. 33 of 1965; hereinafter referred to as the "Act").

In this Ministerial Order, the terms "real property income", "business income", "timber income", "capital gains", "amount of real property income", "amount of business income", "amount of timber income", "amount of miscellaneous income", "gross income", "amount of retirement income", "amount of timber income", "Casualty Loss deduction", "medical expense deduction", "social insurance premium deduction", "deduction for small enterprise-based mutual aid premiums and similar payments", "life insurance premium deduction", "earthquake insurance premium deduction", "donation deduction", "disability deduction", "widow deduction", "single parent deduction", "working student deduction", "spousal deduction", "special spousal deduction", "deduction for Dependents", "special deduction for specified relatives", "basic personal exemption", "taxable gross income", "taxable retirement income" or "taxable timber income" mean, respectively, the real property income, business income, timber income, capital gains, amount of real property income, amount of business income, amount of timber income, amount of miscellaneous income, gross income, amount of retirement income, amount of timber income, Casualty Loss deduction, medical expense deduction, social insurance premium deduction, deduction for small enterprise-based mutual aid premiums and similar payments, life insurance premium deduction, earthquake insurance premium deduction, donation deduction, disability deduction, widow deduction, single parent deduction, working student deduction, spousal deduction, special spousal deduction, deduction for Dependents, special deduction for specified relatives, basic personal exemption, taxable gross income, taxable retirement income or taxable timber income prescribed in Article 1, paragraph (2) (Definitions) of the Order for Enforcement of the Income Tax Act (Cabinet Order No. 96 of 1965; hereinafter referred to as the "Order").

In this Ministerial Order, the terms "dividend credit", "credit for the amount equivalent to the foreign tax adjusted at distribution" or "foreign tax credit" mean, respectively, the dividend credit, credit for the amount equivalent to the foreign tax adjusted at distribution or foreign tax credit prescribed in Part II, Chapter III, Section 2 (Tax Credits) of the Act.

In this Ministerial Order, "heir" includes a universal legatee, and "decedent" includes a person who has made a universal bequest.

The special relationship specified by Ministry of Finance Order as prescribed in Article 1-2, paragraph (9) (Scope of Permanent Establishments) of the Order is any of the following relationships.

a relationship in which one party directly or indirectly holds shares, etc. (meaning shares or equity; the same applies hereinafter in this Article) in a number or amount exceeding 50 percent of the total number or total amount of the issued shares (for an investment corporation prescribed in Article 2, paragraph (12) (Definitions) of the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951), the issued investment units (meaning investment units prescribed in paragraph (14) of that Article; the same applies hereinafter in this item)) or equity (excluding treasury shares (including investment units; the same applies hereinafter in this item) or equity held by the corporation itself) of another corporation (hereinafter referred to as "issued shares, etc." in this Article), or any other relationship in which one party directly or indirectly controls the other party;

a relationship between two corporations where each has shares, etc. in a number or amount exceeding 50 percent of its issued shares, etc. directly or indirectly held by the same person, or any other relationship between two persons where the two persons are directly or indirectly controlled by the same person (excluding a relationship falling under the relationship set forth in the preceding item).

In the case of item (i) of the preceding paragraph, whether one party directly or indirectly holds shares, etc. in a number or amount exceeding 50 percent of the issued shares, etc. of another corporation is determined by the ratio obtained by adding together the ratio of shares, etc. directly held by that one party in that other corporation (meaning the ratio that the number or amount of the shares, etc. of that other corporation held by that one party represents of the issued shares, etc. of that other corporation) and the ratio of shares, etc. indirectly held by that one party in that other corporation.

The ratio of shares, etc. indirectly held as prescribed in the preceding paragraph means the ratio specified in each of the following items for the category of case set forth in that item (if the case falls under more than one of the cases set forth in those items, the total of the ratios specified in those items).

in the case where shares, etc. in a number or amount exceeding 50 percent of the issued shares, etc. of a corporation that is a shareholder, etc. (meaning a shareholder, etc. prescribed in Article 2, item (xiv) (Definitions) of the Corporation Tax Act (Act No. 34 of 1965); the same applies hereinafter in this paragraph) of the other corporation in the preceding paragraph are held by the one party in the preceding paragraph: the ratio that the number or amount of the shares, etc. of that other corporation held by the corporation that is that shareholder, etc. represents of the issued shares, etc. of that other corporation (if there are two or more such corporations that are shareholders, etc., the total of the ratios calculated for each of those two or more corporations that are shareholders, etc.);

in the case where one or more corporations having a chain relationship with the corporation that is a shareholder, etc. of the other corporation in the preceding paragraph (excluding a corporation that is a shareholder, etc. in item (i) falling under the case set forth in that item) and with the one party in that paragraph through the holding of shares, etc. (hereinafter referred to as "capital-linked corporations" in this item) intervene between those persons (limited to the case where the capital-linked corporations and that corporation that is a shareholder, etc. each have shares, etc. in a number or amount exceeding 50 percent of their issued shares, etc. held by that one party or a capital-linked corporation (limited to one whose shares, etc. in a number or amount exceeding 50 percent of its issued shares, etc. are held by that one party or another capital-linked corporation)): the ratio that the number or amount of the shares, etc. of that other corporation held by the corporation that is that shareholder, etc. represents of the issued shares, etc. of that other corporation (if there are two or more such corporations that are shareholders, etc., the total of the ratios calculated for each of those two or more corporations that are shareholders, etc.).

The provisions of paragraph (2) apply mutatis mutandis to the determination of the relationship of being directly or indirectly held in paragraph (1), item (ii).

The persons specified by Ministry of Finance Order as prescribed in Article 2, paragraph (1), item (xxx), (a)(3) (Definitions) of the Act are the persons specified in each of the following items for the category of case set forth in that item.

in the case where the person is a person stated as the head of household in the certificate of residence: a person in whose certificate of residence, among those of persons belonging to the same household as that person, it is stated that the relationship to the head of household set forth in Article 7, item (iv) (Matters to Be Stated in a Certificate of Residence) of the Residential Basic Book Act (Act No. 81 of 1967) (hereinafter referred to as "relationship to the head of household" in the following item and the following Article) is that of the head of household's unregistered husband, or otherwise that it is a relationship found to be in circumstances equivalent to a de facto marital relationship with the head of household;

in the case where the person is not a person stated as the head of household in the certificate of residence: the head of household, where it is stated in that person's certificate of residence that the relationship to the head of household is that of the head of household's unregistered wife, or otherwise that it is a relationship found to be in circumstances equivalent to a de facto marital relationship with the head of household.

The persons specified by Ministry of Finance Order as prescribed in Article 2, paragraph (1), item (xxxi), (c) (Definitions) of the Act are the persons specified in each of the following items for the category of case set forth in that item.

in the case where the person is a person stated as the head of household in the certificate of residence: a person in whose certificate of residence, among those of persons belonging to the same household as that person, it is stated that the relationship to the head of household is that of the head of household's unregistered husband or unregistered wife, or otherwise that it is a relationship found to be in circumstances equivalent to a de facto marital relationship with the head of household;

in the case where the person is not a person stated as the head of household in the certificate of residence: the head of household, where it is stated in that person's certificate of residence that the relationship to the head of household is that of the head of household's unregistered husband or unregistered wife, or otherwise that it is a relationship found to be in circumstances equivalent to a de facto marital relationship with the head of household.