Income Tax Act

If a Resident who makes a departure from Japan (meaning ceasing to have a domicile or residence in Japan; the same applies hereinafter in this Article) holds, at the time of that departure from Japan, Securities or an equity interest in a contribution under a silent partnership contract prescribed in Article 174, item (ix) (Tax Base for a Domestic Corporation's Income Taxes) (excluding Securities that represent the right to acquire shares without contribution or at an advantageous price and that would generate domestic source income prescribed in Article 161, paragraph (1) (Domestic Source Income), and other Securities prescribed by Cabinet Order; hereinafter referred to as "Securities and similar interests" in this Article through Article 60-4 (Special Provisions on Capital Gains upon Application of Foreign Exit Tax Provisions)), for the calculation of that person's business income, capital gains, or miscellaneous income, the Securities and similar interests are deemed to have been transferred at the time of the departure from Japan, for the amount prescribed in each of the following items for the category of case set forth in that item:

if, by the time of filing the Tax Return for the year that includes the date of the departure from Japan, the Resident has given notification of a tax agent pursuant to Article 117, paragraph (2) (Tax Agent) of the Act on General Rules for National Taxes, if the Resident files the Tax Return for that year on or after the date of the departure from Japan without having given notification of a tax agent pursuant to that paragraph, or if a determination is made with regard to income tax for that year: the amount equivalent to the value of the Securities and similar interests at the time of the departure from Japan;

in a case other than as set forth in the preceding item: the amount equivalent to the value of the Securities and similar interests as of the day three months before the scheduled date of the departure from Japan (or, for Securities and similar interests acquired after that day, as of the time of acquisition).

If a Resident who makes a departure from Japan is, at the time of that departure from Japan, a party to a contract for margin transactions prescribed in Article 156-24, paragraph (1) (License and Application for License) of the Financial Instruments and Exchange Act or when-issued transactions (meaning transactions for the purchase and sale of Securities before those Securities are issued which are specified by Ministry of Finance Order) that have not been settled (hereinafter referred to as "unsettled margin transactions or similar transactions" in this Article through Article 60-4), for the calculation of that person's business income or miscellaneous income, the amount of profit or loss prescribed in each of the following items for the category of case set forth in that item is deemed to have arisen at the time of the departure from Japan:

in the case set forth in item (i) of the preceding paragraph: the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled at the time of the departure from Japan;

in the case set forth in item (ii) of the preceding paragraph: the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled on the day three months before the scheduled date of the departure from Japan (or, for unsettled margin transactions or similar transactions for which the contract was concluded after that day, at the time of conclusion).

If a Resident who makes a departure from Japan is, at the time of that departure from Japan, a party to a contract for derivatives transactions prescribed in Article 2, paragraph (20) (Definitions) of the Financial Instruments and Exchange Act that have not been settled (hereinafter referred to as "unsettled derivatives transactions" in this Article through Article 60-4), for the calculation of that person's business income or miscellaneous income, the amount of profit or loss prescribed in each of the following items for the category of case set forth in that item is deemed to have arisen at the time of the departure from Japan:

in the case set forth in paragraph (1), item (i): the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled at the time of the departure from Japan;

in the case set forth in paragraph (1), item (ii): the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled on the day three months before the scheduled date of the departure from Japan (or, for unsettled derivatives transactions for which the contract was concluded after that day, at the time of conclusion).

If an individual (including the individual's heir) to whom the provisions of the preceding three paragraphs (including as applied pursuant to paragraph (8) (including as applied mutatis mutandis pursuant to paragraph (9); the same applies in item (i)) or paragraph (10)) have applied with regard to income tax for the year that includes the date of the departure from Japan transfers (including anything similar to a transfer that Cabinet Order prescribes; the same applies in paragraph (8)) or settles Securities and similar interests held at the time of the departure from Japan, or unsettled margin transactions or similar transactions or unsettled derivatives transactions to whose contracts the individual was a party at that time, the calculation of business income, capital gains, or miscellaneous income is governed by the following; provided, however, that this does not apply to the Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions in the case where neither a Tax Return has been filed nor a determination has been made with regard to income tax for the year that includes that date, to Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions for which the amount prescribed in the items of paragraph (1), the items of paragraph (2), or the items of the preceding paragraph for the category of case set forth in those items has not been included in the gross revenue used to calculate business income, capital gains, or miscellaneous income for the year that includes that date, or to Securities and similar interests, unsettled margin transactions or similar transactions, and unsettled derivatives transactions to which the main clause of paragraph (6) (including as applied pursuant to paragraph (7)) has applied.

the Securities and similar interests are deemed to have been acquired for the amount prescribed in the items of paragraph (1) (or, if the provisions of paragraph (1) have applied pursuant to paragraph (8), for the transfer price for the transfer of those Securities and similar interests prescribed in paragraph (8) or the amount equivalent to the value of those Securities and similar interests at the time of the gift or inheritance with limited liability);

if the unsettled margin transactions or similar transactions or unsettled derivatives transactions are settled, the amount equivalent to the amount of profit prescribed in the items of paragraph (2) or the items of the preceding paragraph with regard to those unsettled margin transactions or similar transactions or unsettled derivatives transactions is to be subtracted from the amount of profit or loss arising from the settlement (hereinafter referred to as the "gain or loss on settlement" in this item), or the amount equivalent to the amount of loss prescribed in the items of paragraph (2) or the items of the preceding paragraph with regard to those unsettled margin transactions or similar transactions or unsettled derivatives transactions is to be added to the gain or loss on settlement.

The provisions of the preceding paragraphs do not apply to a Resident for whom the amount prescribed in each of the following items for the category of case set forth in that item, as of the time of the departure from Japan, for the Securities and similar interests held, and the unsettled margin transactions or similar transactions and unsettled derivatives transactions to whose contracts the Resident is a party, at the time of that departure from Japan is less than 100,000,000 yen, or to a Resident for whom the total of the periods prescribed by Cabinet Order as periods during which the Resident had a domicile or residence in Japan within the 10 years before the date of the departure from Japan is five years or less.

in the case set forth in paragraph (1), item (i): the total of the amount prescribed in that item, the amount prescribed in paragraph (2), item (i), and the amount prescribed in paragraph (3), item (i);

in the case set forth in paragraph (1), item (ii): the total of the amount prescribed in that item, the amount prescribed in paragraph (2), item (ii), and the amount prescribed in paragraph (3), item (ii).

An individual to whom the provisions of paragraphs (1) through (3) are to apply with regard to income tax for the year that includes the date of the departure from Japan may, for those of the Securities and similar interests held at the time of the departure from Japan, or the unsettled margin transactions or similar transactions or unsettled derivatives transactions to whose contracts the individual was a party at that time, that are prescribed in each of the following items for the category of case set forth in that item, treat all of the transfers of Securities and similar interests, the settlements of unsettled margin transactions or similar transactions, and the settlements of unsettled derivatives transactions that were deemed to have been made pursuant to the provisions of paragraphs (1) through (3) in the calculation of the business income, capital gains, or miscellaneous income for that year of the Resident referred to in those paragraphs as not having occurred; provided, however, that this does not apply to the amount equivalent to the income from transfers of Securities and similar based on the facts concealed or disguised, in the case where all or part of the facts that should form the basis for calculating the business income, capital gains, or miscellaneous income from the transfer of the Securities and similar interests, the business income or miscellaneous income from the settlement of the unsettled margin transactions or similar transactions, or the business income or miscellaneous income from the settlement of the unsettled derivatives transactions (hereinafter referred to as "income from transfers of Securities and similar" in this paragraph) were concealed or disguised and, because a Tax Return was filed based on that concealment or disguise or a Tax Return was not filed, a determination or Reassessment is made, or a return filed after the deadline or an Amended Return is filed, by the day on which five years have elapsed from the date of the individual's departure from Japan (excluding the case where a return filed after the deadline or an Amended Return was filed by that day and the filing was not made in anticipation of a determination or Reassessment with regard to income tax as a result of an examination concerning that income tax).

if the individual makes a return to Japan (meaning coming to have a domicile in Japan or to have had a residence in Japan continuously for one year or more up to the present; hereinafter the same applies in this paragraph and in paragraph (6) of the following Article) by the day on which five years have elapsed from the date of the departure from Japan: the Securities and similar interests that the individual has continued to hold until the time of that return to Japan, or the unsettled margin transactions or similar transactions or unsettled derivatives transactions that the individual has not settled;

if, by the day on which five years have elapsed from the date of the departure from Japan, the individual has transferred to a Resident, by gift (other than a gift to the trustee of a public interest trust; hereinafter the same applies in this item), Securities and similar interests held at the time of the departure from Japan, or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions to which the individual was a party at that time: the Securities and similar interests, unsettled margin transactions or similar transactions, or unsettled derivatives transactions that were transferred by that gift;

if, due to the death of the individual by the day on which five years have elapsed from the date of the departure from Japan, the Securities and similar interests held at the time of the departure from Japan, or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions to which the individual was a party at that time, have been transferred by hereditary succession (other than hereditary succession subject to qualified acceptance; hereinafter the same applies in this item) or a legacy (other than a legacy left to the trustee of a public interest trust and a universal legacy which is associated with a qualified acceptance; hereinafter the same applies in this item), and the case comes to fall under either of the following: the Securities and similar interests, unsettled margin transactions or similar transactions, or unsettled derivatives transactions that were transferred by that hereditary succession or legacy.

if, by the day on which five years have elapsed from the date of the departure from Japan, all of the individuals who are heirs and legatees that received a transfer of Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions through that hereditary succession or legacy (including an individual that received a transfer of those Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions from such an individual through hereditary succession or a legacy; the same applies in (b)) have become Residents;

if, due to a division of the estate or similar event prescribed in Article 151-6, paragraph (1) (Special Provisions on Amended Returns in the Event of Division of an Estate or Similar Event) that has arisen with regard to the individual, the individuals who are heirs and legatees that received a transfer of Securities and similar interests or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions through that hereditary succession or legacy have come to include no Nonresident (excluding a person who has made a return to Japan by the day on which five years have elapsed from the date of the departure from Japan).

For the purpose of applying the provisions of the preceding paragraph to an individual to whom the provisions of paragraphs (1) through (3) have applied with regard to income tax for the year that includes the date of the departure from Japan and who, pursuant to Article 137-2, paragraph (2) (Tax Payment Grace Period Where the Special Provisions on Capital Gains upon Departure from Japan Apply), has been granted a tax payment grace period under paragraph (1) of that Article, the term "five years" in that paragraph is deemed to be replaced with "10 years".

If an individual (including the individual's heir) to whom the provisions of paragraphs (1) through (3) have applied with regard to income tax for the year that includes the date of the departure from Japan and who has been granted a tax payment grace period under Article 137-2, paragraph (1) (including as applied pursuant to paragraph (2) of that Article; the same applies in paragraph (10)) has, by the reference expiry date prescribed in paragraph (1) of that Article for that tax payment grace period, transferred (excluding a transfer made at a price lower than the value at the time of the transfer and any other transfer prescribed by Cabinet Order; hereinafter the same applies in this paragraph and the following paragraph) or settled Securities and similar interests that the individual has continued to hold since the time of the departure from Japan, or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions that the individual has not settled, or has transferred them by a gift or inheritance with limited liability (meaning a gift, hereditary succession (but only hereditary succession subject to qualified acceptance), or a legacy (but only a universal legacy which is associated with a qualified acceptance); hereinafter the same applies in this paragraph and the following paragraph), and the transfer price for the transfer or the amount equivalent to the value of the Securities and similar interests at the time of the gift or inheritance with limited liability, or the amount of profit or loss arising from the settlement, the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled at the time of the gift or inheritance with limited liability (referred to as the "deemed margin transaction profit or loss at a gift or inheritance with limited liability" in paragraph (8) of the following Article), or the amount equivalent to the amount of profit or loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled at the time of the gift or inheritance with limited liability (referred to as the "deemed derivatives profit or loss at a gift or inheritance with limited liability" in paragraph (8) of the following Article) falls under any of the following cases, then, for the purpose of applying the provisions of paragraphs (1) through (3) with regard to that individual's income tax for the year that includes the date of the departure from Japan, the phrase "the amount prescribed in each of the following items for the category of case set forth in that item" in paragraph (1) may be deemed to be replaced with "the transfer price for the transfer of those Securities and similar interests prescribed in paragraph (8) or the amount equivalent to the value of those Securities and similar interests at the time of the gift or inheritance with limited liability", the phrase "the amount of profit or loss prescribed in each of the following items for the category of case set forth in that item" in paragraph (2) may be deemed to be replaced with "the amount of profit or loss arising from the settlement prescribed in paragraph (8) or the deemed margin transaction profit or loss at a gift or inheritance with limited liability", and the phrase "the amount of profit or loss prescribed in each of the following items for the category of case set forth in that item" in paragraph (3) may be deemed to be replaced with "the amount of profit or loss arising from the settlement prescribed in paragraph (8) or the deemed derivatives profit or loss at a gift or inheritance with limited liability":

the transfer price for the transfer of the Securities and similar interests or the amount equivalent to the value of the Securities and similar interests at the time of the gift or inheritance with limited liability is lower than the amount equivalent to the value prescribed in the items of paragraph (1) for the category of case set forth in those items as of the time of the departure from Japan (or, if a merger or split of the corporation that issued the Securities and similar interests or any other event prescribed by Cabinet Order occurs after the time of the departure from Japan, the amount calculated pursuant to Cabinet Order based on that amount; the same applies in paragraph (10), item (i));

the amount equivalent to the amount of profit arising from the settlement of the unsettled margin transactions or similar transactions, or the deemed margin-transaction gain at the time of a gift or inheritance with limited liability (meaning the amount equivalent to the amount of profit calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled at the time of the gift or inheritance with limited liability; the same applies in paragraph (8), item (ii) of the following Article), is lower than the deemed margin-transaction gain at the time of departure from Japan (meaning the amount equivalent to the amount of profit prescribed in the items of paragraph (2) for the category of case set forth in those items as of the time of the departure from Japan; the same applies in item (iv) and paragraph (10), items (ii) and (iv));

the margin-transaction loss (meaning the amount equivalent to the amount of loss arising from the settlement of the unsettled margin transactions or similar transactions, or the deemed margin-transaction loss at the time of a gift or inheritance with limited liability (meaning the amount equivalent to the amount of loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled at the time of the gift or inheritance with limited liability; the same applies in paragraph (8), item (iii) of the following Article); the same applies in the following item) exceeds the deemed margin-transaction loss at the time of departure from Japan (meaning the amount equivalent to the amount of loss prescribed in the items of paragraph (2) for the category of case set forth in those items as of the time of the departure from Japan; the same applies in paragraph (10), item (iii));

a deemed margin-transaction gain at the time of departure from Japan had arisen with regard to unsettled margin transactions or similar transactions on which a margin-transaction loss has arisen;

the amount equivalent to the amount of profit arising from the settlement of the unsettled derivatives transactions, or the deemed derivatives gain at the time of a gift or inheritance with limited liability (meaning the amount equivalent to the amount of profit calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled at the time of the gift or inheritance with limited liability; the same applies in paragraph (8), item (v) of the following Article), is lower than the deemed derivatives gain at the time of departure from Japan (meaning the amount equivalent to the amount of profit prescribed in the items of paragraph (3) for the category of case set forth in those items as of the time of the departure from Japan; the same applies in item (vii) and paragraph (10), items (v) and (vii));

the derivatives loss (meaning the amount equivalent to the amount of loss arising from the settlement of the unsettled derivatives transactions, or the deemed derivatives loss at the time of a gift or inheritance with limited liability (meaning the amount equivalent to the amount of loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled at the time of the gift or inheritance with limited liability; the same applies in paragraph (8), item (vi) of the following Article); the same applies in the following item) exceeds the deemed derivatives loss at the time of departure from Japan (meaning the amount equivalent to the amount of loss prescribed in the items of paragraph (3) for the category of case set forth in those items as of the time of the departure from Japan; the same applies in paragraph (10), item (vi));

a deemed derivatives gain at the time of departure from Japan had arisen with regard to unsettled derivatives transactions on which a derivatives loss has arisen.

The provisions of the preceding paragraph apply mutatis mutandis if an individual to whom the provisions of paragraphs (1) through (3) are to apply with regard to income tax for the year that includes the date of the departure from Japan and who has given notification of a tax agent pursuant to Article 117, paragraph (2) of the Act on General Rules for National Taxes by the time of the departure from Japan has, by the Filing Deadline for income tax for the year that includes that date, transferred or settled Securities and similar interests that the individual has continued to hold since that date, or contracts for unsettled margin transactions or similar transactions or unsettled derivatives transactions that the individual has not settled, or has transferred them by a gift or inheritance with limited liability.

If an individual (including the individual's heir) to whom the provisions of paragraphs (1) through (3) have applied with regard to income tax for the year that includes the date of the departure from Japan and who has been granted a tax payment grace period under Article 137-2, paragraph (1) holds, on the day on which five years have elapsed from that date (or, if the individual has been granted a tax payment grace period under paragraph (1) of that Article pursuant to paragraph (2) of that Article, the day on which 10 years have elapsed; hereinafter the same applies in this paragraph), Securities and similar interests that the individual has continued to hold since the time of the departure from Japan, or unsettled margin transactions or similar transactions or unsettled derivatives transactions that the individual has not settled, and these fall under any of the following cases, then, for the purpose of applying the provisions of paragraphs (1) through (3) with regard to that individual's income tax for the year that includes the date of the departure from Japan, the phrases "the time of the departure from Japan", "the day three months before the scheduled date of the departure from Japan (or, for Securities and similar interests acquired after that day, as of the time of acquisition)", "the day three months before the scheduled date of the departure from Japan (or, for unsettled margin transactions or similar transactions for which the contract was concluded after that day, at the time of conclusion)", and "the day three months before the scheduled date of the departure from Japan (or, for unsettled derivatives transactions for which the contract was concluded after that day, at the time of conclusion)" in those provisions may be deemed to be replaced with "the day on which five years have elapsed from the date of the departure from Japan (or, if the individual has been granted a tax payment grace period under paragraph (1) of Article 137-2 pursuant to paragraph (2) of that Article (Tax Payment Grace Period Where the Special Provisions on Capital Gains upon Departure from Japan Apply), the day on which 10 years have elapsed)":

the amount equivalent to the value of the Securities and similar interests on the day on which those five years have elapsed is lower than the amount equivalent to the value prescribed in the items of paragraph (1) for the category of case set forth in those items as of the time of the departure from Japan;

the amount equivalent to the amount of profit calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled on the day on which those five years have elapsed is lower than the deemed margin-transaction gain at the time of departure from Japan;

the amount equivalent to the amount of loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled margin transactions or similar transactions were settled on the day on which those five years have elapsed (referred to as the "deemed margin transaction loss at the five-year mark" in the following item) exceeds the deemed margin-transaction loss at the time of departure from Japan;

a deemed margin-transaction gain at the time of departure from Japan had arisen with regard to unsettled margin transactions or similar transactions on which that deemed margin transaction loss at the five-year mark has arisen;

the amount equivalent to the amount of profit calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled on the day on which those five years have elapsed is lower than the deemed derivatives gain at the time of departure from Japan;

the amount equivalent to the amount of loss calculated pursuant to Ministry of Finance Order on the assumption that the unsettled derivatives transactions were settled on the day on which those five years have elapsed (referred to as the "deemed derivatives loss at the five-year mark" in the following item) exceeds the deemed derivatives loss at the time of departure from Japan;

a deemed derivatives gain at the time of departure from Japan had arisen with regard to unsettled derivatives transactions on which that deemed derivatives loss at the five-year mark has arisen.

For the purpose of applying the provisions of paragraph (6) through the preceding paragraph, Securities and similar interests that an individual has acquired after the time of the departure from Japan due to any of the following events are deemed to have been continuously held by that individual:

a share exchange prescribed in Article 57-4, paragraph (1) (Special Provisions on Capital Gains Due to Share Exchange) or a share transfer prescribed in paragraph (2) of that Article carried out by the corporation that issued shares held by the Resident referred to in paragraph (1);

the exercise of the right to demand acquisition, the occurrence of the grounds to acquire, the resolution for acquisition, or the exercise prescribed in those items, with regard to shares with a put option prescribed in Article 57-4, paragraph (3), item (i), shares subject to call prescribed in item (ii) of that paragraph, shares subject to class-wide call prescribed in item (iii) of that paragraph, bonds with share options prescribed in item (iv) of that paragraph, share options subject to call prescribed in item (v) of that paragraph, or bonds with share options to which share options subject to call are attached prescribed in item (vi) of that paragraph, held by the Resident referred to in paragraph (1);

beyond what is set forth in the preceding two items, an event prescribed by Cabinet Order.

Beyond what is provided for in paragraph (6) through the preceding paragraph, Cabinet Order provides for the necessary particulars concerning the application of the provisions of paragraphs (1) through (5).