Income Tax Act

The tax base for income taxes imposed on a Domestic Corporation is an amount set forth as follows which the Domestic Corporation is paid in Japan (with regard to a monetary award as set forth in item (x), this means the amount remaining after the amount specified by Cabinet Order is deducted therefrom):

interest and similar income as prescribed in Article 23, paragraph (1) (Interest Income);

dividends and similar income as prescribed in Article 24, paragraph (1) (Dividend Income);

compensation for periodic deposits based on a contract for installment deposits (meaning the part of compensation monies based on such a contract which is equivalent to what remains when the sum of installment deposits to be paid in based on that contract is deducted from the monies received as compensation);

compensation for periodic deposits based on a contract as referred to in Article 2, paragraph (4) (Definitions) of the Bank Act (Act No. 59 of 1981) (meaning the part of compensation monies based on such a contract which is equivalent to what remains when the sum of the amounts prescribed by Cabinet Order as installment deposits that must be paid based on the contract is deducted from monies received as compensation);

finance charges that are paid based on a contract prescribed by Cabinet Order as a contract concluded based on mortgage Securities as prescribed in Article 1, paragraph (1) (Delivery of Securities) of the Mortgage Securities Act (Act No. 15 of 1931) which includes information such as the details of the payment of the principal and finance charges for the receivables indicated in the mortgage Securities;

profits based on a contract for the purchase and sellback of a precious metal such as gold or anything equivalent thereto that Cabinet Order provides for, which stipulates that the thing will be sold back at the price stipulated in the contract on the date stipulated in the contract (meaning the amount remaining when the amount required for to purchase the thing is deducted from the amount for which the thing is sold back as stipulated in the contract);

margin arising from Deposits or Savings in a foreign currency the principal and interest of which are to be paid after conversion into Japanese yen or into a different foreign currency at the rate agreed upon in advance;

margin based on an insurance policy concluded by an insurance company as prescribed in Article 2, paragraph (2) (Definitions) of the Insurance Business Act, a foreign insurance company, etc. as prescribed in paragraph (7) of that Article, or a small amount and short term insurance provider as prescribed in paragraph (18) of that Article, or on a former postal life insurance policy (meaning a postal life insurance policy as prescribed in Article 3 (Government Guarantee) of the Postal Life Insurance Act prior to its repeal pursuant to Article 2 (Repeal of Acts) of the Act on the Arrangement of Related Acts for the Enforcement of the Postal Service Privatization Act, etc.), or based on a mutual aid contract similar thereto, which provides that premiums or installment deposits are to be paid in a lump sum (this includes anything prescribed by Cabinet Order as a method of payment equivalent thereto) or provides for any other particulars prescribed by Cabinet Order, and which has a term of insurance or mutual aid (hereinafter referred to as a "term of coverage" in this item) not exceeding five years or has a term of coverage exceeding five years but is canceled within five years from the first day of the term of coverage (meaning the amount calculated pursuant to Cabinet Order as the amount arrived at when the sum total of premiums or installment deposits already paid based on the contract is deducted from the amount of maturity proceeds, return on maturity, mutual aid monies at maturity, or cancellation returns based on the contract);

a distribution of proceeds based on a silent partnership agreement (this includes anything prescribed by Cabinet Order as an agreement equivalent thereto; the same applies in Article 176, paragraph (2) (Special Provisions on Taxation of Interest and Similar Income from Trust Property));

a monetary award from horse racing received by a horse's owner, as prescribed by Cabinet Order

The income taxes imposed on a Domestic Corporation are in the amount set forth in each of the following items for the category to which the item refers:

interest and similar income set forth in item (i) of the preceding Article, or compensation for periodic deposits, finance charges, profits, or margin profits set forth in items (iii) through (viii) of that Article: the amount calculated when that amount is multiplied by a tax rate of 15 percent;

dividends and similar income set forth in item (ii) of the preceding Article, or distributions of profits set forth in item (ix) of that Article: the amount calculated when that amount is multiplied by a tax rate of 20 percent;

monetary awards set forth in item (x) of the preceding Article: the amount calculated when the amount remaining after the amount prescribed by Cabinet Order is deducted from that amount is multiplied by a tax rate of 10 percent.

If a trust company that is a Domestic Corporation (this includes a financial institution as prescribed in Article 1, paragraph (1) (Approval for Additional Business) of the Act on Engagement in Trust Business Activities by Financial Institutions which is engaged in trust business as prescribed in that paragraph; referred to as a "domestic trust company" in the following paragraph) has an entry made in the books kept by a person paying interest and similar income as prescribed in Article 23, paragraph (1) (Interest Income) (hereinafter referred to as "interest and similar income" in this Article) or dividends and similar income as prescribed in Article 24, paragraph (1) (Dividend Income) (hereinafter referred to as "dividends and similar income" in this Article) in Japan, indicating that the Public and Corporate bonds constituting a part of the trust property of a Securities Investment Trust (limited to one established as a trust at a business office in Japan) of which the trust company has undertaken to act as trustee; or a beneficial interest, company bond-type beneficial interest, share, or capital contribution under a Jointly Managed Trust, Investment Trust, or Specified Trust That Issues Beneficiary Certificates (hereinafter referred to as a "public and corporate bond or similar interest" in this paragraph) is a part of the trust property, or if the trust company has a record made of any other information prescribed by Ministry of Finance Order, the provisions of Article 7, paragraph (1), item (iv) (Scope of Taxable Income of Domestic Corporations) and the preceding two Articles do not apply to interest and similar income or dividends and similar income that are paid during the time that such information on the public and corporate bond or similar interest remains on the books.

If a domestic trust company has a record made in the books kept by a person paying interest and similar income, paying dividends and similar income, or distributing profits as set forth in Article 174, item (ix) (Tax Base for a Domestic Corporation's Income Taxes) in Japan, indicating that a Public and Corporate Bond constituting a part of the trust property of a retirement pension trust (limited to one established as a trust at a business office located in Japan) as prescribed in Article 13, paragraph (3), item (ii) (Attribution of Trust Property Assets and Liabilities and of Proceeds and Expenses Attributable to Trust Property) of which the trust company has undertaken to act as trustee; a beneficial interest, company bond-type beneficial interest, share, or capital contribution under a Jointly Managed Trust, Investment Trust, or Specified Trust That Issues Beneficiary Certificates; or a right based on a silent partnership agreement (hereinafter referred to as a "public and corporate bond or similar interest" in this paragraph), is a part of the trust property, or if the trust company has a record made of any other information prescribed by Ministry of Finance Order, the provisions of Article 7, paragraph (1), item (iv) and the preceding two Articles do not apply to interest and similar income, dividends and similar income, or distributions of profits paid during the time that such information on the public and corporate bonds or similar interest remains on the books.

The income taxes paid by a Domestic Corporation on the trust property of a group investment trust as prescribed in Article 13, paragraph (3), item (i) (limited to one established as a trust at a business office located in Japan; hereinafter referred to as a "group investment trust" in this Article) of which the corporation has undertaken to act as trustee (limited to the part corresponding to income taxes that would be required to be withheld on the distribution of proceeds pursuant to Article 181 (Obligation to Withhold Taxes) or Article 212 (Obligation to Withhold Taxes) if the proceeds on which those income taxes were imposed were distributed (excluding the part corresponding only to what is set forth in Article 9, paragraph (1), item (xi) (Nontaxable Income)), and including any taxes equivalent to income taxes and prescribed by Cabinet Order which are imposed pursuant to foreign laws or orders; the same applies in the following paragraph) are credited against the income taxes on distributions of proceeds from that group investment trust, pursuant to Cabinet Order.

The income taxes paid on the trust property of a group investment trust which are to be credited pursuant to the preceding paragraph are added to the amount of distributions of proceeds from the investment trust when those distributions of proceeds are calculated.

Beyond what is prescribed in the preceding paragraph, Cabinet Order provides for particulars concerning the notice that the Domestic Corporation referred to in paragraph (3) gives to a person paid distributions of proceeds from a group investment trust, particulars concerning the amount of tax withheld as prescribed in Article 120, paragraph (1), item (iv) (Filing an Income Tax Return) which that person deducts from the income tax set forth in item (iii) of that paragraph and states in a return under that paragraph, and other necessary particulars concerning the application of the provisions of paragraph (3).