Income Tax Act

Retirement income means income arising from severance pay, a lump-sum early retirement package, other compensation received on a one-time basis due to separation from employment, and compensation of a similar nature (hereinafter referred to as "severance pay and other such compensation" in this Article).

Retirement income is equivalent to 50% of the amount remaining after the retirement income deduction is applied against revenue from severance pay and other such compensation in the year (or, if the severance pay and other such compensation is short-term severance pay, the amount that each of the following items prescribes for the category of case set forth in the item, and if it is specified officers' severance pay, the amount equivalent to the amount remaining after the retirement income deduction is applied against the revenue from the severance pay and other such compensation).

if the amount remaining after the retirement income deduction is applied against the revenue from the severance pay and other such compensation is 3,000,000 yen or less: the amount equivalent to 50% of the remaining amount;

in a case other than that set forth in the preceding item: the sum total of 1,500,000 yen plus the amount remaining after the sum of 3,000,000 yen and the retirement income deduction is deducted from the revenue from the severance pay and other such compensation.

The retirement income deduction prescribed in the preceding paragraph is the amount that each of the following items prescribes for the category of case set forth in the item:

if the taxpayer has 20 or fewer years of service as prescribed by Cabinet Order (hereinafter referred to as "years of service" in this paragraph and paragraph (7)): the amount calculated as 400,000 yen times the taxpayer's years of service;

if the taxpayer has over 20 years of service:the sum total calculated when 20 years are subtracted from the taxpayer's years of service, the difference is multiplied by 700,000 yen, and 8,000,000 yen is added to the product thereof.

The short-term severance pay prescribed in paragraph (2) means severance pay and other such compensation that is received from the person paying the severance pay and other such compensation as severance pay and other such compensation corresponding to short-term years of service (meaning the years of service prescribed in item (i) of the preceding paragraph in which the years of service specified by Cabinet Order as a person other than an officer or similar person prescribed in the following paragraph are five years or less; the same applies in paragraph (7)), and that does not fall under the category of specified officers' severance pay prescribed in the following paragraph.

The specified officers' severance pay prescribed in paragraph (2) means severance pay and other such compensation that a person whose years of service specified by Cabinet Order as an officer or similar person (meaning a person set forth in any of the following items) (hereinafter referred to as "years of service as an officer" in this paragraph and paragraph (7)) are five years or less receives from the person paying the severance pay and other such compensation as severance pay and other such compensation corresponding to those years of service as an officer:

an officer as prescribed in Article 2, item (xv) (Definitions) of the Corporation Tax Act;

a member of the Diet or a member of the assembly of a local government;

a national public employee or local public employee.

Notwithstanding the provisions of paragraph (3), if circumstances fall under one of the cases set forth in the following items, the retirement income deduction provided for in paragraph (2) is the amount prescribed in the relevant item:

a case as prescribed by Cabinet Order, in which the taxpayer has been paid other severance pay and other such compensation in or before the previous year: the amount calculated pursuant to paragraph (3), less the amount that is calculated for the other severance pay and other such compensation when the provisions of that paragraph are applied pursuant to Cabinet Order;

a case in which the amount calculated pursuant to the provisions of paragraph (3) and the preceding item is less than 800,000 yen (other than in a case falling under the following item): 800,000 yen;

a case as prescribed by Cabinet Order in which the taxpayer is found to have left employment as a direct result of becoming a Person with a Disability: the amount calculated pursuant to the provisions of paragraph (3) and item (i) (or 800,000 yen, if the amount so calculated is less than 800,000 yen), plus 1,000,000 yen.

If a taxpayer has, in the year, two or more kinds of severance pay and other such compensation from among general severance pay or other such compensation (meaning severance pay and other such compensation that falls under neither short-term severance pay (meaning the short-term severance pay prescribed in paragraph (4); hereinafter the same applies in this paragraph) nor specified officers' severance pay (meaning the specified officers' severance pay prescribed in paragraph (5); hereinafter the same applies in this paragraph); hereinafter the same applies in this paragraph), short-term severance pay, and specified officers' severance pay, and there is an overlapping period in the years of service for the general severance pay or other such compensation, the short-term years of service for the short-term severance pay, or the years of service as an officer for the specified officers' severance pay, Cabinet Order provides for the calculation of the retirement income.

For the purpose of applying this Act, the following lump-sum payments are deemed to constitute severance pay and other such compensation as prescribed in paragraph (1) of the preceding Article:

a lump-sum payment based on the National Pension Act, Employees' Pension Insurance Act (Act No. 115 of 1954), National Public Officers Mutual Aid Association Act (Act No. 128 of 1958), Local Public Officers, etc. Mutual Aid Association Act (Act No. 152 of 1962), Private School Personnel Mutual Aid Association Act (Act No. 245 of 1953), or Act on the Farmers Pension Fund, Independent Administrative Agency (Act No. 127 of 2002), or any other lump-sum or one-time payment provided for by Cabinet Order which is based on a system similar to the social insurance or mutual aid systems under these Acts (including any similar payment; hereinafter the same applies in this Article);

a lump-sum payment based on the provisions of the Coal Mining Pension Fund Act (Act No. 135 of 1967) which is paid due to a pit worker as prescribed in Article 16, paragraph (1) (Payment for Pit Workers) of that Act or surface worker as prescribed in Article 18, paragraph (1) (Payment for Surface Workers) of that Act leaving employment, or any other lump-sum payment provided for by Cabinet Order which is based on a system similar to the social insurance system under that Act;

a lump-sum payment that the taxpayer receives based on the Fixed-Benefit Corporate Pension Act (Act No. 50 of 2001), and which is paid due to a member as prescribed in Article 25, paragraph (1) (Members) of that Act leaving employment (if any part of installment deposits contributed based on bylaws regarding fixed-benefit corporate pensions as prescribed in Article 3, paragraph (1) (Implementation of Fixed-Benefit Corporate Pensions) of that Act constitute an amount borne by the member, the application of this paragraph is limited to the part of the lump-sum payment that is equivalent to the amount of that lump-sum payment less the amount borne by the member) or any other lump-sum payment prescribed by Cabinet Order as being similar thereto.

Timber income means income arising from the felling of trees in forested land or a transfer of forested land.

Income arising from the felling of trees in forested land or a transfer of forested land within five years after the date of its acquisition is not included in timber income.

Timber income is the amount arrived at when the special timber income deduction is applied against the amount remaining after necessary expenses are deducted from gross revenue constituting timber income in the relevant year.

The special timber income deduction provided for in the preceding paragraph is 500,000 yen (or the remaining amount provided for in that paragraph, if this is less than 500,000 yen).

Capital gains means income arising from a transfer of assets (including the establishment of a superficies right or a right of lease to allow another person to own a building or structure, or an act provided for by Cabinet Order which gives another person long-term use of a piece of land pursuant to a contract; hereinafter the same applies in this Article).

The following income is not included in capital gains:

income arising from a transfer of Inventory (including anything that Cabinet Order prescribes as assets equivalent thereto) or from a person's continuous transfer of other assets on a commercial basis;

income arising from the felling of trees in forested land or a transfer of forested land, beyond that which falls under the preceding item.

Capital gains is the amount arrived at by first treating each of the following items separately as regards the income set forth therein and calculating the sum total of the acquisition costs of assets generating the income set forth in the item plus the cost to transfer those assets, subtracting this sum from gross revenues constituting the income set forth in that item in the year, adding together the net balances from those calculations (or, if gross revenues constituting the income set forth in either one of the following items alone is less than the sum total of the acquisition costs of the assets generating that income and the cost to transfer those assets, offsetting the net balance calculated for the income set forth in the other item by an amount equivalent to the negative balance; hereinafter such an amount is referred to as "net gain" in this Article), then applying the special capital gains deduction against the net gain:

income arising from a transfer of assets (other than a transfer falling under the provisions of the preceding paragraph; the same applies in the following item) that was made within five years after the date of the acquisition thereof (other than income prescribed by Cabinet Order);

income arising from a transfer of assets, other than income as set forth in the preceding item.

The special capital gain deduction provided for in the preceding paragraph is 500,000 yen (or the net gain, if this is less than 500,000 yen).

When a special capital gain deduction as prescribed in paragraph (3) is applied against a net gain pursuant to the provisions of that paragraph, the deduction is first applied against the part of the net gain that comes from income set forth in item (i) of that paragraph.

Occasional income means income outside of interest income, dividend income, real property income, business income, salary income, retirement income, timber income, and capital gains; which does not constitute income from one-time payments arising from continuous activities undertaken on a commercial basis; and which does not have the nature of compensation for work or other services or for the transfer of assets.

Occasional income is the amount arrived at when the amounts expended to gain the revenue arising from occasional income for the year are added together (but only amounts that were directly needed to bring about the undertaking of acts that generated the revenue or to provoke the occurrence of causes that generated the revenue), the sum total thereof is deducted from gross revenues constituting occasional income in the relevant year, and the special occasional income deduction is applied against the net balance.

The special occasional income deduction provided for in the preceding paragraph is 500,000 yen (or the net balance provided for in that paragraph, if this is less than 500,000 yen).