Income Tax Act

The provisions of Part II, Chapter V and Chapter VI (Filing of Returns, Payment of Taxes, and Issuance of Refunds for Residents) apply mutatis mutandis to the filing of returns, payment of taxes, and issuance of refunds for a Nonresident's Income Taxes Imposed on Aggregate Income. In such a case, in Article 112, paragraph (2) (Process of Applying for Approval for a Reduction of Tax Prepayments), the term "transactions" is deemed to be replaced with "transactions (for a Nonresident with a permanent establishment, including those falling under internal dealings as prescribed in Article 161, paragraph (1), item (i) (Domestic Source Income))" and the phrase "that paragraph" is deemed to be replaced with "the preceding paragraph"; in Article 120, paragraph (1) (Filing an Income Tax Return), the phrase "foreign tax credit" is deemed to be replaced with "credit under Article 165-6, paragraphs (1) through (3) (Foreign Tax Credit for Nonresidents)"; in item (iii) of that paragraph, the phrase "Chapter III (Calculation of Tax Amount)" is deemed to be replaced with "Chapter III (excluding Article 93 (Credit for the Amount Equivalent to the Foreign Tax Adjusted at Distribution) and Article 95 (Foreign Tax Credit)) (Calculation of Tax Amount), and Article 165-5-3 (Credit for Amount Equivalent to Foreign Tax Adjusted at Distribution for Nonresidents) and Article 165-6"; in paragraph (8) of that Article, the phrase "business that generates timber income" is deemed to be replaced with "business that generates timber income (limited to business related to the domestic source income specified in the items of Article 164, paragraph (1) (How Nonresidents Are Taxed); hereinafter referred to as "specified business" in this paragraph)", the phrase "business that generates miscellaneous income" is deemed to be replaced with "specified business that generates miscellaneous income", the phrase "that business" is deemed to be replaced with "that specified business", and the phrase "must be attached to that return" is deemed to be replaced with "must be attached to that return, and if a Nonresident conducting business both in Japan and outside Japan files a return under that paragraph, a detailed statement of revenue and expenditures as prescribed by Ministry of Finance Order must be attached to that return"; in Article 122, paragraph (1), item (i) (Filing a Return to Receive a Refund), the phrase "foreign tax credit" is deemed to be replaced with "credit under Article 165-6, paragraphs (1) through (3) (Foreign Tax Credit for Nonresidents)"; in paragraph (2) of that Article, the phrase "Article 95, paragraph (2) or (3) (Foreign Tax Credit)" is deemed to be replaced with "Article 165-6, paragraph (2) or (3)"; in Article 123, paragraph (2), item (vi) (Filing Tax Returns Showing Losses), the phrase "Article 95 (Foreign Tax Credit)" is deemed to be replaced with "Article 165-6 (Foreign Tax Credit for Nonresidents)"; in Article 143 (Blue Returns), the term "business" is deemed to be replaced with "business (limited to business related to the domestic source income specified in the items of Article 164, paragraph (1) (How Nonresidents Are Taxed))"; in Article 144 (Application for Approval to File a Blue Return), the phrase "commences business" is deemed to be replaced with "commences business (limited to business related to the domestic source income specified in the items of Article 164, paragraph (1) (How Nonresidents Are Taxed))"; in Article 145, item (ii) (Denial of Applications for Approval to File a Blue Return), the term "transactions" is deemed to be replaced with "transactions (for a Nonresident with a permanent establishment, including those falling under internal dealings as prescribed in Article 161, paragraph (1), item (i) (Domestic Source Income); the same applies in Article 148, paragraph (1) and Article 150, paragraph (1), item (iii) (Rescission of Approval to File a Blue Return))"; and in Article 147 (When a Resident Is Deemed to Receive Approval to File a Blue Return), the term "business" is deemed to be replaced with "business (limited to business related to the domestic source income specified in the items of Article 164, paragraph (1) (How Nonresidents Are Taxed))".

If a Nonresident with a permanent establishment has domestic source income set forth in Article 161, paragraph (1), item (i) (Domestic Source Income) (hereinafter referred to as "income attributable to a permanent establishment" in this Article), the Nonresident must, pursuant to Ministry of Finance Order, prepare documents giving the details of the transactions attributed to the permanent establishment and other documents prescribed by Ministry of Finance Order with regard to any transaction that the Nonresident has conducted with another person the income from which is attributed to the permanent establishment of the Nonresident in calculating Income in Each Class calculated in accordance with Article 165, paragraph (1) (Calculation of the Tax Base and Amount of Income Taxes Imposed on Aggregate Income) with regard to the Nonresident's income attributable to a permanent establishment for that year.

If a Nonresident with a permanent establishment has income attributable to a permanent establishment, and a transfer of assets, provision of services, or other fact between the Nonresident's place of business or similar place as prescribed in Article 161, paragraph (1), item (i) and the permanent establishment falls under an internal dealing as prescribed in that item, the Nonresident must, pursuant to Ministry of Finance Order, prepare documents giving the details of that fact and other documents prescribed by Ministry of Finance Order.

The provisions of Part II, Chapter VII (Special Provisions on Residents' Requests for Reassessment) apply mutatis mutandis to a request for Reassessment pursuant to the provisions of Article 23, paragraph (1) of the Act on General Rules for National Taxes (Requests for Reassessment) involving a Nonresident's income taxes imposed on aggregate income.

The provisions of Part II, Chapter VIII (Reassessments and Determinations Involving Residents) apply mutatis mutandis to Reassessments and determinations involving a Nonresident's income taxes imposed on aggregate income.

If there is an act or calculation of a Nonresident who has domestic source income set forth in Article 164, paragraph (1), item (i), (a) (How Nonresidents Are Taxed) which, if allowed, would be found to result in an unjust reduction of the Nonresident's income tax burden due to an increase in the amount deducted in calculating Income in Each Class related to that domestic source income, an increase in the amount deducted from the income tax on the income related to that domestic source income, a decrease in the amount of profit or an increase in the amount of loss related to internal dealings as prescribed in Article 161, paragraph (1), item (i) (Domestic Source Income), or any other reason, the district director may, when making a Reassessment or determination concerning the Nonresident's income tax, calculate the amounts set forth in Article 120, paragraph (1), item (i) or items (iii) through (v) (Filing an Income Tax Return), Article 122, paragraph (1), items (i) through (iii) (Filing a Return to Receive a Refund), or Article 123, paragraph (2), item (i), item (iii), item (v), or item (vii) (Filing Tax Returns Showing Losses), as applied mutatis mutandis pursuant to Article 166 (Filing of Returns, Payment of Taxes, and Issuance of Refunds), for each year of the Nonresident, as the district director finds appropriate, notwithstanding that act or calculation.

Income taxes are imposed on a Nonresident's domestic source income as set forth in the items of Article 164, paragraph (2) (How Nonresidents Are Taxed), separately from the Nonresident's other income, and the tax base for those income taxes is the amount constituting the domestic source income that the Nonresident is to be paid (or, for domestic source income as set forth in one of the following items, the amount prescribed in the item):

interest and similar income as set forth in Article 161, paragraph (1), item (viii) (Domestic Source Income) which constitutes interest on bearer public and corporate bonds and distributions of proceeds linked to a bearer beneficiary certificate from a Loan Trust, Bond Investment Trust, or Bond-Based Investment Trust Under Public Offering: the amount that the Nonresident has been paid;

dividends and similar income set forth in Article 161, paragraph (1), item (ix) which constitute dividends of surplus from bearer shares or similar interests (meaning dividends of surplus prescribed in Article 24, paragraph (1) (Dividend Income)) and distributions of proceeds based on bearer beneficiary certificates in an Investment Trust (other than a Bond Investment Trust or Bond-Based Investment Trust Under Public Offering) or Specified Trust That Issues Beneficiary Certificates: the amount that the Nonresident has been paid;

pensions as set forth in Article 161, paragraph (1), item (xii), (b): the amount of the pension that the Nonresident is to be paid, less the amount calculated when 50,000 yen is multiplied by the number of months in which the Nonresident is to be paid the pension;

monetary awards as set forth in Article 161, paragraph (1), item (xiii): the amount that the Nonresident is to be paid, less 500,000 yen;

pensions as set forth in Article 161, paragraph (1), item (xiv): the amount that the Nonresident is to be paid based on a contract as prescribed in that item, less the part of the insurance premiums or installment deposits paid based on that contract which is calculated pursuant to Cabinet Order as being part of the amount that the Nonresident is to be paid.